Speaker 1: This is Bloomberg business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast.
Speaker 2: Strong US economic data making investors rethink and take down
Speaker 2: again expectations for FED rate cuts this year, and that
Speaker 2: strong economic news included Friday's jobs report this as Federal
Speaker 2: Reserve Chair Jay Powell also reminded us in a speech
Speaker 2: this past week that the Fed has time to wait
Speaker 2: for clearer signs of lower inflation before cutting interest rates. Meantime,
Speaker 2: Tim on the company front, Tesla top of mind for
Speaker 2: a couple of days. In fact, we'll explain about that
Speaker 2: in just a moment.
Speaker 3: Also ahead of read on the consumer thanks to two
Speaker 3: views from the c suite.
Speaker 1: GJ.
Speaker 3: Hart, CEO of Red Robin Gourmet Bergers on the company's
Speaker 3: turnaround and standing out among a ton of Burger chams,
Speaker 3: and the co founder of the coconut water company, the
Speaker 3: Vita Coco Company, Mike Kurbin, on continuing to go it alone.
Speaker 2: Plus where the real stress is in real estate, with
Speaker 2: Lauren Hackfelder, co CEO real Estate Investing over at Morgan
Speaker 2: Stanley Investment Management, and then Austin Allison, co founder of Picasso,
Speaker 2: on owning a share of a lux vacation property. FYI, Tim,
Speaker 2: don't call it a time share, although it does have
Speaker 2: a lot of similar qualities. I was like, this is
Speaker 2: a time share?
Speaker 3: All that to come? We begin with Tesla. The carmaker
Speaker 3: reported its first year over year sales decline since twenty
Speaker 3: twenty this past week, signaling more concern for an ev
Speaker 3: industry already struggling to find its footing.
Speaker 2: We cut up with Bloomberg News auto reporter Gabby Coppola
Speaker 2: and co host of Bloomberg Technology on Bloomberg TV and Ludlow.
Speaker 4: The way that I look at it is it's the
Speaker 4: biggest deliveries miss against Bloomberg consensus at least, which is
Speaker 4: the average we take evanist estimates on record. And then
Speaker 4: you start to ask, well, why did we get this
Speaker 4: so wrong? What was it that happened in the quarter
Speaker 4: that led to this strain? Low's liveries number and Tesla
Speaker 4: put in its statement a lot of supply side factors,
Speaker 4: diverting shipments of parts and finished goods because of the
Speaker 4: situation in the Red Sea, a pause of production in
Speaker 4: Berlin because of what they called an arson attack, and
Speaker 4: then a new Model three in Fremont, my home town
Speaker 4: in the Bay Area, impacting production.
Speaker 3: This is that ramp up that they referred to, right.
Speaker 4: But how does that skeptical I'm talking the voice of
Speaker 4: the market is speaking through me. How does that answer
Speaker 4: why the deliveries were so low? Maybe production which also misestimates,
Speaker 4: but what happened here? And I think the answer is
Speaker 4: demand well, and that.
Speaker 2: Gets to the bigger macro micro story or macro story,
Speaker 2: right in terms of EV's still growing, but not the
Speaker 2: eptic we all expect it corrected exactly.
Speaker 4: So the correct way to state it is there is
Speaker 4: still growth at EV sales, it's decelerating, so we have
Speaker 4: a lower pace of growth this year than last. I
Speaker 4: think that what you read more consistently today right now
Speaker 4: the reaction TESLA is the impact of higher rates and
Speaker 4: the consumer started to be felt in the first quarter.
Speaker 4: Then I look at Gabby Coppler's fantastic reporting. What was
Speaker 4: popular in the first quarter, cheap combustion engine cars.
Speaker 2: Well, all right, Gabby, there's a perfect setup for you,
Speaker 2: so come on in. Your story is great and it
Speaker 2: gets into what you know Americans are up to. They're
Speaker 2: looking for a deal, they're looking for a bargain if
Speaker 2: they're out there shopping for a car.
Speaker 5: Yeah, it's you know, it was really striking to me
Speaker 5: because for so long in this on the Speed I
Speaker 5: remember talking about how Americans just seem to have bottomless
Speaker 5: appetite for you know, pickup trucks and pickup trucks that
Speaker 5: were going more upscale with luxury interiors, and the whole
Speaker 5: market was shifting from sedan's to SUVs because everybody wanted
Speaker 5: an suv. And now I think, you know, the interest
Speaker 5: rates are really starting to bite, and but people still
Speaker 5: need transportation, so that's what you're seeing. I mean, I
Speaker 5: was struck by Toyota, you know, had really you know,
Speaker 5: strong sales results. I think their sales were up twenty
Speaker 5: percent quarter on quarter. But what was interesting to me
Speaker 5: is that their sedan sales actually grew just about the
Speaker 5: same as their suv sales. So I mean it shows
Speaker 5: you that people, i mean sidans are often you know,
Speaker 5: unless they're like a luxury car they're less expensive than
Speaker 5: an suv, they're smaller, more compact models, things like that,
Speaker 5: and that's what people I think the bottom line, like
Speaker 5: the payment, the monthly payment on your car, is what's
Speaker 5: really curbing people's interests. You know, they still need to
Speaker 5: buy something, but they just can't afford a lot of
Speaker 5: what's out there.
Speaker 3: Yes, so okay, so that brings us back to what
Speaker 3: the racing car buyer.
Speaker 6: Yeah, the recent car.
Speaker 3: Buyer had love and on the Gossip yesterday.
Speaker 2: Oh did you get it?
Speaker 6: I got it?
Speaker 4: Well, I got a Model Hy Sorry, Gabby. I picked
Speaker 4: up a Model Y last Thursday. And I did it
Speaker 4: because my wife and I needed a new car. And
Speaker 4: as you know, I've been driving a tigue around Volkswagen
Speaker 4: suv for the last three years. And the least priced
Speaker 4: three hundred dollars a month for the Tesla Model Why.
Speaker 4: And that reflects the federal tax credit, but also the
Speaker 4: incentives that Tesla took off its own back. You know that,
Speaker 4: the discounting. But Gabby, it's still the same point that
Speaker 4: Gabby's making, right, it's economics. And you know the consistent
Speaker 4: thing that the cell side, the auto's analyst, whoever it is,
Speaker 4: is saying after Tesla's numbers came out, is we're starting
Speaker 4: to realize that the market for why and three, or
Speaker 4: simply put, smaller cars that are forty to fifty thousand
Speaker 4: US dollars, it's just not there anymore. So when's the
Speaker 4: next Tesla thing coming? Cyberdrugs and niche products, funky but
Speaker 4: niche and the twenty five thousand dollars EV that I
Speaker 4: think a lot of people really want is a long
Speaker 4: way away. That's the story here.
Speaker 5: I agree that that price and the cost is really
Speaker 5: the story. But I do wonder if when it comes
Speaker 5: to the demand for evs, if we still have things
Speaker 5: like range anxiety or you know, just the lack of
Speaker 5: charging infrastructure that also is holding things back. I mean,
Speaker 5: I hear that a lot from automakers. I mean, of course,
Speaker 5: everybody wants to give excuses for why their cars aren't
Speaker 5: selling well, but you know, yeah, I mean, I just
Speaker 5: think that that when you look at the EV side
Speaker 5: of things, I don't know if price will cure everything.
Speaker 5: I know Tesla has a much better charging network than
Speaker 5: any of its competitors here in the US, but that
Speaker 5: network is also being opened to a lot of other brands.
Speaker 7: Now.
Speaker 5: So you hear stories of Tesla owners kind of grumbling
Speaker 5: that they have to share now. So I'm just going
Speaker 5: to say, I don't know if that's you know, there
Speaker 5: may be more to it than just the price.
Speaker 2: It's interesting because I feel like we've talked with Keith
Speaker 2: Nolton right about how hybrids right, Yeah, the hybrid cells
Speaker 2: have gone up. So people are interested in doing kind
Speaker 2: of the right thing for the environment, but they don't
Speaker 2: want to be caught such an.
Speaker 3: Economic decision as well, because if you're having, you know,
Speaker 3: a car with better gas mileage, then you're not you
Speaker 3: don't have to visit the pump as much. And mileage
Speaker 3: has improved a lot in recent years.
Speaker 5: Gabby, Yeah, it has. And you know, I just maybe
Speaker 5: I'm cynical or I've been covering this be too long,
Speaker 5: but I feel like doing what's right for the planet.
Speaker 5: For some people, maybe that is like a leading factor
Speaker 5: of why they choose a car, but most people, you know,
Speaker 5: want a car that meets their needs. And you know,
Speaker 5: and like what you were just saying, like about it's
Speaker 5: about it's economics too. You know, gas is still you know,
Speaker 5: it's not that cheap still, and if you can get
Speaker 5: better gas mileage driving in electric mode. And I think,
Speaker 5: you know, like Toto will make this point that like
Speaker 5: there are a lot of the hybrids are competitive with
Speaker 5: the price of a combustion engine car. So once you
Speaker 5: get to once you get to parody and you're offering
Speaker 5: people savings on gas, then you know that's that's really appealing.
Speaker 5: And then you have a gas you know, tank to
Speaker 5: deal with your ranging anxiety. But to point, I think
Speaker 5: you can get some great deals on EV least at
Speaker 5: least cvs right now if you do want to go
Speaker 5: that route.
Speaker 4: The root of what Gaby and I are reporting on
Speaker 4: is reflected in the sales data and reflected in the
Speaker 4: analyst notes, is the the economic reality for a lot
Speaker 4: of households. Yes, my lease is three hundred dollars a month.
Speaker 4: It's significantly less than the last these I had on
Speaker 4: a big combustion suv to charge in the middle of
Speaker 4: the day at thirty five cents kill of what hour
Speaker 4: this was about midday Pacific time on Friday last week.
Speaker 4: To get from twenty five percent state of charge to
Speaker 4: eighty was about ten dollars To fill up my gas
Speaker 4: car is about eighty dollars at the moment, but there
Speaker 4: is also some fetters. I've only got ten thousand miles
Speaker 4: a year on the lease. Well, what if you commute
Speaker 4: sixty miles every day, You're not going to have enough
Speaker 4: miles in the year to net out and do it.
Speaker 4: And then, you know, we talked about a little bit yesterday,
Speaker 4: I think, but if you then get yourself an EV
Speaker 4: and you want to install a charger at home, you
Speaker 4: have a very significant income cap on the state and
Speaker 4: federal incentives available to help you rebate or pay for
Speaker 4: that charger. It's not straightforward. I sympathize for any consumer
Speaker 4: who's like, how do I even get started?
Speaker 2: Yeah, it's difficult. Yeah, I mean this is go ahead, Gabby.
Speaker 5: Well, there's just one other point I was going to
Speaker 5: bring up. The ED reminded me the people are also
Speaker 5: experiencing negative equity, meaning that you know, the auto market
Speaker 5: is so weird right now, right like the pandemic created
Speaker 5: all these distortions. There were supply chain s, there were
Speaker 5: severe shortages of car. Dealers were charging over ANSRP. People
Speaker 5: were paying through the nose for a new car. Now
Speaker 5: two years later, production is normalizing, so used car prices
Speaker 5: are coming down and a lot of people are being
Speaker 5: stuck with their car underwater. I talked to a guy
Speaker 5: who actually bought a He's bought a Tesla Model S
Speaker 5: that now has forty thousand dollars worth of negative equity
Speaker 5: in that vehicle, and the only way he can trade
Speaker 5: it in is if he pays Telsa forty thousand dolls.
Speaker 5: He's like, I want a new car. I love Tesla,
Speaker 5: I love my car, but I have to, you know,
Speaker 5: cough up forty grand if I want to trade this in.
Speaker 5: So I don't think that's a I don't think that's
Speaker 5: a huge drag yet, but it's certainly something that I'm watching.
