WEBVTT - Private Equity Fees Are Ripe For The ’Vanguard Effect’ 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge. You. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits, each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.959 Podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:25.080 at Bloomberg dot com. Well, the Wall Street Journal is 0:00:25.239 --> 0:00:29.160 reporting that Vanguard Group held preliminary talks with private equity 0:00:29.200 --> 0:00:33.080 firms as it considers offering alternative investments to its clients. 0:00:33.320 --> 0:00:36.199 To get the latest returned to Eric call Tunist. Eric 0:00:36.320 --> 0:00:38.760 is a senior et f annalyst for Bloomberg Intelligence based 0:00:38.760 --> 0:00:41.000 in Princeton, New Jersey. Eric, thanks so much for joining us. 0:00:41.400 --> 0:00:43.920 What do you think Vanguard is doing here as it 0:00:43.960 --> 0:00:46.479 takes a look at the private equity space. Yeah, I 0:00:46.520 --> 0:00:48.159 think a lot of people when they first look at this, 0:00:48.200 --> 0:00:51.360 they think they're going to offer mutual funds right for 0:00:51.400 --> 0:00:54.600 the masses, But this is a little different. What the 0:00:54.720 --> 0:00:58.680 story really taps into, in my opinion, is the growing 0:00:58.760 --> 0:01:03.560 advisory businesses Vanguard. Vanguard has five trillion a little more 0:01:03.600 --> 0:01:06.520 than that, actually in fund assets, but it's only got 0:01:06.520 --> 0:01:09.760 about a hundred billion in advisory assets. This is money 0:01:09.800 --> 0:01:14.600 that it gives a tax. Advice manages your portfolio, but 0:01:14.720 --> 0:01:17.280 that's a growing business of theirs, And what they're what 0:01:17.360 --> 0:01:20.959 they're looking at is, hey, we're advisors now and we 0:01:21.120 --> 0:01:24.280 offer obviously exposure to public markets, but we see that 0:01:24.360 --> 0:01:29.360 there's less companies going public, they're waiting longer. Private equity 0:01:29.480 --> 0:01:31.559 is where there's a lot of wealth to be made. 0:01:31.920 --> 0:01:35.880 Potentially we could offer this to those clients, at least 0:01:35.880 --> 0:01:39.080 the ones that pass the accredited investor test, which most 0:01:39.160 --> 0:01:42.360 retail investors I think that use Vanguard would uh, And 0:01:42.440 --> 0:01:45.679 so it's in my opinion pretty logical. The private equity 0:01:45.720 --> 0:01:47.800 market is expected to grow their skating to where the 0:01:47.800 --> 0:01:50.480 puck will be. The interesting part is will they be 0:01:50.520 --> 0:01:54.840 able to offer it in vanguardian fees? Right now private 0:01:54.840 --> 0:01:57.720 equity fund could be one or two percent, if not more. 0:01:58.240 --> 0:02:01.240 Vanguard is used to offering funds at ten basis points. 0:02:01.240 --> 0:02:04.760 So yeah, that's a big question mark, but certainly it's 0:02:04.800 --> 0:02:09.600 not surprising, especially in the post Vogel Vogel Vanguard is 0:02:09.639 --> 0:02:12.440 a little more aggressive. Well, I want to pick up 0:02:12.480 --> 0:02:14.960 on exactly that point the whole concept of fees here, 0:02:14.960 --> 0:02:18.640 because Vanderguard is the indexing giant, They're really the ones 0:02:19.000 --> 0:02:22.960 with John Vogel, who really came up with the idea 0:02:23.200 --> 0:02:26.520 of a low fee type of funds that just tried 0:02:26.560 --> 0:02:30.600 to track the market performance. Uh. They arguably have been 0:02:30.639 --> 0:02:34.119 responsible for what we've seen across the asset management industry 0:02:34.680 --> 0:02:36.840 with a lot of the firms facing a lot of 0:02:36.880 --> 0:02:40.760 print pressure is due to those lowered fees. Will Vanguard 0:02:40.800 --> 0:02:44.680 do the same thing to private equity? So yeah, I 0:02:44.760 --> 0:02:47.840 think they could start that ball rolling. Uh. You know 0:02:47.919 --> 0:02:51.560 what's interesting is Vanguard has this situation where they offer 0:02:51.680 --> 0:02:56.000 active mutual funds and about half of the one point 0:02:56.080 --> 0:02:59.520 three trillion they have an active mutual point assets is subadvised. 