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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Affo card Playing and broud Otto with the

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Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Let's get a look at where the action is in

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Speaker 2: the equity markets with.

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Speaker 3: Billy Billy Lipschotz. Thank you're sitting right next to.

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Speaker 2: Me, Billy Lipschotz. You can talk all you want about stocks.

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Speaker 2: I only have one question. Few Can you explain to

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Speaker 2: me what our good friend Bill Akerman is doing here?

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Speaker 3: Nothing now, nothing as of now? Walk us through this

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Speaker 3: story here. So earlier in the month, well, I guess

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Speaker 3: now in August. So in July he filed to launch

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Speaker 3: and price a closed end fund that would trade in

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Speaker 3: the US. It would be similar, in his words, essentially

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Speaker 3: mirror their European offering, which currently trades under the ticker PSH.

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Speaker 3: Space NA trades at a twenty percent discount to what

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Speaker 3: it actual the assets that it owns it's invested in, Alphabet, Chapotle,

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Speaker 3: Howard Hughes, Universal Music, a handful of stocks beating the drum.

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Speaker 3: He kind of said, you know, we see this as

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Speaker 3: a potential twenty five billion dollar offering going to court retail.

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Speaker 3: We're going to court institutions. Basically, I have a lot

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Speaker 3: of very wealthy friends. They're going to give us money.

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Speaker 3: It's going to be awesome. It's only going to be

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Speaker 3: a two percent fee. We won't charge that for a year.

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Speaker 3: Then a couple days later, he wrote a letter to

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Speaker 3: investors in the hedge fund saying, hey, demand's not as

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Speaker 3: strong as we would have expected. Initially. We're thinking that

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Speaker 3: maybe we'll raise between two and a half billion and

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Speaker 3: four billion dollars, so a sharp drop off from the

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Speaker 3: twenty five billion dollar number. He actually name dropped Seth

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Speaker 3: Clarmen's bow post. He named dropped Putnam among others, kind

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Speaker 3: of alluding to people who are already in for the book, saying,

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Speaker 3: get yours in soon. It's going to help us build

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Speaker 3: this out. Didn't realize that that had to be filed publicly.

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Speaker 3: So the next day we see that in a public filing,

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Speaker 3: or at least that's what we're told through the filings.

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Speaker 3: Seth Carmon and Bloomberg is reported isn't super happy about that.

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Speaker 3: They withdraw their order, they opt out. We see just

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Speaker 3: a few days later the fun coming back saying, you know,

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Speaker 3: we thought two and a half to four billion, now

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Speaker 3: we're actually gonna go after two billion, but don't worry,

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Speaker 3: it's gonna price next Monday. So we're still kind of

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Speaker 3: full speed ahead, two billion dollars, feeling great, perching squares

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Speaker 3: in for five hundred million dollars. Then yesterday we get

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Speaker 3: the filing that because to kind of oversimplify, because they

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Speaker 3: couldn't answer the question that investors wanted to know, why

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Speaker 3: would I buy this at IPO when I can buy

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Speaker 3: it at a discount, We're actually gonna pull the offering,

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Speaker 3: rework it potentially, and try to come back with a

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Speaker 3: different model. So going from twenty five billion to potentially

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Speaker 3: four billion to two billion to now nothing as of now,

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Speaker 3: though again he did say they plan on coming back

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Speaker 3: in some potentially different formation.

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Speaker 4: I don't know what to even ask about that. That

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Speaker 4: was a great explanation by that one, but it's such

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Speaker 4: a nightmare.

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Speaker 2: But at Mike angle is there's an angle here. He's

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Speaker 2: a really smart guy. How do you misjudge the market?

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Speaker 2: How do you misjudge demand? How do you make that

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Speaker 2: mistake of putting out a letter. These are things Bill

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Speaker 2: Ackman doesn't do well.