Speaker 5: I think because you know, the dealers who chose to
Speaker 5: do that, they thought, oh, you know, I'm going to
Speaker 5: do what the market will bear I can charge over
Speaker 5: an SRP. Well, now when you want to get that
Speaker 5: person into a new car three years later, good luck,
Speaker 5: because now you've got to be able to roll over
Speaker 5: all the debt they have that they took on to
Speaker 5: pay that price you charged.
Speaker 2: So that's like.
Speaker 5: Another factor to kind of, you know, think about as
Speaker 5: we looked at the health of the new car market
Speaker 5: this year.
Speaker 3: Okay, so let's end where we began, and that's what
Speaker 3: teslave about how the company moves forward from here with
Speaker 3: the outlook that we understand for the EV market, not
Speaker 3: just here in the US but globally have of the challenges
Speaker 3: that Gaby just talked about.
Speaker 6: Yeah, what's the company's strategy here?
Speaker 4: I take elon musket face value and that is that
Speaker 4: tests between two waves. So it's the acknowledgment that the
Speaker 4: growth they saw built on Model Y and three mass
Speaker 4: market vehicles, it's kind of been and gone. The next
Speaker 4: wave is the twenty five thousand dollars price point card,
Speaker 4: which many more Americans but also Chinese and Europeans going forward.
Speaker 4: But then also acknowledge the big cohort of investors that
Speaker 4: don't give a damn about the deliveries. They're only focused
Speaker 4: on the software story, and you have to give credit
Speaker 4: where credits due, you know, and their financials will show
Speaker 4: that software has a role to play for them.
Speaker 2: A sector that just continues to be fascinating. Guys, thank
Speaker 2: you so much, really terrific staff Bloomberg TV's co host
Speaker 2: of Bloomberg Technology at Ludlow here in studio along with
Speaker 2: Bloomberg News Auto reporter Gabby Coppola.
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Speaker 3: Hey Carol, Yes, you know what I love talking about food?
Speaker 3: Love talking about food.
Speaker 2: So do He also loves consuming food.
Speaker 3: It's not just conversations, okay, But here's the thing. We
Speaker 3: like talking about it. Yes, not just because we like
Speaker 3: to eat it, but also because talking to the people
Speaker 3: who run restaurants, who operate restaurants, it gives us a
Speaker 3: good idea of how the consumer's doing. And of course
Speaker 3: what's going on with wages, with employment, with inflation.
Speaker 2: There's a lot of inputs with food costs and things, right.
Speaker 3: I mean, it's really really important. Red Robin Gormet Berger's
Speaker 3: one of those restaurants. In the US and Canada. There
Speaker 3: are more than five hundred Red Robin restaurants, including franchises.
Speaker 3: The company a microcap with a market cap of roughly
Speaker 3: one hundred and seventeen million dollars.
Speaker 2: All right, here to talk about the earnings the business,
Speaker 2: what's impacting the menu. A lot going on is GJ.
Speaker 2: Hart CEO Red Robin Gourmet Berger is joining us from Denver. GJ.
Speaker 2: Nice to have you here with us. First of all,
Speaker 2: how are you doing? How's the business doing well?
Speaker 8: First of all, It's great to be with you guys today.
Speaker 8: I'm doing very well. And you know, we have been
Speaker 8: on a path over the last year and a piece
Speaker 8: to transform this brand on what we call a comeback
Speaker 8: in the north Star Plan, and we are feeling really
Speaker 8: good about where we sit today and excited about what
Speaker 8: twenty twenty four will bring for it.
Speaker 3: How's the comeback going? Because shares down about forty percent
Speaker 3: so far this year, we're bloomberg. This is the stuff
Speaker 3: we look at. This is the data we look at.
Speaker 3: What are investors missing about this turnaround plan right now?
Speaker 6: In your opinion?
Speaker 8: You know, when we laid out the north Star Plan,
Speaker 8: we said it was a three to five year plan.
Speaker 8: When you do these kind of transformations, you know there's
Speaker 8: there's a time element, and in this particular case, there
Speaker 8: was a tremendous amount to do, of which we accomplished
Speaker 8: a lot in twenty twenty three. And I think in
Speaker 8: some respects it's it's how soon will this happen?
Speaker 9: And you can't always predict that.
Speaker 8: So when I look at our results in twenty twenty
Speaker 8: three at a one point six percent comp we grew
Speaker 8: our ibadad by thirty three percent. We invested twenty five
Speaker 8: million dollars back into the business. We were able to
Speaker 8: add the kind of people we needed, managers, et cetera.
Speaker 8: We upgraded our kitchens, we upgraded our food. Eighty five
Speaker 8: percent of our menu has been upgraded. You know, I
Speaker 8: look at all that and say, you know, we are
Speaker 8: we are in a good place relative to.
Speaker 9: Where we thought we would be.
Speaker 8: And you know, at the end of the day, the
Speaker 8: share price goes up and down, and over the long
Speaker 8: term it will follow the right trajectory. And at this point,
Speaker 8: we're pleased with where we were in twenty twenty three
Speaker 8: and where we are now.
Speaker 2: But is it frustrating or is there any part of
Speaker 2: your message that you feel like is not necessarily getting
Speaker 2: through to investors, because it's not only that it's downstill
Speaker 2: forty percent this year, but you've got twenty percent of
Speaker 2: the float that's being shorted, so investors, there's a negative
Speaker 2: tone to it.
Speaker 9: You know.
Speaker 8: In our north Star Plan, the fifth point of the
Speaker 8: plan was we want to earn respect back of our
Speaker 8: investor base and of our analysts and any any interested
Speaker 8: party on Wall Street. And I think the company's history,
Speaker 8: you know, has been not always achieving what they say
Speaker 8: they're going to achieve, and.
Speaker 9: So we're working really hard on that. We think we've done.
Speaker 8: A nice job communicating where we are and where we stand.
Speaker 9: And so at the end of the day, you.
Speaker 8: Know, is it frustrating, Not really, because we're in this
Speaker 8: for the long haul. You know, we we see a
Speaker 8: tremendous amount of opportunity ahead of us. You know, we've
Speaker 8: put this forth like if you're playing baseball, it's a
Speaker 8: second inning, and that's not meaning second ending in a
Speaker 8: negative way, but in a positive way in terms of
Speaker 8: the runway ahead of us, the opportunity to take an
Speaker 8: iconic brand, a fifty year old brand, and bring it
Speaker 8: back into a great place. And so you know, if
Speaker 8: you believe in that over a period of time, you'll
Speaker 8: stick with us. And at the end of the day,
Speaker 8: you know, we we know and believe that we're doing
Speaker 8: the right thing.
Speaker 3: Well, you've, of course, i imagine, have done consumer research, and
Speaker 3: I'm just curious about the perception of the Red Robin
Speaker 3: Brand right now where it is, and how it resonates
Speaker 3: with consumers at this point, and how that's different than
Speaker 3: where you want it to resonate when you're done with
Speaker 3: this turnaround, give us the delta there.
Speaker 8: Yeah, so you're right, we've had to do a lot
Speaker 8: of things. First things first, as we like to call
Speaker 8: it around here, and it really some of the decisions
Speaker 8: made back five, six, seven years ago for whatever reason,
Speaker 8: you know, we're things that definitely hurt from the consumer
Speaker 8: experience perspective. You know, when you get rid of bussers
Speaker 8: in a restaurant, or you get rid of an expo
Speaker 8: in the kitchen, or you don't have the same management compliment.
Speaker 9: There's a lot of those.
Speaker 8: Things that you have to fix before you can really
Speaker 8: go out with confidence and say, hey, give us another shot.
Speaker 8: And so we've done a lot of that work in
Speaker 8: twenty twenty three. Our plan as we go into twenty
Speaker 8: twenty four is to bump up our marketing efforts. We
Speaker 8: think we're in a great position to be able to
Speaker 8: do that, and then right after we do that, we'll
Speaker 8: be relaunching our loyalty platform to be much more exciting
Speaker 8: and much more rewarding. For our guests, and so you
Speaker 8: know where we are today. You know, with the results
Speaker 8: we achieved in twenty twenty three, we believe we're slowly
Speaker 8: getting people to say, hey, I'm going to give red
Speaker 8: Robin another shot, but we've got a long way to go.
Speaker 8: At the same time, when you look at our overall
Speaker 8: consumer sentiment scores and you align that with the work
Speaker 8: that we did in twenty twenty three, we're pleased to
Speaker 8: see nice bumps and all of those levels. So people
Speaker 8: are starting to see it, but I will say that
Speaker 8: the frequency at a red Robin had dipped down, so
Speaker 8: we've got some work to do. So people may not
Speaker 8: necessarily see it because they haven't been in for quite
Speaker 8: a while. So this marketing effort we've got going into
Speaker 8: twenty twenty four here and the loyalty platform will really
Speaker 8: address that issue. And at that point, we think that
Speaker 8: with our plan and executing at the restaurant level, that
Speaker 8: we'll start to see those guests come back.
Speaker 2: Hey, GJ, how do you There are so many burger
Speaker 2: places out there, and you know that there's more that
Speaker 2: seem to be coming out every day, So there's I
Speaker 2: feel like the older guard like your own and I
Speaker 2: understand like you guys are working on, you know, the
Speaker 2: transformation and kind of bringing it out differently if you will,
Speaker 2: But how do you how do you stand apart or
Speaker 2: how do you differentiate and who is the customer that
Speaker 2: you want? In particular?
Speaker 8: You're right, there's been a heck of a lot more competition.
Speaker 8: So first, let me address every one of our buildings,
Speaker 8: says Red Robin, Gourmet Burgers and brutes, and so one
Speaker 8: of the things that we that I really challenged our
Speaker 8: team is we're going to have this promise of gourmet burgers.
Speaker 8: We've always done a great job from an innovation, flavor profile,
Speaker 8: what you put with the burger, et cetera. But are
Speaker 8: we really confident that we can compete in the sea
Speaker 8: of burgerland today through all the different players that are
Speaker 8: out there. And the truth of the matter is Red
Speaker 8: Robin had sort of fallen bey and so hence why
Speaker 8: we changed our total cooking platform mid year to a
Speaker 8: flattop of our flattop.
Speaker 9: Grill, which we believe is where you.
Speaker 8: Start with the right kind of burger to develop a
Speaker 8: gourmet burger, and so we made those changes. It's twenty
Speaker 8: percent bigger because it yields better, et cetera, versus having
Speaker 8: it cooked on a conveyor belt type cooking more fast
Speaker 8: food oriented. So we did that and we feel like
Speaker 8: that that really helped us to be able to compete
Speaker 8: in the gourmet burger space, and our guests and our again,
Speaker 8: our satisfaction sports would tell us that that's true.
Speaker 3: So I just want to jump in because we only
Speaker 3: have about a minute left here. We talk about ozepic
Speaker 3: and the weight loss drugs all the time on our program.
Speaker 3: How are you thinking about this new class of drugs
Speaker 3: being used for weight loss? Do you change the menu
Speaker 3: at all?
Speaker 8: Well, first of all, you know, we do have some
Speaker 8: some items on our menu. You know, we've got a
Speaker 8: turkey burger and impossible burger, and so we have some
Speaker 8: of that addressed already. But at the end of the day,
Speaker 8: you know, we'll have to see what the consumer ultimately does.
Speaker 8: Today when you look across the broad spectrum those the drug,
Speaker 8: weight loss, the whole situation, I think it's been slow
Speaker 8: to be adapted, and particularly in casual dining, because when
Speaker 8: people go out for an experience like that, they you know,
Speaker 8: they typically will fall back like, hey, it's an experience.
Speaker 8: So I'm not necessarily going to be worried about exactly
Speaker 8: what I eat.
Speaker 9: Now.
Speaker 8: That's not to say we're not paying attention to it.