0:03:00.240 --> 0:03:02.640 I think they could do something similar here. But what's 0:03:02.680 --> 0:03:05.920 interesting about those active mutual fund assets is that the 0:03:06.280 --> 0:03:09.760 asset weighted average fee is about twenty basis points. So 0:03:09.800 --> 0:03:12.280 they figured out a way to get active cheap. They 0:03:12.400 --> 0:03:14.280 probably do the same thing with private equity. They're just 0:03:14.320 --> 0:03:16.639 not going to offer something expensive. Now. The question is, 0:03:16.720 --> 0:03:18.880 let's say they start doing this and they offer a 0:03:18.880 --> 0:03:23.080 fund for private equity that's say forty basis points or something. Um, yeah, 0:03:23.160 --> 0:03:26.000 I think that could start to create what we call 0:03:26.160 --> 0:03:29.480 this the Vanguard effect. It's not just Vanguard offering it cheap. 0:03:29.840 --> 0:03:32.800 It's that they force others in the neighborhood to lower 0:03:32.840 --> 0:03:34.600 their fees. That's just been going on in E T 0:03:34.760 --> 0:03:38.360 F and funds for the last thirty years. So yeah, 0:03:38.520 --> 0:03:40.720 I think it could be something. It just probably is 0:03:40.720 --> 0:03:43.520 going to take quite a while. Again, given that the 0:03:43.560 --> 0:03:46.480 advisory assets they have is only about a hundred billion, 0:03:47.000 --> 0:03:49.119 so that's why this is going to be a very 0:03:49.200 --> 0:03:52.040 slow process. But look, I've looked at the fees. They're 0:03:52.120 --> 0:03:54.680 kind of right for disruption, I would say, and Vanguard 0:03:54.720 --> 0:03:58.200 is the king of disruptors in asset management. So that 0:03:58.240 --> 0:04:00.800 brings me to my question, what has been the response 0:04:01.560 --> 0:04:04.880 from the private equity community today, Because when Vanguard you know, 0:04:04.920 --> 0:04:08.200 starts looking at you know, your business, much like when 0:04:08.240 --> 0:04:11.040 Amazon looks at you know, a certain business, whether it's 0:04:11.040 --> 0:04:17.359 retail or groceries, competitors take notice. Yeah. I've been looking 0:04:17.400 --> 0:04:19.599 on Twitter at some of the reaction. I think a 0:04:19.600 --> 0:04:21.520 lot of people think, first of all, do you really 0:04:21.520 --> 0:04:26.159 want Vanguard type investors in all liquid uh, you know funds. 0:04:26.200 --> 0:04:28.760 That's one thing I don't. I think a lot of 0:04:28.800 --> 0:04:31.159 the best private equity and the best hedge funds because 0:04:31.480 --> 0:04:36.520 Vanguard offers hedge funds type alternative strategies in mutual funds already, 0:04:36.560 --> 0:04:40.159 so they do all. Uh, they haven't really you know, 0:04:40.240 --> 0:04:43.400 completely disrupted the hedge fund business with that, So I 0:04:43.400 --> 0:04:45.000 don't think there's a lot of fear. I don't think 0:04:45.000 --> 0:04:47.240 there should be a lot of fear. Again, just like 0:04:47.279 --> 0:04:49.400 with mutual funds, if you're good and you've got something 0:04:49.440 --> 0:04:51.200 good going on, you'll be able to charge for it. 0:04:51.320 --> 0:04:53.560 So I think for the ones that might not be 0:04:53.600 --> 0:04:56.359 as good or might just be mediocre, those are the 0:04:56.360 --> 0:04:59.240 ones that probably should be worried about about being priced 0:04:59.279 --> 0:05:02.200 out or price down by a Vanguard. Just real quick, 0:05:02.279 --> 0:05:04.600 how much could this potentially be an effort of Vanguard 0:05:04.640 --> 0:05:08.400 to boost its own profits. I don't think it's much. 0:05:08.480 --> 0:05:10.920 I really think Vanguard is playing a different game. They 0:05:10.960 --> 0:05:14.520 just are not like other companies generally. That's the DNA 0:05:14.600 --> 0:05:17.360 of Vogel still in there, the mutual ownership structure. I 0:05:17.400 --> 0:05:19.719 just think they're really boy scout in their nature, and 0:05:19.720 --> 0:05:21.440 they just want to serve their clients, and they feel 0:05:21.440 --> 0:05:24.040 like private equity is something that would be missing from 0:05:24.040 --> 0:05:27.520 a client portfolio in the future. Eric Baun, thank you 0:05:27.560 --> 0:05:30.040 so much for being with us and sharing that perspective. 0:05:30.120 --> 0:05:33.720 Eric Boltun as a senior et F analyst for Bloomberg Intelligence. 0:05:49.040 --> 0:05:52.400 New York State has passed some of the most sweeping 0:05:52.839 --> 0:05:58.239 overhauls to rent end property legislation in its history, having 0:05:58.480 --> 0:06:02.520 some pretty big ripple effect throughout the real estate market. 0:06:02.600 --> 0:06:05.840 Joining us down to discuss Francis Greenberger, chairman and chief 0:06:05.839 --> 0:06:09.880 executive officer of Time Equities Incorporated, based in New York City. So, 0:06:09.960 --> 0:06:12.520 New York State agreed to strength and rent laws and 0:06:12.640 --> 0:06:16.320 tenant protections. From your perspective, what are the most important 0:06:16.400 --> 0:06:23.120 parts of this legislation. Well, I think the legislation represents 0:06:23.240 --> 0:06:27.680 very bad social and economic policy for the city and state, 0:06:28.040 --> 0:06:31.839 and I'm happy to tell you why. Uh. Politically, it's 0:06:32.080 --> 0:06:35.760 the narrative is that it's protecting one point three million tenants, 0:06:35.800 --> 0:06:38.800 but it really isn't because all of those tenants are 0:06:38.800 --> 0:06:42.680 rent stabilized and they were protected against under existing law, 0:06:43.360 --> 0:06:45.880 and the increases to the last five years have ranged 0:06:45.920 --> 0:06:51.280 between zero and one. Uh. Now, the part that is 0:06:51.320 --> 0:06:54.120 being affected are the few people that choose to lead 0:06:54.160 --> 0:06:57.160 those apartments, and it's about the new tenants who come in. 0:06:57.960 --> 0:07:01.440 Under the prior law, there were incentives for fixing up 0:07:01.440 --> 0:07:06.240 those apartments. There were extra increases which gave the owners 0:07:06.640 --> 0:07:11.480 some balance to pay the increased expenses and operating taxes 0:07:11.680 --> 0:07:14.800 and taxes which were not being covered by the zero 0:07:14.920 --> 0:07:19.560 or rent allowance for existing tenants. So was it there 0:07:19.600 --> 0:07:22.840 was a certain amount of balance that has been lost, 0:07:23.400 --> 0:07:27.440 and now owners will simply face increasing losses every year. 0:07:28.560 --> 0:07:31.200 So it's not good economic policy. So what is your 0:07:31.200 --> 0:07:35.080 expectation about what this new rent law will due to 0:07:35.280 --> 0:07:39.960 the value of housing. I think it will dramatically decrease 0:07:40.000 --> 0:07:43.880 the value of housing, which will have another effect, which 0:07:43.960 --> 0:07:46.600 is that it will erode the city's tax base. The 0:07:46.640 --> 0:07:49.600 city needs those taxes, So what are they going to do. 0:07:50.120 --> 0:07:54.000 They're going to increase the taxes on people own their 0:07:54.040 --> 0:07:58.080 own homes, whether their co opt condominiums or private houses. 0:07:58.960 --> 0:08:01.960 They will have to subs at eye these few thousand 0:08:02.160 --> 0:08:06.000 apartments that we're turning over and providing the economic lifeline 0:08:06.040 --> 0:08:09.440 for rental housing. So Francis just walk us through how 0:08:09.520 --> 0:08:14.280 it would dramatically lower property values in New York City. Well, 0:08:14.320 --> 0:08:17.440 if you buy a property where you expect your income 0:08:17.520 --> 0:08:20.840 to go down every year instead of stay the same 0:08:20.960 --> 0:08:23.480 or go up, you're obviously going to pay a lot 0:08:23.560 --> 0:08:27.120 less for it. Well, I guess one question that I 0:08:27.200 --> 0:08:31.559 have is there's one thing about buying an apartment building 0:08:31.560 --> 0:08:33.880 in order to rent out the individual units. It's another 0:08:33.920 --> 0:08:38.720 thing if you have a condominium building and you sell 0:08:38.880 --> 0:08:42.280 units to people. There's a question of whether there might 0:08:42.400 --> 0:08:47.960 be a greater demand for the condominium type units. If 0:08:48.000 --> 0:08:51.600 you are going to guarantee a certain degree of maintenance, etcetera. 