Speaker 8: It's not to say we're not going to address it
Speaker 8: more so than what we already do on the menu.
Speaker 9: But we'll see. I mean, it's definitely something we're paying
Speaker 9: attention to.
Speaker 6: All right.
Speaker 2: Well, so appreciate you stopping buy and spending some time
Speaker 2: with us. GJ. Hart, President and chief executive officer at
Speaker 2: Red Robin Gourmet Burgers, joining us there.
Speaker 6: In number ten. I would like a burger right now.
Speaker 2: Yeah, I would too. You and I were both thinking
Speaker 2: about that a lot Iderberger lest night. I would take
Speaker 2: another one right now. This is Bloomberg Radio.
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Speaker 2: Well. Vita Coco is one of the top players in
Speaker 2: the coconut water market. It's a space that's been shared
Speaker 2: by some brands that you definitely know of PepsiCo and
Speaker 2: the Coca Cola Company and a few others. Tim and
Speaker 2: North America has definitely been a dominant market for this drink, specifically.
Speaker 6: In the US alone.
Speaker 3: The coconut water market size is projected to surpass eighteen
Speaker 3: point five billion dollars by twenty thirty one, growing at
Speaker 3: a compound annual growth rate of nearly nineteen percent. With
Speaker 3: a look at the market and more, let's get to
Speaker 3: the interview with Mike Curbin, co founder and executive chair
Speaker 3: at the Vita Cocoa Company. Joining us from New York City. Mike,
Speaker 3: good to have you with us this afternoon. Earnings came
Speaker 3: out late February reported net sales for the fourth quarter
Speaker 3: that beat the average analy assessment, the stock staring nearly
Speaker 3: fifteen percent on that news. I do want to take
Speaker 3: a step back and talk big picture here about the
Speaker 3: marketplace growth, consumer demand. Where are you seeing demand right
Speaker 3: now in the category?
Speaker 10: Yeah, thanks for having me so.
Speaker 11: Coconut water is the fastest growing category in the beverage
Speaker 11: aisle today, twenty years after we started building this category
Speaker 11: from scratch. It is one of the largest beverage categories
Speaker 11: across the tropical world. And now over the last twenty years,
Speaker 11: we've been building it in North America and Western Europe,
Speaker 11: and we're seeing coconut water become a household staple across
Speaker 11: these markets. And we think that as we continue to
Speaker 11: grow and continue to educate consumers on the benefits and
Speaker 11: usage occasions for coconut water, we think it will be
Speaker 11: continued to become a household staple in both North America
Speaker 11: and Western Europe and all the other markets where we're
Speaker 11: continuing to build our business.
Speaker 2: Hey, North America, as we talked about, has been a
Speaker 2: dominant mark for the drink. Talk to us a little
Speaker 2: bit about if that's kind of where you see the
Speaker 2: continued growth or how you find and tap into other
Speaker 2: markets where you see future growth in particular, and who
Speaker 2: do you see us your kind of typical buyer, if
Speaker 2: there is one.
Speaker 11: North America continues to be our largest market and continues
Speaker 11: to grow incredibly fast. Today we're in one in ten
Speaker 11: households in the United States. If you think about other
Speaker 11: similar type of categories, Ocean Spray is a brand that
Speaker 11: I like to reference quite a bit Cranberry Juice. Ocean
Speaker 11: Spray is in one in sorry four and ten households
Speaker 11: across North America. So you know, this is something you know,
Speaker 11: as we think about coconut water, which has all these
Speaker 11: incredible usage occasions. It's incredibly hydrating drink as a sports
Speaker 11: drink or replenishment, but it's also amazing in a cocktail,
Speaker 11: and it's amazing in this movie in the morning. So
Speaker 11: it has all these incredible occasions for usage, and we
Speaker 11: think that as we continue to grow, you know, more
Speaker 11: and more households will continue to get.
Speaker 3: Curious about the cost side of the equation here and
Speaker 3: specifically where the ingredients come from. Where do the coconuts
Speaker 3: that you guys use come from.
Speaker 10: So I actually just got back yesterday from Sri Lanka.
Speaker 11: We manufactured quite a bit in Southeast Asia, Sri Lanka, Philippines, Thailand,
Speaker 11: and also Brazil is also a large center for our production.
Speaker 2: Anything any problems that you guys have seen with kind
Speaker 2: of some of the challenges our wars, I should say,
Speaker 2: around the world, is that impacting you guys at all?
Speaker 11: We saw you know, free costs increased a little bit
Speaker 11: with the issues around the Suez Canal, but that's been
Speaker 11: moderating and we've been able to you know, continue to
Speaker 11: you know, withstand that and grow, grow our margins and
Speaker 11: you know, uh, we don't see that as a major
Speaker 11: a major issue for us moving forward.
Speaker 3: The animal rights organization PETA has raised issues about monkeys
Speaker 3: being forced to harvest coconuts in some parts of the world.
Speaker 3: Has that been something that you've experienced at all when
Speaker 3: you've been traveling now and sourcing.
Speaker 10: These I've never seen a monkey pick a coconut.
Speaker 11: This is something that does happen in Thailand in a
Speaker 11: tourist attraction, but is not something that is used in
Speaker 11: typical coconut farming techniques. We cracked over a billion coconuts
Speaker 11: last year to produce our coconut water, and none of
Speaker 11: them were picked by monkeys.
Speaker 2: But how do you ensure you know, Mike, and we
Speaker 2: certainly have from just reporting in the business world and
Speaker 2: financial world, you know that when you get into emerging
Speaker 2: economies sometimes oversight is not always what it needs to be.
Speaker 2: How do you ensure that everything that goes into a
Speaker 2: Vita cocoa drink that it is done in a sustainable
Speaker 2: and caring way and fair way.
Speaker 11: Yeah, it's one of the most important parts of our business. Actually,
Speaker 11: over the last many years, we've built through the Vita
Speaker 11: Cocoa Project. We've done incredible things on the ground in
Speaker 11: the Philippines. For example, we've built over forty schools, educating
Speaker 11: farmers specifically on new techniques and bringing them new types
Speaker 11: of coconut.
Speaker 10: Trees to improve their yield and increase their income. So
Speaker 10: we do a lot of work on the ground.
Speaker 11: We also do social audits of all of our facilities,
Speaker 11: making sure that everything is done in the best way possible.
Speaker 11: And I think this is one of the beauties of
Speaker 11: the business. We've been able to create this business off
Speaker 11: of what historically was a byproduct of the coconut manufacturing business.
Speaker 10: The water.
Speaker 11: There's always been a byproduct. We've been able to help
Speaker 11: up cycle that byproduct, give these markets, these farmers an
Speaker 11: avenue to sell the product, and at the same time
Speaker 11: put programs together to continue to develop these help develop
Speaker 11: these economies.
Speaker 10: So it's been that's been one of the most rewarding
Speaker 10: things for me.
Speaker 3: Mike, how have you been able to innovate in the
Speaker 3: production of this I'm curious about ways that over the
Speaker 3: last two decades that you've been able to experiment with
Speaker 3: with cutting costs or their to make this a concentrated
Speaker 3: product and then add water to it once it's at
Speaker 3: its final destination. Are there ways to create a fountain
Speaker 3: drink out of this? Talk to me about innovation here.
Speaker 10: Yeah.
Speaker 11: So as we think about cost, its scale, right. So,
Speaker 11: cocaut water, like I mentioned, was historically a byproduct. It's
Speaker 11: about the actual packaging and process of packaging that is costly.
Speaker 11: But over time, the more scale we get, the more
Speaker 11: we're able to.
Speaker 10: Leverage that scale and bring down costs.
Speaker 11: As we think about innovations and so on, we're really
Speaker 11: focused these days on more sizes, more pack types, more flavors,
Speaker 11: and expanding shelf space.
Speaker 10: I brought a bution spray earlier.
Speaker 11: When you think about it, we built this business over
Speaker 11: the last twenty years selling single serve individual you know,
Speaker 11: vitacocos on the shelf. We would have two, three, four
Speaker 11: or five facings at the grocery store today. Over the
Speaker 11: last couple of years, we've been introducing new pack types
Speaker 11: and new formats with twelve paps, four packs and six
Speaker 11: packs and one leaders and multipacks of one leaders. We're
Speaker 11: starting to build out that billboard on shelf. And if
Speaker 11: you think about that compared to ocean spray, which has
Speaker 11: four times the shelf space we have. That's kind of
Speaker 11: something that we're working towards. It's continuing to create this
Speaker 11: billboard at retail for consumers to see coconut water as
Speaker 11: they're walking down the aisle.
Speaker 2: Hey, Mike, for someone who's been doing this for twenty years,
Speaker 2: start back in two thousand and four, as you continue
Speaker 2: your build out and look to do you know, more
Speaker 2: growth in the North American market and elsewhere. I'm just
Speaker 2: curious do you plan to continue to do it alone?
Speaker 2: You're a publicly out company. I get it, but I'm
Speaker 2: sure you've had people knocking on your door. Is there
Speaker 2: a plan? At one point, Coca Cola owned a brand,
Speaker 2: then obviously it was sold back to its creator. But
Speaker 2: I'm just curious, is there any plans you know or
Speaker 2: do you? Are you open? Is there a partner or
Speaker 2: a price that would make sense for your brand to
Speaker 2: get together with someone else?
Speaker 11: I mean, we have a great partnership with Cure Doctor
Speaker 11: pept They're the largest distributor in North America and they're
Speaker 11: a small shareholder.
Speaker 10: But they're really a great distribution partner.
Speaker 11: So we feel we've got the right partnerships and resources,
Speaker 11: and we generate a lot of cash and we feel
Speaker 11: we're in a really good position to continue to invest
Speaker 11: in growth and that is our main priority today.
Speaker 4: Is that a.
Speaker 11: Yeah for now to no, it's we could grow this
Speaker 11: business significant the setup that we currently have well.
Speaker 2: Really cool stuff and look forward to talking with you
Speaker 2: again as you guys continue on that growth growth path. Mike,
Speaker 2: thank you so much. Mike Kurvan, he's co founder executive
Speaker 2: chair of the Vita Cocoa Company, joining us right here
Speaker 2: on Bloomberg Business What.
Speaker 3: I was an early adopter of coconut water, like back
Speaker 3: in the day. I've been on the core coconut water train.
Speaker 2: Many different flavors do you have?
Speaker 6: I just like the regular one.
Speaker 1: Regularly you're listening to the Bloomberg Business Week. Catch us
Speaker 1: live weekday afternoons from two to five pm Eastern Listen
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Speaker 1: Bloomberg Business act or want us live on YouTube all right.
Speaker 2: Last week you might recall Bloomberg's Matt Day reported on
Speaker 2: Amazon's plans to spend nearly one hundred and fifty billion
Speaker 2: dollars in the next fifteen years on data centers needed
Speaker 2: for the expected boom for AI applications and other digital services.
Speaker 3: Data center is one of the real estate investment plays
Speaker 3: we've heard a lot about for years. More recently, though,
Speaker 3: the focus and concern has been on the commercial real
Speaker 3: estate space, particularly offices, as working from home still sticks
Speaker 3: for many post pandemic. The Bloomberg Read Office Property index
Speaker 3: down about six percent year to date as we were
Speaker 3: putting our show together. Last about three percent in twenty
Speaker 3: twenty three after dropping close to forty percent in twenty
Speaker 3: twenty two.
Speaker 6: It's been brutal.
Speaker 2: Yeah, absolutely, we continue to ask questions about the space.
Speaker 2: All right, with a look at the commercial real estate space,
Speaker 2: we welcome Lauren Hockfelder. She's co CEO of real estate
Speaker 2: investing over at Morgan Stanley Investment Management. She joins us
Speaker 2: right here in New York City. Lauren, welcome to Bloomberg. Hey,
Speaker 2: commercial real estate, we know location, location, location, but it
Speaker 2: also can be divided into a lot of different buckets.