0:08:51.800 --> 0:08:54.360 That might be UH sort of left behind a little 0:08:54.360 --> 0:08:57.600 bit on the rental units due to fee pressures. Well, 0:08:57.640 --> 0:09:01.880 clearly the future of rental house UH and the maintenance 0:09:01.920 --> 0:09:06.040 of it UH is in doubt because when owners don't 0:09:06.080 --> 0:09:09.160 have income to pay the costs, where is the money 0:09:09.200 --> 0:09:11.920 going to come from. We see that in the in 0:09:11.960 --> 0:09:15.400 the housing that the that the government owns, the Nightsha housing, 0:09:15.480 --> 0:09:18.240 and what a disaster that is because they are base 0:09:18.360 --> 0:09:22.680 basically starved it in this case their own revenue streams 0:09:22.800 --> 0:09:27.080 and didn't do the necessary repairs. So, yes, condominium or 0:09:27.160 --> 0:09:30.720 co op housing will be superior in the event in 0:09:30.760 --> 0:09:35.120 the sense that it will be UH better maintained On 0:09:35.160 --> 0:09:37.480 the other hand, those are the people who are going 0:09:37.559 --> 0:09:42.920 to be picking up the bill for the UH for 0:09:42.920 --> 0:09:47.480 for taking away this income stream and tax space on 0:09:47.640 --> 0:09:51.720 rent on the rental housing side. Another potential effect here 0:09:51.880 --> 0:09:56.040 is that as this situation increases, and again I think 0:09:56.080 --> 0:09:58.520 it's really very important to focus on the fact that 0:09:58.559 --> 0:10:02.800 this law really affects few thousand apartments that turn over 0:10:02.880 --> 0:10:10.000 every year and we're then being rented at UH significant 0:10:10.000 --> 0:10:17.839 increases or UH twenty. They used to allow increases, so 0:10:18.000 --> 0:10:22.360 um by taking that away, it made force increases on 0:10:22.559 --> 0:10:25.720 the people that are stabilized tenants in place, whereas I said, 0:10:26.000 --> 0:10:28.680 current law has left those increases at zero or one, 0:10:29.840 --> 0:10:32.080 so those people may also have to pick up the bill. 0:10:32.880 --> 0:10:37.440 This is a complete disbalancing of what previously was a 0:10:37.480 --> 0:10:41.400 working solution. So, for instance, how will this impact you're 0:10:41.440 --> 0:10:46.000 investing across a New York City. Well, I think that's 0:10:46.040 --> 0:10:48.920 the other thing. Uh Again, as I said, there was 0:10:48.960 --> 0:10:53.960 a semi balanced picture before, and now the political process 0:10:54.000 --> 0:10:57.280 has taken that away, which means that in the eyes 0:10:57.320 --> 0:11:00.600 of business people and investors like me, the state and 0:11:00.640 --> 0:11:04.040 the city are no longer reliable partners. And I think 0:11:04.080 --> 0:11:06.840 any person who invested with people who turned out to 0:11:06.840 --> 0:11:10.880 be unreliable certainly wouldn't come back and be invested. So 0:11:10.960 --> 0:11:12.800 I think you're going to see more and more people 0:11:13.440 --> 0:11:16.760 uh turning their investments to states that have a more 0:11:16.800 --> 0:11:22.880 reliable pattern of unfair pattern of treating business and investors 0:11:22.880 --> 0:11:26.520 in their in their states fairly. So friends, as which 0:11:26.520 --> 0:11:29.400 states are you turning your sites to instead of New 0:11:29.480 --> 0:11:33.720 York when it comes to investing, Well, we're currently we're 0:11:33.840 --> 0:11:37.679 just started a construction project in Florida. We just finished 0:11:37.679 --> 0:11:42.280 one in Michigan in a place called Grand Rapids. Uh, 0:11:42.520 --> 0:11:47.840 we're about to begin one in Chicago. So from your perspective, 0:11:47.880 --> 0:11:50.160 is this something that again it seems like it's a 0:11:50.200 --> 0:11:55.280 relatively uh low number of units we're talking about across 0:11:55.679 --> 0:11:58.439 you know, a big market. I mean, is the material 0:11:58.520 --> 0:12:00.840 it just doesn't seem that matio real to the overall 0:12:00.880 --> 0:12:04.439 economics of real estate in this market. Well, I think 0:12:04.640 --> 0:12:07.760 in addition, as I say, it disturbed the balance that 0:12:07.880 --> 0:12:13.559 existed between allowing existing tenants zero or one percent increases 0:12:14.240 --> 0:12:18.960 and still allowing landlords to maintain, not increase their profit margins. 