Speaker 2: You've got office, retail, you've got data centers, you've got industrial.
Speaker 2: Walk us through the different sectors. Where are you seeing
Speaker 2: strength and where's the continued weakness like perhaps office?
Speaker 12: Sure?
Speaker 7: Well, first of all, thank you for having me it's
Speaker 7: great to be here, And I would say it's funny
Speaker 7: you use the old expression location, location, location, that is
Speaker 7: absolutely paramount and real estate. But you know, today we
Speaker 7: talk about dislocation, dislocation, dislocation. We have to look at
Speaker 7: what's changing, what's being disrupted, and invest accordingly. So yes,
Speaker 7: take office, take US Commodity office in particular, and it
Speaker 7: is absolutely being disrupted. You have a dramatic demand destruction.
Speaker 7: We all know that people tried out working from home
Speaker 7: in the pandemic and decided it wasn't so bad.
Speaker 12: So we're seeing a dramatic demand destruction.
Speaker 7: But frankly, also those assets just don't meet modern tenant demands.
Speaker 7: They don't meet them from a standpoint of quality or menetization. Frankly,
Speaker 7: they don't meet their carbon reduction goals. So these are
Speaker 7: assets that many of which will be stranded because they
Speaker 7: simply don't have long term cash flow growth potential.
Speaker 12: But go to the office.
Speaker 2: Wait, wait, wait, can I jump into those So US
Speaker 2: Commodity Office, you're saying it's going to be stranded, So
Speaker 2: what happens and what are the financial implications, whether it's
Speaker 2: to the owners of those properties, to the banks, who
Speaker 2: hold the loans on those properties. How does that play out?
Speaker 2: And then how does that maybe make more valuable some
Speaker 2: of the higher tier office property.
Speaker 7: Yeah, no, no, that's a fantastic question. Well, I'll start
Speaker 7: with the ends. So you're seeing a massive consolidation of
Speaker 7: demand into.
Speaker 12: The best of the best assets.
Speaker 7: So perhaps counter intuitively, the destruction of demand for more
Speaker 7: commodity space is actually driving increased demand for the best
Speaker 7: of the best.
Speaker 12: I'll give you an example. Take San Francisco.
Speaker 7: San Francisco office is one of the worst markets globally,
Speaker 7: and I can tell you even in San Francisco, we
Speaker 7: own some of the best office assets in that market.
Speaker 7: Even today we're signing leases at rents above pre COVID levels.
Speaker 7: So to your point, it speaks to the benefits to
Speaker 7: the best.
Speaker 3: Okay, so let's talk about some of those benefits or
Speaker 3: what that offers potential tenants. I mean, what exactly in
Speaker 3: twenty twenty four, in this world of hybrid work that
Speaker 3: we live in a world where AI companies are just
Speaker 3: flourishing in the Bay Area and bringing people back to
Speaker 3: the city. What is an office building? What does an
Speaker 3: office building need to provide to attract and retain tenants
Speaker 3: right now.
Speaker 12: Yeah.
Speaker 7: Absolutely, Look, it's amenities, it's a focus on wellness. It
Speaker 7: is all of the bones, if you will, so big
Speaker 7: open ceiling heights, big open windows. But ultimately it comes
Speaker 7: down to I think amenetization, wellness, and of course location.
Speaker 3: Can buildings that don't offer those things right now? Can
Speaker 3: they be converted at a reasonable cost to buildings that
Speaker 3: will soon become attractive.
Speaker 7: There's a lot of talk about converting old office buildings
Speaker 7: into other uses, converting it into residential, converting it into
Speaker 7: life science or lab space, and the reality is some
Speaker 7: assets will be converted.
Speaker 12: We've seen success stories.
Speaker 7: For example, here in New York after September eleventh, a
Speaker 7: lot of office buildings in Lower Manhattan were converted to
Speaker 7: residential buildings.
Speaker 12: But two things were different.
Speaker 7: One, many of those office buildings had smaller floor plates,
Speaker 7: so physical structures that were more conducive to conversion. And two, frankly,
Speaker 7: there was a government subsidy for that. And I think
Speaker 7: that the math is simply even for those assets that
Speaker 7: have the right physical footprint, the math is very challenging
Speaker 7: when you get to overhauling the mechanical systems, everything going
Speaker 7: up and down the building.
Speaker 2: Hey, one thing I wanted to ask you obviously front
Speaker 2: and center here coming off the unfortunate bridge collapse in Baltimore,
Speaker 2: and we are once again talking about supply chains, and
Speaker 2: that is certainly an investment trend that you guys are seeing.
Speaker 2: You call it a second mega trend tail and driving
Speaker 2: demand in the industrial real estate space, and it has
Speaker 2: to do with the global supply chain. Talk to us
Speaker 2: about that, and you guys are investing this.
Speaker 7: Way absolutely, so I would say, in contrast to office we.
Speaker 12: Love industrial real estate.
Speaker 7: We love it on a global basis, and it's really
Speaker 7: for two reasons. The first is e commerce. So that's
Speaker 7: very much been the story of the last decade. So we,
Speaker 7: as all of us started buying and increasing share of
Speaker 7: our goods online versus in store, and frankly demanding it
Speaker 7: get to us faster and faster. We started buying and
Speaker 7: buildings those warehouses that get goods to our front doors
Speaker 7: every day. And as e commerce penetration went grew by
Speaker 7: two and a half x, so too did rents. So
Speaker 7: that's been a great tailwind for US industrial real estate,
Speaker 7: for global industrial real estate, and I think that will continue,
Speaker 7: albeit decelerate. The second mega trend, and it's really at
Speaker 7: the earlier innings. Even more exciting is the overhaul in
Speaker 7: the global supply chain. Look, we're coming off decades of
Speaker 7: a super smooth, super efficient global supply chain. We've all
Speaker 7: enjoyed the disinflationary benefits of that supply chain, but now
Speaker 7: things are changing. You look at that what happened tragically
Speaker 7: in Baltimore this week, But I think it's.
Speaker 12: Really it goes well beyond that.
Speaker 7: Among the many things that COVID late bear was the
Speaker 7: fragility of the global supply chain, and we live at
Speaker 7: daily now. It is event driven supply shocks, so COVID
Speaker 7: certainly being an enormous one, but you also have what's
Speaker 7: going on in the Panama Canal or labor disputes at
Speaker 7: the court, so event driven supply shocks, and.
Speaker 12: Frankly, you have the overlay of geopolitics.
Speaker 3: Yeah global, Hey, Lauren, we only have thirty seconds left.
Speaker 3: But I do want to talk politics, not geopolitics. How
Speaker 3: do investors in this space need to follow the presidential election?
Speaker 3: Does do things change for you if Biden loses and
Speaker 3: Trump wins?
Speaker 7: Well, politics affects everything, But ultimately we are focused around
Speaker 7: big mega trends that are durable demand drivers regardless of
Speaker 7: who's in office.
Speaker 2: All right, interesting stuff, and certainly it feels like this
Speaker 2: is going to be continuing a chapter in the real
Speaker 2: estate state space in general. Kind of we talk about
Speaker 2: in terms of how office plays its way out and
Speaker 2: then just kind of where investors are going. Hey, Lauren,
Speaker 2: thank you so much. Lauren Hockfelder, CEO real Estate Investing
Speaker 2: at Morgan Stanley Investment Management, joining us in New York City.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 1: Play and Android Auto with the Bloomberg Business App. You
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Speaker 2: Well.
Speaker 3: A time share this is not Picasso is a service
Speaker 3: that allows you to own a share of a vacation
Speaker 3: home instead of having to buy the whole thing. Like
Speaker 3: I said, maybe an eighth of a share of a
Speaker 3: skihouse in Park City or Breckinridge that'll such you back
Speaker 3: maybe seven hundred and fifty five thousand dollars, or an
Speaker 3: eighth of a share of a home in Malibu for
Speaker 3: under a million dollars. So it's not just that you
Speaker 3: own a share of it. You share the costs that
Speaker 3: are associated with the home as well with the other
Speaker 3: co owners, and then Picasso handles the maintenance and other
Speaker 3: management issues.
Speaker 2: All right, and now it's looking the company to broaden
Speaker 2: it's appeal by offering shares at a lower price point.
Speaker 2: So let's get into with Austin Allison. He's co founder
Speaker 2: and chief executive officer of Picasso. He joins us in
Speaker 2: our studio, but coming in from San Francisco. How are you.
Speaker 13: I'm doing well. Thanks for having me today.
Speaker 2: It's great to have you here. You know, before we
Speaker 2: got started, you said you guys were launched in twenty twenty,
Speaker 2: so you're coming up on your fourth year.
Speaker 13: Yeah, three and a half years since launching. It's been
Speaker 13: a wild ride.
Speaker 2: I bet it is, all right. So give us an
Speaker 2: idea of the trajectory. I mean, from when you started,
Speaker 2: and I mean I'm assuming that was kind of fast
Speaker 2: and furious and that there was a lot of demand
Speaker 2: or was there.
Speaker 13: Yeah, it was a crazy time for sure. Let me
Speaker 13: just start with the mission and the vision of the company.
Speaker 13: The vision is about empowering more people to find their
Speaker 13: happy place through co ownership. And we started the company
Speaker 13: in twenty twenty in San Francisco. We've grown to now
Speaker 13: almost every market around the US, but until this week,
Speaker 13: we were operating in about forty destinations around the US,
Speaker 13: as well as Paris, London, and Mexico. And what we
Speaker 13: do is very simple. We empower families to co own
Speaker 13: beautiful luxury vacation homes together and Picasso manages every detail,
Speaker 13: everything from design to furnishing to bill pay and maintenance.
Speaker 3: Who determines the time that these families get to go
Speaker 3: spring break is oftentimes overlaps with other spring break of families.
Speaker 13: Yeah, so this is the number one question that we
Speaker 13: get from prospective buyers. And the answer is we've created
Speaker 13: a proprietary scheduling tool that we call smart Stay. It's
Speaker 13: available from an app on your iPhone or Android, and
Speaker 13: smart Stay will ensure that you get your pro rat
Speaker 13: of time throughout the year. So if you own one
Speaker 13: eighth of a home, smart Stay will ensure that you
Speaker 13: get one eighth of the peak season, one eighth of
Speaker 13: the non peak season, and one eighth of the holidays.
Speaker 2: All Right, so when the plumbing goes, everybody's got to
Speaker 2: chip in.
Speaker 13: Well, yeah, and a lot of that is accounted for
Speaker 13: and planned and advanced. So as the manager of the home,
Speaker 13: Picasso is thinking about what things might break or what
Speaker 13: things may wear over time, and we're actually accruing in
Speaker 13: the budget so that there's funds available to repair some
Speaker 13: of those things when they occur.
Speaker 2: Yeah, go ahead, Carol, No, no, no, no, no, go ahead.
Speaker 3: So talk to us about the business. Because you guys
Speaker 3: sell you you buy the homes and then you resell
Speaker 3: them as shares.
Speaker 6: Is that correct?
Speaker 13: Well, kind of. Usually the way that it works is
Speaker 13: we have thousands of listings on our website at picasso
Speaker 13: dot com. You can also see them on our app,
Speaker 13: and consumers will go to our website and express interest
Speaker 13: in homes that meet their needs. Once we see enough
Speaker 13: interest in a particular home, then Picasso gets involved, works
Speaker 13: with the listing agent to get the home under contract,
Speaker 13: We do diligence on behalf of the ownership group, and
Speaker 13: then we convert it into a co owned Picasso home.
Speaker 2: Fascinating. Talk to us about the ramp up and demand
Speaker 2: and types of sales. Just give us, give us some metrics.
Speaker 2: We're Bloomberg as we all. Yeah, I'd love to know
Speaker 2: some of the else.