0:12:19.000 --> 0:12:22.000 But they were able to pay the increased expenses out 0:12:22.040 --> 0:12:24.559 of the increased rents on the vacancies, so that has 0:12:24.600 --> 0:12:27.640 been taken away and landlords have been left with a 0:12:27.679 --> 0:12:31.120 losing proposition. You know, that leaves a very bitter taste 0:12:31.120 --> 0:12:34.960 in people's minds and and and in their investment intentions. 0:12:35.520 --> 0:12:40.040 And just like the Amazon reaction to politics in New 0:12:40.120 --> 0:12:42.199 York was negative, I think you're going to see this 0:12:42.360 --> 0:12:45.840 spread and this is a a second uh nail in 0:12:45.880 --> 0:12:50.920 the uh in the coffin, so to speak. So francis 0:12:51.000 --> 0:12:53.200 just just just real quick here, how much do you 0:12:53.800 --> 0:12:56.560 how much do you expect prices to go down in 0:12:56.600 --> 0:13:05.240 New York City? Uh? You? Um, real estate often trades 0:13:05.320 --> 0:13:10.640 on futures rather than existing and this has taken away 0:13:10.679 --> 0:13:14.960 to the future, the hope for something better and it's 0:13:15.280 --> 0:13:18.839 and it's replaced it with an expectation of something worse. 0:13:19.480 --> 0:13:24.000 Is that reduction? Is it more? I'm not sure the 0:13:24.040 --> 0:13:29.360 market will tell our storyection that would be news. Francis Greenberger, 0:13:29.440 --> 0:13:33.000 value of all rental housing in New York. Francis Greenberger, 0:13:33.160 --> 0:13:35.439 Chairman CEO of Time Equity, Inc. Thank you so much 0:13:35.520 --> 0:13:55.559 for joining us. Well about a year after shuttering it's 0:13:55.640 --> 0:13:59.200 US operations, toys are us is back to get a 0:13:59.200 --> 0:14:00.959 sense of what's going on there. We welcome to good 0:14:00.960 --> 0:14:04.880 friend Burt Flickinger, Managing director of Strategic Resource Group, joining 0:14:04.920 --> 0:14:08.000 us here in our Bloomberg Interactive Brooker Studio. So correct 0:14:08.000 --> 0:14:10.480 me if I'm wrong, Bert, So, the US business of 0:14:10.559 --> 0:14:14.200 Toys r US UH shuttered their operations about a year ago, 0:14:14.240 --> 0:14:16.640 but now they're coming back. How are they doing that? 0:14:16.920 --> 0:14:20.400 Coming back with a couple of stores, But it's already 0:14:20.400 --> 0:14:23.880 a proven concept and that they have scores of stores 0:14:23.920 --> 0:14:27.600 that are very successful Asia, India, parts of Europe. And 0:14:27.640 --> 0:14:31.840 it was affirmed by Kroger fred Meyer brilliant CEO Rodney 0:14:31.920 --> 0:14:36.840 McMullen that put six hundred Jeffrey Jeffries Toy Box Toys 0:14:36.920 --> 0:14:41.440 r US departments and stores within the Kroger stores, which 0:14:41.440 --> 0:14:45.880 are doing tremendously well. The other key comparable on the 0:14:45.880 --> 0:14:50.800 Bloomberg terminal is the toys have catalyzed a big part 0:14:50.840 --> 0:14:55.200 of Walmart, Target and Amazon's growth and on a total 0:14:55.240 --> 0:14:58.720 return basis in the last year, Walmart and Target are 0:14:58.720 --> 0:15:01.960 both up about forty or sent Amazon about the same 0:15:02.520 --> 0:15:05.560 and compared to the x RT or the SMP Retail 0:15:05.600 --> 0:15:09.040 Index is barely up at all, and they still can't 0:15:09.040 --> 0:15:12.480 handle the big box stores still can't handle the demand 0:15:13.640 --> 0:15:15.880 of the ten billion that Toys r Us did in 0:15:15.920 --> 0:15:19.720 the US retail So it sounds like Richard Barry has 0:15:19.760 --> 0:15:24.520 come up with this concept of reincarnating Toys r US 0:15:25.040 --> 0:15:27.800 with smaller stores but in some of the same footprints, 0:15:28.520 --> 0:15:32.760 shrunken footprints, because he saw an opportunity there that was 0:15:32.880 --> 0:15:38.320 still being unmet by the big box retailers. My question is, UH, 0:15:39.080 --> 0:15:42.200 what what exactly is this reincarnation. Is it just taking 0:15:42.200 --> 0:15:45.520 the name and