Speaker 13: Yeah, well, back to your question around you know what
Speaker 13: it was like launching during the pandemic. The first couple
Speaker 13: of years were crazy. I mean, we grew from zero
Speaker 13: to We've done more than a billion dollars in revenue
Speaker 13: over the course of the first three years of the
Speaker 13: company's history. We have thousands of owners and the way
Speaker 13: that our model works is when we aggregate an ownership
Speaker 13: group and identify the home, we make a service fee
Speaker 13: that's baked into the share price of the home, and
Speaker 13: then we provide a variety of services throughout the life
Speaker 13: of the relationship that we have with our customers. So
Speaker 13: that includes things like property management, financing. About seventy percent
Speaker 13: of people who buy a Picasso use financing, and Picasso
Speaker 13: is the originator of those loans. We also help with resale,
Speaker 13: so when you buy an eighth or a quarter of
Speaker 13: a beautiful vacation home through Picasso and someday you decide
Speaker 13: to sell, we help with that sales process as well,
Speaker 13: and it's really easy.
Speaker 2: How long do people stay with their ownership, I'm curious
Speaker 2: about turnover.
Speaker 13: Yeah, it depends on the owner. But we estimate that
Speaker 13: the average owner is going to stay in their Picasso
Speaker 13: home for about five years because.
Speaker 2: They are staying in I mean, you're now three and
Speaker 2: a half years in so the people.
Speaker 13: Yeah, we're looking at cohort trends to estimate what we
Speaker 13: think the average life is going to be. A whole
Speaker 13: home somebody would typically stay in for you know, seven
Speaker 13: to eight years on average.
Speaker 3: Okay, let's say I'm interested in the home in the
Speaker 3: mountains in the winter, I want to ski there in
Speaker 3: the summer, i want a mountain bike there. Where do
Speaker 3: I leave my skis? Where do I leave my mountain bike?
Speaker 3: So the seven other families don't mess with my stuff?
Speaker 13: Well, one of the best parts of owning a home
Speaker 13: is that you get to keep your stuff there. That's
Speaker 13: true of owning a Picasso as well. We outfit every
Speaker 13: Picasso home with eight owners closets, so when you show
Speaker 13: up at the home, you pull your stuff out of
Speaker 13: your owner's closet and you enjoy the home with none
Speaker 13: of the headaches or none of the hassle.
Speaker 2: What are some of the common headaches so that come
Speaker 2: up in this process.
Speaker 13: Well, there aren't really any any headaches because we're taking
Speaker 13: on that burden as the manager of the property. But
Speaker 13: I would say the compromise associated with co ownership is
Speaker 13: that you don't own one hundred percent of the home,
Speaker 13: which means you're not going to get one hundred percent
Speaker 13: of the calendar.
Speaker 2: You can't say, hey, honey, let's just for the weekend
Speaker 2: go up and you.
Speaker 13: Know, well, actually you can. You can, so as long
Speaker 13: as the home is available, you can. But basically, the
Speaker 13: main compromise with co ownership is that you're sharing the
Speaker 13: calendar with other people. So the way that most of
Speaker 13: our owners describe the calendar benefit is you're going to
Speaker 13: get about eighty percent of the dates that you want
Speaker 13: out of the calendar, and you're happy to make the
Speaker 13: trade off on the twenty percent that you're not getting
Speaker 13: because you're saving so much money. It's about eighty five
Speaker 13: percent less expensive to own a picasso when compared to
Speaker 13: owning the whole home. It's about seventy five percent less
Speaker 13: expensive per night than renting a comparable Airbnb or short terminal.
Speaker 13: So it just makes a lot of sense financially, and
Speaker 13: it's a lot easier as well, because we manage the
Speaker 13: whole experience.
Speaker 3: How do you make decisions that for personalization. For example,
Speaker 3: let's say I want to get a hot tub at
Speaker 3: that mountain home, but you know the other families don't
Speaker 3: want a hot tub there.
Speaker 6: How do you do that?
Speaker 2: It's like the co op, right, kind of trusted.
Speaker 13: Yeah, it is analogous to the co op in some ways.
Speaker 13: But when owners buy into a Picasso, they're typically buying
Speaker 13: into the style of that home, the design of that home,
Speaker 13: which which we manage, and the amenities of that home.
Speaker 13: So if somebody wants to make a change, like let's
Speaker 13: say that you bought into a home without a pool,
Speaker 13: and later you decide you want a home with a pool,
Speaker 13: most people would just sell out of their Picasso without
Speaker 13: a pool and sell into a new one. But it
Speaker 13: is possible for all the owners in a home to
Speaker 13: actually vote and make a change to a home such
Speaker 13: as a bedroom or a pool, and in that scenario,
Speaker 13: Picasso would facilitate the project on their behalf.
Speaker 2: Awstin I'm curious though, if you buy fractional ownership into
Speaker 2: a particular piece of property and then you sell, do
Speaker 2: you sell at the price you bought into or you
Speaker 2: with the market bear? Like, how does that work? Because
Speaker 2: can you lose money on that initial investment.
Speaker 13: Well, like any real estate purchase, yes you could lose money,
Speaker 13: but most real estate goes up in value over time,
Speaker 13: and that's certainly what's happened with our real estate. So
Speaker 13: people who have purchased a Picasso and later resold our
Speaker 13: customers have made on average a ten percent gain over
Speaker 13: what they paid. But it trans I mean with Piasso,
Speaker 13: you're buying a home. The only difference is you're buying
Speaker 13: a portion of it instead of the whole thing. So
Speaker 13: it trades just like the underlying real estate would if
Speaker 13: you were selling the whole home. But we make the
Speaker 13: process easier by facilitating the share of part of the home.
Speaker 3: There's a huge affordability problem in a lot of these towns,
Speaker 3: absolutely right. How do you handle pushback? I know that
Speaker 3: in some areas where you operate, for example in St. Helena, California,
Speaker 3: you had to reach a settlement with the town. How
Speaker 3: do you anticipate pushback on this model?
Speaker 13: Yeah, well, the housing affordability problem is real and it's
Speaker 13: here to stay. You know, homes aren't going to get
Speaker 13: a whole lot cheaper into the future. So what we're
Speaker 13: seeing is consumers are resorting to co ownership as a
Speaker 13: way to make housing more affordable.
Speaker 3: That could also be said to price out locals from
Speaker 3: living there.
Speaker 13: No, it actually has the opposite effect in a small town.
Speaker 13: So one of the challenges in a small vacation home
Speaker 13: community is that second home buyers are buying up a
Speaker 13: lot of the median priced homes. The beauty of this
Speaker 13: model is it's kind of like car pulling, but for
Speaker 13: second homes, where we're aggregating demand into fewer properties. So
Speaker 13: instead of having eight families in San Francisco buying median
Speaker 13: price homes and NAPA just to have them sit empty
Speaker 13: ten months per year, our model concentrates those eight families
Speaker 13: into one home, so it actually creates more opportunity for
Speaker 13: the local workforce. But like any new category, it takes
Speaker 13: time to be understood.
Speaker 2: Who's your typical buyer? Just got about thirty seconds.
Speaker 13: Yeah, So the typical buyer ranges from a you know,
Speaker 13: young family that's early in their career and maybe can't
Speaker 13: afford or can't justify owning the home of their dreams
Speaker 13: all the way to a very established, you know, empty
Speaker 13: nester that's looking for a special happy place for the family.
Speaker 2: To get a bulk, that's the range. Just quickly, is
Speaker 2: there a bulk? Is it like people a certain demographic
Speaker 2: in terms of age.
Speaker 13: I would say the sweet spot is like forty to
Speaker 13: sixty in terms of age. And I would say seventy
Speaker 13: to eighty percent of people are looking for a home
Speaker 13: that's within a two to three hour commute from their
Speaker 13: primary home.
Speaker 2: And just quickly, one last question ten seconds. Do you
Speaker 2: make money on every transaction? Does?
Speaker 14: How do?
Speaker 13: What's the business? We make money on the service fee upfront,
Speaker 13: and then we make money on the recurring services that
Speaker 13: we provide, including property management, financing and resell.
Speaker 2: Really interesting, really cool stuff.
Speaker 13: Thank you, Thank you so much.
Speaker 2: Austin Allison, co founder a CEO of Picasso, joining us
Speaker 2: here in studio.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from two to five pm Eastern Listen
Speaker 1: on Apple car Play and and brout Auto with a
Speaker 1: Bloomberg Business app, or watch us live on YouTube.
Speaker 2: Plenty ahead in our second hour, the weekend edition of
Speaker 2: Bloomberg Business Week, including the former drivetime radio talk show
Speaker 2: host turned influential YouTuber with two billion monthly viewers who
Speaker 2: now wants to sell you tim a supercar online. We
Speaker 2: mentioned her in last week's show and knew we wanted
Speaker 2: to hear from her directly. She joins us a little
Speaker 2: later on.
Speaker 3: Plus, it's springtime in the US, which means warm weather,
Speaker 3: blooming flowers, and the rejuvenation of the art market, questioned Mark.
Speaker 3: Our Pursuits teams spring culture opener featuring the tiny Mediterranean
Speaker 3: island nation known for Golden Visa's online gambling and tax
Speaker 3: advantages that wants to lure the ultra wealthy with art exhibitions.
Speaker 2: It's also probably home to some really great and expensive cars.
Speaker 2: I was kind of thinking as I read that story,
Speaker 2: and fast and expensive cars are where we start this hour.
Speaker 2: Our next guest is well known in the F one
Speaker 2: racing world as well as to fans of the Netflix
Speaker 2: show Drive to Survive.
Speaker 3: Gunther Steiner is the ambassador of the F one Miami
Speaker 3: Grand Prix that's taking place on May fifth. He's been
Speaker 3: eight seasons as the team principal for the has F
Speaker 3: one team and recently stopped by our New York studio.
Speaker 3: We began by asking him why Miami.
Speaker 15: Miami, Miami, I'm ambassador for the MEMI Gabrix.
Speaker 6: It is a new Grand Prix.
Speaker 15: It's only the first season that it's on this year,
Speaker 15: and they came in pretty big and they Reis de
Speaker 15: BArch in Formula one of organization, just how they do things,
Speaker 15: you know, just much more entertainment, much more activation, a
Speaker 15: lot more going on. So if anybody who wants to
Speaker 15: go and see a Grand Prix, Miami is pretty good
Speaker 15: because the.
Speaker 2: Kind of an event place right correct.
Speaker 15: It's it's an event. It's not just a car race,
Speaker 15: it's an event.
Speaker 6: There is a.
Speaker 15: Different races post a super Cup. There is a one
Speaker 15: Academy which is the Woman Racing Series. There's just a
Speaker 15: lot going on all day. It's a sprint weekend. Sprint
Speaker 15: weekend means there is a race already on Saturday, there's
Speaker 15: qualifying on Friday for the sprint race on Saturday, and
Speaker 15: then it's qualifying for the race on Saturday afternoon.
Speaker 6: So a lot of.
Speaker 15: Things going on and for sure it will be an
Speaker 15: exciting weekend.
Speaker 3: What does having a race in Miami bring to the
Speaker 3: race and also bring to the franchise?
Speaker 15: I think Miami is Miami going there, it's always it's
Speaker 15: a cool city.
Speaker 3: You know, we didn't do a remote from Miami.
Speaker 2: I have that well, I've been. Yeah, it's a great place.
Speaker 3: Exactly, you guys want to go there, you know, especially
Speaker 3: in the winter.
Speaker 15: Yeah, from New York winter, you know, yeah, sure no,
Speaker 15: but no if for the one people, it's also.
Speaker 6: They do such a good job.