then re envisioning the modern toy store 0:15:45.680 --> 0:15:49.440 or is this basically just restarting without the debt? Lisa, 0:15:49.520 --> 0:15:53.320 It's both restarting without the debt, that's key, and the 0:15:53.400 --> 0:15:56.200 landlords of the major malls will pay for the UH 0:15:56.280 --> 0:15:58.440 fit out a lot of the equipment build out, so 0:15:58.480 --> 0:16:02.040 they'll be next to no capital commitment. The key thing 0:16:02.440 --> 0:16:05.520 you references the name UH. They'll have the name. The 0:16:05.600 --> 0:16:09.080 stores were about fifteen years behind UH, caught in a 0:16:09.200 --> 0:16:13.880 bowl constricted proverbial choke hold from RNADO and the original 0:16:14.000 --> 0:16:17.960 legacy owners and now with Richard Barry, it's the chief 0:16:18.000 --> 0:16:20.560 merchant who goes all the way back to the seminal 0:16:20.600 --> 0:16:24.160 genius Charles Lazarus who uh started Toys r US and 0:16:24.240 --> 0:16:27.680 built it into a worldwide powerhouse. Barry knows how to 0:16:27.760 --> 0:16:32.600 merchandise the stores, work with Disney, Marvel, Lucas studios for 0:16:32.640 --> 0:16:35.440 the licensed goods, but also to make the stores exciting 0:16:35.480 --> 0:16:38.760 from a digital interactive standpoint. So they'll have the name, 0:16:39.200 --> 0:16:42.840 but the stores will catch up about fifteen years because 0:16:42.840 --> 0:16:46.640 they'll have the capital along with the skill and hopefully 0:16:46.640 --> 0:16:50.640 the scale. So what I understand about this is Toys 0:16:50.720 --> 0:16:53.080 Rust is looking to open about it maybe a half 0:16:53.080 --> 0:16:56.000 a dozen stores for the holiday season. Do you think 0:16:56.040 --> 0:16:59.120 this might just be the first step and maybe bringing 0:16:59.160 --> 0:17:01.840 back Toys Rust and bigger way in US? Yes, the 0:17:01.920 --> 0:17:06.240 first step, and and our research indicates with mall support, 0:17:06.280 --> 0:17:08.879 they'll be able to do at least fifty, likely a 0:17:08.960 --> 0:17:12.440 hundred plus stores in the major malls across the US 0:17:12.760 --> 0:17:15.280 which would love to have Toys or US and Babies 0:17:15.440 --> 0:17:18.640 or US as a co anchor. And what's interesting from 0:17:18.640 --> 0:17:22.120 our researches, Amazon has an achilles heel in this thing too, 0:17:22.760 --> 0:17:26.320 is Amazon's almost de facto price gouging on anything that's 0:17:26.359 --> 0:17:29.919 either heavier weight or large and shipping size. So if 0:17:29.920 --> 0:17:33.320 it's a baby crib or baby stroller. Amazonal charge a 0:17:33.400 --> 0:17:37.280 hundred dollars more delivered Amazon Prime members than say even 0:17:37.320 --> 0:17:40.160 Alby's on the West Side of Manhattan or any other 0:17:40.240 --> 0:17:43.119 major toy retailer in the US. There's a lot of 0:17:43.200 --> 0:17:49.440 room with the support from UH Jack's, Marvel, Marvel has Bro, 0:17:49.920 --> 0:17:53.840 the studios and the hardlines and soft lines vendors, and 0:17:53.880 --> 0:17:57.080 also Amazon went bankrupt with diapers are US, so there's 0:17:57.119 --> 0:17:59.960 a big window for Toys r US to re estate 0:18:00.000 --> 0:18:03.439 wish itself. One thing you talked about was reimagining the 0:18:03.520 --> 0:18:07.720 stores and making them more enticing to the modern child, 0:18:07.840 --> 0:18:11.040 which means having all sorts of electronics there. I'm just 0:18:11.080 --> 0:18:14.840 wondering what type of investment uh they really need to 0:18:14.920 --> 0:18:18.400 get these stores into a shape to be an experience, 0:18:18.440 --> 0:18:20.199 which really is the name of the game in retail 0:18:20.240 --> 0:18:24.359 right now. Perfect variable you're referencing, Lisa. If it's an 0:18:24.400 --> 0:18:27.840 investment on toys or US as part, it could be 0:18:27.880 --> 0:18:31.360 a million plus per store. If they get the support 0:18:31.560 --> 0:18:38.280 of Disney behind Star Wars, UH Frozen, Future Toy Story releases, 0:18:38.480 --> 0:18:42.680 Kung Fu Panda, whatever it is, and get the studios 0:18:42.760 --> 0:18:46.320 to co invest and ideally get somebody like UH Bob 0:18:46.359 --> 0:18:51.159 Pittman at Clear Channel Outdoor use their skill outside on 0:18:51.280 --> 0:18:53.560 the air rights of the store, the walls and the 0:18:53.600 --> 0:18:57.840 departments inside the store could be spectacular. Would would the 0:18:57.960 --> 0:19:00.679 actual vendors, the toy vendors, Would they prefer to do 0:19:00.720 --> 0:19:05.280 business with toys r US over say Amazon or Walmart? 0:19:06.000 --> 0:19:09.040 UH definitely prefer to do business with toys. Are USO 0:19:09.240 --> 0:19:12.960 over Amazon? Going back to the Hachette Books, UH and 0:19:13.160 --> 0:19:17.960 I trust case for UH anti competitive practices, potential predatory 0:19:18.040 --> 0:19:22.600 pricing that seems to be ubiquitous beyond books to toys, etcetera. 0:19:23.119 --> 0:19:27.200 Walmart under Doug McMillan, Target under Brian Cornell are more 0:19:27.320 --> 0:19:30.399 enlightened buyers, but they don't have the physical space and 0:19:30.440 --> 0:19:33.480 the stores to carry the full depth and range of toys. 0:19:33.520 --> 0:19:35.760 So the vendors are seeing a lot of growth with 0:19:35.880 --> 0:19:39.240 Macy's committing a full floor at Harold Squared to Toys 0:19:39.560 --> 0:19:41.520 and some of the other stores, but nobody can do 0:19:41.560 --> 0:19:44.240 it like Toys r US and Richard Berry. The one 0:19:44.400 --> 0:19:48.840 variable is David Pico, who is the genius of real 0:19:48.960 --> 0:19:52.360 estate strategy and development, got picked off by Chris Baldwin 0:19:52.400 --> 0:19:55.119 and his team to go to BJ's wholesale, So toys 0:19:55.119 --> 0:19:57.600 are us is skating shorthanded with a key player on 0:19:57.640 --> 0:20:00.600 the development side. But Richard Berry's the end and he'll 0:20:00.600 --> 0:20:04.399 break through with this format. To Paul's point on on 0:20:04.520 --> 0:20:09.000 a very strong continuum of future growth. Really interesting to 0:20:09.040 --> 0:20:13.080 see the revival here. I Frankly Brick and Mortar. Bert Flickinger, 0:20:13.119 --> 0:20:15.159 thank you so much for being with us. Always a pleasure. 0:20:15.160 --> 0:20:35.520 Bert Flickinger is Managing director for Strategic Resource Group. Well, 0:20:35.520 --> 0:20:40.240 many companies are developing products to reduce sugar intake by consumers. 0:20:40.560 --> 0:20:43.440 One such company is Duma Talk and has really startup 0:20:43.440 --> 0:20:46.720 that has created a sugar reduction solution that uses targeted 0:20:46.760 --> 0:20:50.000 delivery technology to reduce the amount of sugar used up 0:20:50.000 --> 0:20:54.280 to per serving. To help us dig into the details 0:20:54.359 --> 0:20:58.320 of this new company, we welcome Iran Baniel, chief executive 0:20:58.320 --> 0:21:01.760 officer and president of Duma Talk based in Israel. Aron, 0:21:01.880 --> 0:21:03.520 thank you so much for joining us. I wonder if 0:21:03.520 --> 0:21:05.719 you could just briefly kind of tell us kind of 0:21:05.760 --> 0:21:09.600 what is the solution, uh that your company has that 0:21:09.680 --> 0:21:14.800 reduces the sugar intake. So nice to be with you guys. 0:21:16.280 --> 0:21:21.560 When you take a bite into a cake, say over 0:21:21.800 --> 0:21:26.000 eight of the sugar in the cake will never see 0:21:26.000 --> 0:21:31.200 a sweet receptor, so it contributes nothing towards the sweetness 0:21:31.320 --> 0:21:37.439 of the product, so only would probably hit receptors. What 0:21:37.680 --> 0:21:44.040 we do is by loading the sugar onto a mineral 0:21:44.560 --> 0:21:50.280 or a fiber carrier, we actually create clusters of sugar 0:21:50.320 --> 0:21:54.800 molecules and when those hit the receptors, they get they 0:21:54.880 --> 0:21:59.400 stick to the receptors longer, and they keep pumping sugar 0:21:59.440 --> 0:22:07.320 molecule to the receptors, sort of cheating you to experience 0:22:07.760 --> 0:22:12.280 a sweetness that is disproportionate to the amount of sugar 0:22:12.800 --> 0:22:16.359 in the cake or in the biscuit or in the chocolate. 