Speaker 15: Organizing it. Stephen Ross and Tom Garfink just they put
Speaker 15: on this race somewhere I wouldn't say out of nowhere,
Speaker 15: but the idea behind to make it around the stadium
Speaker 15: and use the stadium to host the teams in their
Speaker 15: old hospitalities of the teams are set up in there,
Speaker 15: and with the general admission ticket you actually can have
Speaker 15: a look at that stuff. And also you can get
Speaker 15: very close. Just with the general admission ticket, which is
Speaker 15: the lowest class ticket, the cheapest one, you can get
Speaker 15: very close to the cast.
Speaker 6: So it's pretty cool what they came up with.
Speaker 2: Guntain, I think there's what five Grand Prix races now
Speaker 2: on North American soil. So is there a point working
Speaker 2: be too much? Like? How do you think about that?
Speaker 15: In the moment, there is enough in the moment, I
Speaker 15: would say for the future if the sports keeps on
Speaker 15: growing in the US. The US was the biggest growing
Speaker 15: market for Formula one in the last five years since
Speaker 15: Libert the media took over. They grew it in the
Speaker 15: States because it was underdeveloped in North America. That was
Speaker 15: only Mexico and Canada for a long time, and then
Speaker 15: Austin came in, and then Miami came in, and then
Speaker 15: Las Vegas came in. So I think in the moment
Speaker 15: they have to solidify the market here and then we
Speaker 15: can think about the next race. But in the moment
Speaker 15: it's not enough. It's the right amount.
Speaker 3: Forgive me, But I have to ask, who do you
Speaker 3: think is the most like driver and principle in F one?
Speaker 6: The most like driver?
Speaker 15: Yeah, Louis Hamilton, I would say he's the most like driver.
Speaker 3: What about the most disliked?
Speaker 6: I don't know.
Speaker 3: That's where I was going exactly, Yeah, I think, yeah,
Speaker 3: I think Lewis Hamilton, And that's fair to say he's
Speaker 3: a crowd favorite.
Speaker 6: Yeah, I think. So, it's good, you know, you forget
Speaker 6: about that. Daniel Ricardo is very like you know, well,
Speaker 6: you know, so.
Speaker 3: You can't have favorite kids, exactly.
Speaker 15: Yeah, you need to love them all, you know, so
Speaker 15: we love them all.
Speaker 6: What was I said?
Speaker 2: Is he a good fit? At Ferrari.
Speaker 15: Right, Oh, yes, yeah, I would say so. And I
Speaker 15: think he's motivated. He's now at the stage where he
Speaker 15: knows that it will be his last seat in F
Speaker 15: one driving, you know in F one, So I think
Speaker 15: it's every driver stream to go to ferrag at some
Speaker 15: style stage. I would say, I didn't I didn't get
Speaker 15: to know any drive, which I said. He he doesn't
Speaker 15: want to go to Ferrari, So I think he will
Speaker 15: fit him.
Speaker 6: Well, he's very good.
Speaker 15: He's got a very good relationship with Fred for sir,
Speaker 15: the team principle because when when he was up and
Speaker 15: coming in the in the law of series is, Fred
Speaker 15: was his his boss basically.
Speaker 6: So I think there's a good scene of j there.
Speaker 2: I'm going to say we are mate smarter on this
Speaker 2: subject thanks to our Hannah Elliott, who you know, covers
Speaker 2: our you know, our auto columnists here.
Speaker 3: But these are all my original questions.
Speaker 2: But one of the things we were actually talking about
Speaker 2: her with some other things earlier, and you know, she
Speaker 2: asked she moved up this point of like you know
Speaker 2: how you kind of create more parody, like you could
Speaker 2: often have a team that wins race after or race
Speaker 2: after a race in terms of Formula one, and we
Speaker 2: think about the Red Bull team right, who's done really well.
Speaker 2: So are there things that could be changed to kind
Speaker 2: of shake it up so that you don't have the
Speaker 2: same team over and over maybe taking top spot? And
Speaker 2: should it be done or how do you feel about
Speaker 2: the purity of like leaving it alone.
Speaker 15: I'm for leaving it alone. There's a lot of motors
Speaker 15: pot where there's balance of performance. You put more weight
Speaker 15: in the car, so you use the power, change the
Speaker 15: mechanicals or something exactly. But Formula one is the best
Speaker 15: man should win and the best machine. You know, if
Speaker 15: it's over and over again, there is a rule if
Speaker 15: somebody in the rules can make the best machine, he
Speaker 15: should have that advantage because they are the best. And
Speaker 15: I think it will keep on changing. There was a
Speaker 15: lot of things done that the field is so close together.
Speaker 15: If you think there is twenty cars out there and
Speaker 15: in some of the qualifyings between the first and the
Speaker 15: last is one second? How much is one second? Twenty cars,
Speaker 15: twenty different people, you know, ten different car made makes
Speaker 15: you know it's something amazing to have him in one second?
Speaker 6: Obviously it's not.
Speaker 15: I mean everybody would prefer that every weekend, another car
Speaker 15: would win, but I.
Speaker 6: Think in Formula one that's not possible.
Speaker 9: But when you think.
Speaker 2: About sailboat sometimes racing, right, they all have the same
Speaker 2: model and it's like a certain class in something. But
Speaker 2: you're right, like racing is, it's different.
Speaker 15: It's the best, the best machine, and the best man
Speaker 15: should win.
Speaker 2: The best team that figures it out, right, Yeah.
Speaker 6: Yeah, exactly, Yeah, that's for the best.
Speaker 3: But don't you think from a fan perspective or from
Speaker 3: the perspective of an audience or building that continuing to
Speaker 3: build that audience, it might be better for more parody.
Speaker 15: It might be short term better for more pality. But
Speaker 15: then it's it's becoming a stage sport if you manipulate
Speaker 15: the rules one, because then if somebody is not good,
Speaker 15: all of a sudden, he gets let's say, fifty horsepower
Speaker 15: more and he's gonna win. What is the next one doing,
Speaker 15: not develop the car, just try to ask for a
Speaker 15: favor to get even another twenty horsepower more. So, it's
Speaker 15: not really, that is not really what Formula one is about.
Speaker 15: Formula one is about the best people in the best machines.
Speaker 15: I think in the moment you have a little bit
Speaker 15: go back to Louise Hammerton. He won seven championships almost
Speaker 15: in a row, you know, and Mercedes was dominating. We
Speaker 15: forgot about that period, but then it ended. There is
Speaker 15: Mercedes now their fourth or fifth best. Now in the moment,
Speaker 15: it can happen to anybody. It can happen that the
Speaker 15: next three races Ferrari makes some development on their own,
Speaker 15: behalf without help of any authority, and catch up, you know,
Speaker 15: so that I think would be the best outcome.
Speaker 2: And sometimes there's a case of right, not only the
Speaker 2: equipment or the car, it's also the driver. Right, So
Speaker 2: the combination, like you just don't know what plays. You
Speaker 2: mentioned women and women racing, and I'm just curious about
Speaker 2: the F one Academy. How do you get more women
Speaker 2: out there and racing and will the academy do that?
Speaker 2: And what should be done to not only increase women
Speaker 2: in terms of racing, but also more diversity.
Speaker 6: I think we start with women.
Speaker 15: I think with the F one Academy program is started
Speaker 15: that and it's not short term. We will have a
Speaker 15: woman in a form. It takes some time. This is
Speaker 15: a new start to get women into racing because normally
Speaker 15: girls when they are small, they don't go go crafting boys.
Speaker 15: Let's say I take a number. We've got a million
Speaker 15: boys and we've got one hundred women. The chance to
Speaker 15: find a talent a million is much higher than to
Speaker 15: find them in one hundred. So we need to bring
Speaker 15: the amount of girls up which compete in lower classes
Speaker 15: to find this big talent to come in. Having now
Speaker 15: the academy, at least they can see that they can
Speaker 15: get into the academy, and we create a momentum around
Speaker 15: And even if the girls which are now in the
Speaker 15: academy cannot make it because they're already too old when
Speaker 15: they could get to, at least we create interest and
Speaker 15: maybe their daughters get into go crafting, and then all
Speaker 15: of a sudden we get the pool bigger.
Speaker 2: It's got to start a much younger. So it's got
Speaker 2: to start younger.
Speaker 15: They need to start younger, like the boys start five
Speaker 15: six years old.
Speaker 2: One other thing I want to ask you, because in
Speaker 2: sports increasingly we report on it here in Bloomberg, is
Speaker 2: the amount of money that's coming in from Saudi Arabia
Speaker 2: bare in the introduction into Middle Eastern money into f one?
Speaker 2: Is that a good thing? How are you saying about it?
Speaker 2: And how does.
Speaker 14: It change it.
Speaker 15: I don't think it changes F one in general. It's
Speaker 15: just like there is there is quite a few races now.
Speaker 15: There's five races now in the Middle East, right, But
Speaker 15: otherwise I think the Middle East is investing in old sports.
Speaker 6: If you look to investing in.
Speaker 2: Gold, we understand what they're doing. But you think it's okay,
Speaker 2: it's okay.
Speaker 15: Yeah, I think it's okay. There is that, there's nothing,
Speaker 15: there's nothing wrong with it. I think they are interested
Speaker 15: to invest in sports, and Formula one is one of
Speaker 15: the biggest global sports, so why should not they invest there.
Speaker 2: We got thirty seconds left. What's next for you? We
Speaker 2: know Miami, it's your focus.
Speaker 6: I don't know the rest. What is for me.
Speaker 15: I'm in a good place now. If there's something interesting
Speaker 15: for me coming along where I get a good challenge
Speaker 15: and a good opportunity with a vision to go on
Speaker 15: the podium, I take it. Otherwise, I keep on doing
Speaker 15: what I like to do, and.
Speaker 6: That is I have a choice another team. Perhaps, I
Speaker 6: don't know a lot of that.
Speaker 3: In the moment, I'm still thinking of putting a five
Speaker 3: year old behind the wheel of a go cart.
Speaker 2: You have a son, you.
Speaker 14: Can do it.
Speaker 13: I have a daughter, you know he's five?
Speaker 2: Well real quickly ten seconds? How young do they have
Speaker 2: to start?
Speaker 3: Said five or six?
Speaker 2: We did say five or six?
Speaker 13: D really yeah, yeah.
Speaker 3: My kid can't even get a glass of water without
Speaker 3: spilling it behind the wheel.
Speaker 2: Good to Thank you so much. Good luck and good
Speaker 2: luck in Miami gudn Steiner. He is ambassador of F
Speaker 2: one Miami Grand Prix. Joining us here in our interactive
Speaker 2: broker studio.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Listen live
Speaker 1: each weekdays starting at two pm Eastern on Apple car
Speaker 1: Play and Android Auto with the Bloomberg Business App. You
Speaker 1: can also listen live on Amazon Alexa from our flagship
Speaker 1: New York station Just Say Alexa playing Bloomberg eleven thirty.
Speaker 2: Well, our next guest was a highlight of this weekend's
Speaker 2: past Bloomberg Business Week podcast and broadcast. We actually caught
Speaker 2: up with our Bloomberg Auto columnst Hannah Elliott about the
Speaker 2: influential YouTuber who started an auction house to sell million
Speaker 2: dollar cars online. That site, tim sbx Cars, went live today.
Speaker 3: Here to tell us all about it is Alex Hershey,
Speaker 3: co founder of Supercar Blondie joining us from Dubai, which
Speaker 3: Carolina kind of think alex is a pretty good market
Speaker 3: to sell hyper cars, true or foss.
Speaker 16: True True, yes, definitely, but there are so many other markets,
Speaker 16: you know, and that's just why we started this, because
Speaker 16: there are collectors from all over the world who want
Speaker 16: these incredible cars.
Speaker 3: We'll talk to us a little bit about the need
Speaker 3: that you saw and why you started SPX cars. What
Speaker 3: was the need that needed to be fulfilled in your mind.