0:22:16.920 --> 0:22:23.679 So you literally use less two taste more that is 0:22:24.240 --> 0:22:31.040 flavored delivery improved in efficacy. So the results of this, 0:22:31.520 --> 0:22:35.080 if I am correct, is that you can reduce by 0:22:35.080 --> 0:22:38.720 more than of sugar content in some of these sweets 0:22:38.800 --> 0:22:44.320 or other products by using your technologies. I'm wondering have 0:22:44.440 --> 0:22:48.119 there been any big companies that have adopted some of 0:22:48.160 --> 0:22:53.240 your techniques. So we are now in the process of 0:22:53.720 --> 0:23:03.880 a providing large pilots to some those large CPGs um 0:23:03.920 --> 0:23:11.760 taking existing products and making the doumatalk version of the product, 0:23:11.880 --> 0:23:16.040 which would be not only reduced in sugar, but also 0:23:16.320 --> 0:23:21.560 rich in fiber and rich often in proteins. So we 0:23:21.760 --> 0:23:27.880 also have developed a whole host of data on how 0:23:28.040 --> 0:23:32.480 you can replace the photy percent of sugar you've taken 0:23:32.520 --> 0:23:41.080 out with really much better for you nutrition and actually, 0:23:41.760 --> 0:23:48.240 in blind tastings, consumers seem to prefer the Doumatalk reduced 0:23:48.400 --> 0:23:55.040 version to the original products. So we started by wanting 0:23:55.080 --> 0:23:59.600 to be as sweet, we are now understanding that we 0:23:59.680 --> 0:24:05.160 are very often preferred and we seem to fare better 0:24:05.640 --> 0:24:11.040 than the original. So that's really, uh, the first time 0:24:11.840 --> 0:24:16.439 that someone that we are aware of can propose a 0:24:16.520 --> 0:24:22.560 sugar reduced version of products that don't disrupt the need 0:24:22.720 --> 0:24:28.080 we have for indulgences for the products we love. So, 0:24:28.400 --> 0:24:31.760 is this going to be another colored packet, packet of 0:24:31.760 --> 0:24:33.760 sweeteners in the bowl when I go to a restaurant. 0:24:33.800 --> 0:24:35.800 I've got pink, I've got blue, I've got yellow. Is 0:24:35.840 --> 0:24:40.359 this going to be another those your competitors? No, what, 0:24:41.840 --> 0:24:46.240 the existing sugar reductions are not sugar based. We are 0:24:46.240 --> 0:24:52.120 sugar based, and sugar is not It's not bad for you, 0:24:52.400 --> 0:24:58.000 and unless you over overdo it. So sugar, if you 0:24:58.080 --> 0:25:04.400 consume sugar in measured quantities. You'll find it gives you energy, 0:25:04.720 --> 0:25:09.920 its bulk, it's taste, its color, its happiness. Sugar is happiness, 0:25:09.960 --> 0:25:17.359 but only if consumed as recommended. So what we do 0:25:17.600 --> 0:25:22.600 is we actually allow you to consume the products you 0:25:22.720 --> 0:25:29.240 love without actually overdoing the sugar intake. Run. One question 0:25:29.240 --> 0:25:33.080 that I have is people have found that sugar replacements 0:25:33.200 --> 0:25:38.880 actually don't necessarily contribute to weight loss because people feel hungrier, 0:25:38.920 --> 0:25:40.600 their bodies feel like they're going to be getting a 0:25:40.600 --> 0:25:43.000 certain amount of sugar, so they eat more to compensate 0:25:43.080 --> 0:25:47.080 for that. Has there been any study done in a 0:25:47.119 --> 0:25:52.920 similar vein with Tom talk, It's a very good question, 0:25:53.080 --> 0:25:58.440 and thank you for asking it. We are the funding 0:25:59.119 --> 0:26:04.080 is there and angst others to fund much larger trials 0:26:04.119 --> 0:26:07.919 than we've done. But one of the mode of actions 0:26:07.960 --> 0:26:15.480 that we have developed is called muco adhesive. The area 0:26:15.600 --> 0:26:22.439 of the tongue is the best probably area for dispersing 0:26:24.040 --> 0:26:32.159 in a very same way things like sugars, but also people. 0:26:32.920 --> 0:26:37.640 It's been used for pharmaceuticals as well. So what we 0:26:37.800 --> 0:26:43.000 actually do is we have this cluster, let's say, of 0:26:43.080 --> 0:26:48.359 sweetness come to the receptor. It sticks by the receptor 0:26:48.840 --> 0:26:54.840 longer and and the sweetness is very satisfying, so you 0:26:55.000 --> 0:27:00.280 don't really reach out for another bite so quickly. Yeah, 0:27:00.359 --> 0:27:05.360