Speaker 16: I've been traveling the world for the last seven years
Speaker 16: and meeting collectors and dealers and OEMs, and what I've
Speaker 16: worked out is that there was no central location full
Speaker 16: of these collectors around the world to meet to buy
Speaker 16: and sell their cars. And so you know why we
Speaker 16: get calls from collectors and say, hey, listen, do you
Speaker 16: know where I can buy this car? Or do you
Speaker 16: know who can buy one of my cars? And I
Speaker 16: just didn't have the time to connect these guys. So
Speaker 16: now this platform is what solves that issue. And we're
Speaker 16: here really to shake up how supercars and premium cars
Speaker 16: are traded around the world.
Speaker 2: Well, and how's you know, just obviously first day the
Speaker 2: auction site went up up and running, went live what
Speaker 2: can you tell us about earlier activity? Actually, aren't it?
Speaker 16: Yeah, it's quite exciting actually, So yeah, we just went
Speaker 16: live a few hours ago. On our listings, we have
Speaker 16: tens of thousands of views already and we have registered
Speaker 16: bidders from all over the world. We just our latest
Speaker 16: registered bittered was from Egypt and then we had one
Speaker 16: from Japan. So really they're in markets that we feel
Speaker 16: are underserved by these in house auctions and digital auction spaces.
Speaker 16: You know, there are so many collectors around the world
Speaker 16: who cannot travel physically in person to these in house auctions,
Speaker 16: and so for them just to be able to sit
Speaker 16: at home from whatever country they're in in the world
Speaker 16: and bid on their dream car from their home is awesome.
Speaker 2: So, Alex, does that mean they don't get to kind
Speaker 2: of take it for a test drive or kick the
Speaker 2: tires kind of thing. Do they just buy it online
Speaker 2: and they've just got to kind of trust it? How
Speaker 2: does that work?
Speaker 17: Yeah, Look, they can go and see the car.
Speaker 16: We encourage buyers to go and see the cars in person,
Speaker 16: so the cars are available to go, and you know,
Speaker 16: these collectors, it's not the first time they're doing this, right,
Speaker 16: these collectors are used to buying cars from overseas and
Speaker 16: shipping them into their own location, So if they have
Speaker 16: any questions about the car, they can go and send
Speaker 16: one of their team, you know, collected the collection manager
Speaker 16: to go see the car in person. Otherwise we've got
Speaker 16: we on every single listing. We've got about one hundred
Speaker 16: and fifty photos of the car, and the folks need
Speaker 16: to be super recent and through our network we can
Speaker 16: always like make sure that these cars are listed as is.
Speaker 3: Hey, I'm wondering about just the development of you professionally
Speaker 3: over the last seven years, as you mentioned, and sort
Speaker 3: of the way that you've built this not just this
Speaker 3: media organization, but the way you built this profile within
Speaker 3: this niche community. Where did you interact with so many
Speaker 3: people who can afford these vehicles, I mean vehicles that
Speaker 3: are literally once in a one and a one of
Speaker 3: a kind vehicles. How do you think that car community
Speaker 3: views you now versus when you started back in twenty
Speaker 3: seventeen or went full time in twenty seventeen.
Speaker 17: So differently, so differently.
Speaker 16: Yeah, when I started in twenty seventeen, I came at
Speaker 16: or came to this world as like a layman, right,
Speaker 16: I wasn't a car expert, a car journalist. I was
Speaker 16: just a girl who loved cars. And when I came
Speaker 16: into the community, it was really male focused, and I
Speaker 16: really wasn't that welcome, to be honest with you, I was,
Speaker 16: first of all, I was a woman, which is fine,
Speaker 16: but also I was coming in from a social media perspective,
Speaker 16: and the automotive world has really rely on traditional journalists
Speaker 16: for you know, since time began to advertise their cars,
Speaker 16: and coming in from social media, this whole new form,
Speaker 16: this whole new world, it really wasn't understood and we
Speaker 16: were just kind of taken as cowboys, right. But over
Speaker 16: the last few years, manufacturers now I've realized that social
Speaker 16: media is a crucial way to get the word out
Speaker 16: about new cars and advertise their cars. So for me
Speaker 16: to have kind of the biggest presence online for the
Speaker 16: automotive world has been quite a shift from seven years
Speaker 16: ago to now.
Speaker 17: And now you know, I'm taken very seriously, which is
Speaker 17: very nice.
Speaker 2: So you are taken very seriously, and I guess that's
Speaker 2: why people will entrust you with their expensive cars. Like,
Speaker 2: let's talk about that process. Because some of these cars,
Speaker 2: you know, millions of dollars. There's not necessarily a lot
Speaker 2: of them, depending on the specific car, So how do
Speaker 2: you actually find them and get a hold of them out.
Speaker 16: Well, I suppose that's also why we're doing what we're
Speaker 16: doing with his platform, because I have been hunted. That's
Speaker 16: been my whole job, hunting down these super rare, super
Speaker 16: collectible cars from around the world, and so doing that,
Speaker 16: I have developed this network of collectors and dealers who
Speaker 16: really have the krem de la creme of cars in
Speaker 16: the world. And it was always really hard for these
Speaker 16: guys to sell it because they might know a few
Speaker 16: people in their own country or in their own network
Speaker 16: who might want to buy one of these cars, but
Speaker 16: to reach people outside of their country was really difficult.
Speaker 16: You had to go through private broke of private broker,
Speaker 16: private broker. It would take months and months and months.
Speaker 16: So for me, I have that network already built, so
Speaker 16: I have. What was really amazing is I didn't expect
Speaker 16: that kind of feedback from them. They said, take my car,
Speaker 16: take my car, I trust.
Speaker 17: How do you get them?
Speaker 2: How do you get them to trust you?
Speaker 5: Though?
Speaker 2: I mean, these are valuable cores and in that case
Speaker 2: is super rare.
Speaker 16: Well, they've been they've been trusting me to drive these cars, and.
Speaker 17: You know, and which is just amazing for me.
Speaker 16: I'm driving ten million dollar cars that do not belong
Speaker 16: to me, so the trust was there to be able
Speaker 16: to get me behind the wheel. And now with the
Speaker 16: brand up built and the reach that I have, you know,
Speaker 16: we get two billion views per month on average, and
Speaker 16: for people wanting to sell their cars, that is really
Speaker 16: really valuable. So for them to know, Okay, you've got
Speaker 16: this reach and you can get as many eyeballs as possible,
Speaker 16: or more eyeballs than any auction house in the world,
Speaker 16: take my car.
Speaker 2: Here you go, and you don't have to put up
Speaker 2: okay and be a little silly, but I'm serious because
Speaker 2: I'm just thinking, oh my gosh, do you have to
Speaker 2: put up a bard, you have to do anything? Like
Speaker 2: do you have to for them to say, okay, here
Speaker 2: take the car.
Speaker 16: And so basically what's good is the seller just keeps
Speaker 16: their car where it is right So with in house auctions,
Speaker 16: they would usually have to ship their car to wherever
Speaker 16: the auction is being held, which could be halfway across
Speaker 16: the globe.
Speaker 17: They would have to take our insurance.
Speaker 16: It's a big risk right, So for us, the seller
Speaker 16: just keeps the car wherever it is right now, which
Speaker 16: mitigates the risk if the fees are way lower on
Speaker 16: the digital platform because we don't have the millions of
Speaker 16: dollars that goes into creating these in house auction spaces, right,
Speaker 16: so we can keep the fees lower for the buyer
Speaker 16: as well.
Speaker 3: We'll talk a little bit about those fees. Give us
Speaker 3: an example of the transaction fee that you would take
Speaker 3: in order to facilitate a transaction here.
Speaker 17: Yeah.
Speaker 16: Sure, So for the seller, it's just admin fees, so
Speaker 16: it literally starts at two hundred and fifty dollars. You
Speaker 16: can sell your car on our platform to for two
Speaker 16: hundred fifty dollars. And so if you want a professional photography,
Speaker 16: we have a whole team of photographers around the world
Speaker 16: who will come to you in whatever country you're in
Speaker 16: and actually take those photos. That cost is nine hundred
Speaker 16: and fifty dollars. Then we have our white Glove service.
Speaker 16: So that's when you have a really really special collect
Speaker 16: action or a one off car there's worth you know,
Speaker 16: twenty thirty million dollars. We can customize the way that
Speaker 16: we sell that car. We can even have like a
Speaker 16: preview somewhere beautiful and invite all of these potential buyers.
Speaker 17: So that's the seller.
Speaker 16: The buyer is only five percent on top of the
Speaker 16: sales price. So when you look at in house auctions
Speaker 16: between the buyer and seller, it can be around fifty
Speaker 16: twenty percent, So ours is five percent, which you know
Speaker 16: is a lot less for the buyer.
Speaker 2: Hey, just thirty seconds. Are there enough truly rare cars
Speaker 2: in the world to support your business?
Speaker 15: You know?
Speaker 16: I was asking that when I first started traveling around
Speaker 16: the world trying to find them to film them. Now
Speaker 16: I know there is because we traveled every single day
Speaker 16: for seven years to find these cars, and we found
Speaker 16: hundreds and hundreds and hundreds of them.
Speaker 17: So they're all going to be on our site.
Speaker 2: Ten seconds. What's what's one real quickly that you that
Speaker 2: might be interesting to buyers?
Speaker 16: Real quick merceds one, AMG one. It's the first time
Speaker 16: it's ever going to be for auction.
Speaker 6: How much?
Speaker 1: Oh?
Speaker 2: Yeah, how much?
Speaker 17: Well, we can't say yeah, but it doesn't.
Speaker 6: There the reserve.
Speaker 17: Yes, is there a reserve price? There is a reserve.
Speaker 16: We can't say the reserve, but once you near the
Speaker 16: reserve price, you're going to be able to see it
Speaker 16: on the side, it'll say near reserve price and then
Speaker 16: everyone's like, oh, the next bid it could sell.
Speaker 2: All right, well, listen, come back soon and we'll check
Speaker 2: in with how it's all going. Alex. Thank you Alex Hershey,
Speaker 2: co founder a supercar Blondie. Of course, her new live
Speaker 2: auction website has just gone up xbx cars. Really great
Speaker 2: to check in with her. Joining us there from Dubai.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from two to five pm Easter Listen
Speaker 1: on Apple car Play and then brought auto with a
Speaker 1: Bloomberg Business app or watch us live on YouTube.
Speaker 2: It's time for the Green Culture Opener, courtesy of our
Speaker 2: Bloomberg Pursuit Steam, which means something at art, something at books,
Speaker 2: something to see on the bigger, little screen. It is
Speaker 2: all here. These stories, by the way, featured in the
Speaker 2: new issue at Bloomberg Business Week on newstands, already online
Speaker 2: at Bloomberg dot com, Slash BusinessWeek, and of course tim
Speaker 2: on the Bloomberg terminal.
Speaker 3: For more on this, we're joined by the editor of
Speaker 3: Bloomberg Pursuits, Chris Rouser, along with the Bloomberg Arts columnist
Speaker 3: James Tarmi. Hey, Chris, I want to start with you
Speaker 3: and just sort of get a holistic view of how
Speaker 3: you think about putting together the Spring Culture Opener, because
Speaker 3: it's got a lot of culture in it.
Speaker 18: Yeah, yes, it sure does. Spring is a good time
Speaker 18: for TV and movies because film studios are building up
Speaker 18: for the summer blockbuster season. Streamers want to get out
Speaker 18: their TV shows before Emmy deadline. Books are also coming
Speaker 18: out before the summer because they want to be the
Speaker 18: hot summer book. So there's just always a lot going on.
Speaker 18: And this summer the great year for global art biennials,
Speaker 18: which is you know, fine art, contemporary art at the
Speaker 18: Whitney in New York and Venice, and so there's just
Speaker 18: a lot to talk about right now, and we were
Speaker 18: excited to have James oversee all of it. And so
Speaker 18: this year we had Malta on our where to Go lists,
Speaker 18: our annual places you should travel in twenty twenty four lists,
Speaker 18: and it would because malta little island nation off of Sicily,
Speaker 18: is having an art biennial, a big contemporary art fair
Speaker 18: for the first time this year, and they're also opening
Speaker 18: later this year, hopefully a contemporary art center like a
Speaker 18: permanent museum. And so I said, James, you should go
Speaker 18: to Malta and check all of this out.
Speaker 14: And I thought he was joking, But when I realized
Speaker 14: that he was serious, I why do you.
Speaker 2: Think he was joking?
Speaker 14: First of all, well, it's just, you know, Malta is
Speaker 14: not necessarily synonymous with contemporary art, which is the entire
Speaker 14: point of what I ended up writing about, and the
Speaker 14: entire point of what all these people are trying to do.
Speaker 14: Malta is predominantly famous as either a tax haven or
Speaker 14: a country that has been issuing these so called golden passports,
Speaker 14: which allow people to have Malti's passports and therefore access
Speaker 14: to the EU, which they sell for a lot of money.
Speaker 14: It's not necessarily known as with its finger on the
Speaker 14: pulse of the contemporary art scene. So that's sort of
Speaker 14: why I thought he was being lightly facetious. But when
Speaker 14: I went there, I was actually quite dazzled by the
Speaker 14: efforts that people had put into actually making this very
Speaker 14: very small place and interesting destination for our lovers.
Speaker 3: James, you think it's reputation though as a place for
Speaker 3: golden passports, as a place for gambling and in the
Speaker 3: words of some folks you spoke to as a place
Speaker 3: to launder money. We'll hold it back when it comes
Speaker 3: to art.
Speaker 14: Honestly, the thing is that we just simply don't know, right.
Speaker 13: You know.
Speaker 14: The thing about reputations, as the saying goes, is that
Speaker 14: it's a lifetime to make and just takes a little
Speaker 14: bit to rip apart. So I think the cultural reputation
Speaker 14: of the island is going to definitely take some time.
Speaker 14: That being said, they are really looking to this as
Speaker 14: a means forward passed this sort of present perceptions about
Speaker 14: the island as a sunny but shady place.
Speaker 2: I have to say, there's a line in the story
Speaker 2: which should be an easy touristic cell. The country boasts
Speaker 2: spectacular history, storybooks, cities, and dramatic citadels, all drenched in daylight,
Speaker 2: so dazzling that sunglasses are more of a necessity than accessory.
Speaker 2: I love that line. And Chris, as you were like,
Speaker 2: as James came back and kind of was telling you
Speaker 2: about what was going on, what kind of jumped out
Speaker 2: for you before we get him to kind of dig
Speaker 2: into some of the details of what he saw.
Speaker 18: You know, I had heard of I've never been to Malta,
Speaker 18: but I know I actually know some people who are
Speaker 18: doing the passport program. I have plenty of friends who
Speaker 18: have been, and so I've always known it's a beautiful
Speaker 18: place with some great, very interesting history. And what really
Speaker 18: excited me about what James saw was that for this
Speaker 18: biennial they put art all over the islands. They put
Speaker 18: art in castles, they put them in grain silos and
Speaker 18: old citadels. There were performances in beautiful fields on the
Speaker 18: cliff side, and I just thought it would be like
Speaker 18: such a great place to go with fresh eyes and
Speaker 18: see interesting art that you've never seen before.
Speaker 3: Al Ron, go back people who are doing the Golden
Speaker 3: Passport thing, because it's basically eight hundred thousand bucks to
Speaker 3: just get a passport for the EU by going to Malta.
Speaker 18: Yeah, it's you don't have friends doing that, No, guess.
Speaker 3: I gotta hang out with Chris Moore.
Speaker 2: I have to say, looking at the story too online,
Speaker 2: just some of the pictures, so James tell us about
Speaker 2: what you saw.
Speaker 14: The thing is that they do have all of these
Speaker 14: unbelievable places as showcases for artwork. So I was in
Speaker 14: the historic Grandmaster's Palace of the Knights of Malta looking
Speaker 14: at different works. I was trekking, as Chris says, to
Speaker 14: the island of Gozo, where I climbed up to the
Speaker 14: top of a citadel and into these unused green silos
Speaker 14: where there was this like machine that was strobing lights.
Speaker 14: I mean, it was very, very cool, and it allowed
Speaker 14: me to see the island in a way that I
Speaker 14: absolutely never would have even if I had been there
Speaker 14: as a tourist. And also it was a showcase for
Speaker 14: all these old places, even though these old places were
Speaker 14: showing very new things.
Speaker 2: It's very small if you think it, like, if you
Speaker 2: go to see this, like you're gonna you're gonna walk
Speaker 2: around the island, right and see a lot of your
Speaker 2: old trade in the history.
Speaker 14: Yeah, it's the actual old city of Valletta. You will
Speaker 14: recognize it from Game of Thrones shots. You know, it's
Speaker 14: very classically well it goes back to Game of Throne,
Speaker 14: well kind of, I guess. But the rest of the
Speaker 14: island is also quite picturesque. Then there are parts of
Speaker 14: it that are not at all these new developments and
Speaker 14: resorts and stuff.
Speaker 3: But okay, James, I just wanted to touch on this idea
Speaker 3: of what the art market is going to look like
Speaker 3: this year, because I didn't know this until reading your story,
Speaker 3: but twenty twenty three wasn't so great of a year
Speaker 3: for the folks selling art.
Speaker 14: Yeah it wasn't a disaster, but it was not great.
Speaker 14: Global sales down about four percent, but of course that
Speaker 14: doesn't count for inflation, so they're they're actually down quite
Speaker 14: a bit more than that. But more to the point,
Speaker 14: as I say in this piece, the art market creates
Speaker 14: its own momentum. Right, people get excited, and then they
Speaker 14: get other people get excited, and then then there's there's buzz,
Speaker 14: and there's and there's a market, and there's purchasing that
Speaker 14: didn't happen last year, and one that made it hard
Speaker 14: hard to write pieces, and two it made it hard
Speaker 14: to sell art. And so people are really hoping that
Speaker 14: this is the year that contemporary art, but also kind
Speaker 14: of generally twentieth and twenty first century artworks broadly sort
Speaker 14: of get their mojo back. But really what that comes
Speaker 14: down to has nothing to do with art and everything
Speaker 14: to do with interest rates.
Speaker 2: Is this amazing. I was really surprised. I just thought
Speaker 2: people who buy art are like, they.
Speaker 3: Don't care they're like people who just bought pay cash for.
Speaker 2: A place to take out some gold bars. Right, and
Speaker 2: just like by this piece.
Speaker 14: Of art, you would be stunned by how much of
Speaker 14: the art market is built on debt.
Speaker 2: That amazing.
Speaker 6: I had no idea any.
Speaker 2: Said prime loans.
Speaker 14: I don't know know, well, actually you know the debt.
Speaker 14: Occasionally people do get bridge loans, particularly galleries, because they
Speaker 14: have short and liquidity crunches.
Speaker 2: All right, well, I can't afford art masterpieces and I yeah,
Speaker 2: other things can't afford, but I can't afford books and
Speaker 2: going to see movies or my streaming services. So Chris
Speaker 2: take us to some of the things we can read
Speaker 2: and what we can see on the bigger little screen.
Speaker 2: How did you guys kind of pull that list together?
Speaker 18: So we have our contributing movie credit, movie and TV
Speaker 18: critic Esther Zuckerman. She has seen a ton of the
Speaker 18: movies already that are coming out because they've been out
Speaker 18: and festivals and stuff. Some are actually there's this one
Speaker 18: Zandia movie, Challengers, that has actually been delayed quite a bit.
Speaker 18: And so she she did a great preview of the
Speaker 18: TV shows and movies that you should see. And James Also,
Speaker 18: James is a really fast reader and he read tons
Speaker 18: of books Gallley form.
Speaker 2: Just becuse nothing was going on in the art market exactly.
Speaker 18: Right, I guess not.
Speaker 3: But yeah, I'm really fun fun stuff command Yeah, okay, James,
Speaker 3: I can't believe you got to read all these books.
Speaker 3: That's pretty cool thing to do for work. Ian Fleming
Speaker 3: known for James Bond.
Speaker 14: Yes, not necessarily known for being the grandson of one
Speaker 14: of the most important British financiers, who effectively was able
Speaker 14: to corral a tremendous amount of British capital and put
Speaker 14: it into American railroads. But that's that's a side note. Yeah,
Speaker 14: a cool side note, a very cool side note. The
Speaker 14: man had a very very interesting life, and oftentimes he's
Speaker 14: conflated in the contemporary imagination with his kind of most
Speaker 14: famous character, which is James Bond. But he while also
Speaker 14: being debonair and British and possibly working for the services
Speaker 14: and kind of being a real what could generously be
Speaker 14: described as a ladies man, what could more accurately be
Speaker 14: described as a serial womanizer. You know, he was actually
Speaker 14: quite different than Bond and a very very interesting person.
Speaker 14: And so this new biography of him has unparalleled access
Speaker 14: to the Fleming family's papers, so you get all of
Speaker 14: this new information that helps reappraise our understandings of who
Speaker 14: he actually is.
Speaker 2: Chris, is there a book that kind of stands out
Speaker 2: for you?
Speaker 18: Yeah, there's a few. I'm really excited about RuPaul's memoir
Speaker 18: The House of Hidden Reading Meanings rather the House of
Speaker 18: Hidden Meanings. And you know, RuPaul has had such an
Speaker 18: interesting career and life and has sort of famously has
Speaker 18: a lot of sort of wisdom to impart and so
Speaker 18: I'm excited for that. And the author Claire Masud, also
Speaker 18: who always has something wonderful, has a book called This
Speaker 18: This Strange, Eventful History that's coming out to me.
Speaker 2: Should we end on the American Nightmare?
Speaker 18: Well, as always, do.
Speaker 2: You want to just give us a quick rundown of
Speaker 2: this movie?
Speaker 18: The movie is Civil War and it's from filmmaker filmmaker
Speaker 18: Alex Garland, and it stars Karson Dunce and some other
Speaker 18: great people. And it's about a war, a civil war
Speaker 18: in America, and it doesn't really dwell on why the
Speaker 18: war started or who the two sides are. It's not
Speaker 18: really a red stave versus Blue stage story. It's really
Speaker 18: just a kind of almost like Saving Private Ryan battlefield movie,
Speaker 18: except for the battlefields are cities and towns and farms
Speaker 18: in America. And esther the critics that it was incredibly
Speaker 18: chilling and powerful to watch. She said the last thirty minutes,
Speaker 18: she held her breath for the last thirty minutes. She's
Speaker 18: never seen anything like it, So I think it's going
Speaker 18: to make a big splash and be tough to watch.
Speaker 14: Yeah, you know, honestly, it's a different kind of war
Speaker 14: movie because the backdrop is American town's cornfields. Yeah, us
Speaker 14: the US capital. This is not a movie where it's fictionalized. Really,
Speaker 14: it's it's a movie where it tries to be as
Speaker 14: realistic as possible, which is I think what the really uncanny,
Speaker 14: chilling part of it is depressing.
Speaker 2: I think I'll go to Malta instead.
Speaker 3: I'll just read, maybe read a book, I don't know,
Speaker 3: create my own art, yeah.
Speaker 18: Exactly, Borrow some money and got a golden.
Speaker 3: Yeah, hang out with Chris.
Speaker 6: He'll send you to Malta.
Speaker 14: You can take us offline and talk some more with you.
Speaker 3: Hey, big thank you to Bloomberg Art's collednist James Tarmi,
Speaker 3: along with the editor of Bloomberg Pursuits, Chris Rouser.
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