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Speaker 3: So to start at a high level, the largest closed

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Speaker 3: end fund in US history was just over five billion dollars. Okay,

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Speaker 3: So he was coming in with the ambition to four

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Speaker 3: x that because he has a million and change followers

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Speaker 3: on X and he has a strong track record. If

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Speaker 3: you even look at and invested in the European offering,

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Speaker 3: you've done pretty well over the last few years. But

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Speaker 3: to your point, there's so many snags that came out

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Speaker 3: of this. And when I talk to people who operate

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Speaker 3: in the closed end fund space, they initially were kind

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Speaker 3: of saying they don't this has to go through a

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Speaker 3: seasoning period. The SEC is going to hold it up,

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Speaker 3: which Pershing Square came out and said was actually playing

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Speaker 3: a factor in the delayed pricing to the extent that

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Speaker 3: I talked to a couple of advisors. You said maybe September,

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Speaker 3: just because you need this to cool off. The way

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Speaker 3: this is structuring, you can't just kind of ignore these

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Speaker 3: warning signs and keep your pedal to the medal. And

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Speaker 3: it does seem like a number of miscalculations have kind

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Speaker 3: of ended up throwing it into a tailspin. Well, it's

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Speaker 3: a fact.

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Speaker 4: I mean literally, like yesterday, he was on the exact

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Speaker 4: same time. We were talking about the different evolution of

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Speaker 4: the story. All right, Billy, you'll be coming back at

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Speaker 4: the top of the eleven as well. Billy lipschealz A

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Speaker 4: joining us. Bloomberg Senior Equities reporter Joining us.

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Speaker 1: There, you're listening to the Bloomberg Intelligence Podcast. Catch us

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Speaker 1: live weekdays at ten am Eastern on applecar Play and

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Speaker 1: live on Amazon Alexa from our flagship New York station.

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Speaker 1: Just say Alexa playing Bloomberg eleven thirty.

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Speaker 4: Okay, let's go to the individual movers here. One of

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Speaker 4: them is meta. That's not popping ten percent. Did you

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Speaker 4: listen to the earnings call on the beach?

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Speaker 2: He did part of it, part of it, but then

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Speaker 2: then my swell came in, so I had to drop

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Speaker 2: an out.

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Speaker 5: I understand.

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Speaker 6: I mean this priority.

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Speaker 4: Mandy pp sing was not at the beach on the

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Speaker 4: earnings call. And I know this because he was on

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Speaker 4: set with me when the numbers came out. Mandy Singh,

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Speaker 4: Bloomberg Intelligence Senior at Tech Industry analyst, you were pretty

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Speaker 4: positive on Meta earnings in the street really agrees with you.

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Speaker 4: This is AI delivering on helping more targeted ads, meaning

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Speaker 4: more revenue straight.

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Speaker 7: I mean, look, with all the other AI spend that

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Speaker 7: we are seeing from the cloud vendors, they're saying the

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Speaker 7: revenue will come in twenty five twenty six, Meta is

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Speaker 7: actually delivering AI revenue right now. And that's the big

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Speaker 7: surprise that all the large anguid model investments they have done,

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Speaker 7: they have infused their apps with AI and it's actually

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Speaker 7: yielding tangible returns. And there was a good Macro read too.

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Speaker 7: I mean my sense was e commerce spending is strong,

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Speaker 7: Gaming spending is strong. That's why their advertisers who are

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Speaker 7: spending on Meta platforms. So overall, I think Macro looks

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Speaker 7: to be much better than what people talk about, and

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Speaker 7: ad spending is strong and that's why Meta did well.

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Speaker 2: Is this a cross for Amazon for Google in terms

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Speaker 2: of the ad spending angle?

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Speaker 7: Absolutely, I mean Amazon is que towards e commerce. In fact,

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Speaker 7: anybody who is an e commerce provider on Amazon's platform

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Speaker 7: has to spend on ads for you know, slotting, and

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Speaker 7: so I do think you know, and certain pockets when

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Speaker 7: it comes to ads aren't doing well, which is why

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Speaker 7: Google didn't have that sort of a lift, because they

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Speaker 7: are sort of equal across different sectors. Automotive, insurance, those

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Speaker 7: are the weak sectors, so they're probably not spending as

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Speaker 7: much on ads, but e commerce, retail, these are the

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Speaker 7: pockets where the AD spending is strong. And I think

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Speaker 7: Snap should do well.

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Speaker 4: Tonight, so the cap X spend also, So they narrowed

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Speaker 4: the range specifically to come in for thirty seven to

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Speaker 4: forty billion rather than thirty five to forty billion. They

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Speaker 4: didn't raise it, yeah, which is not what some of

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Speaker 4: the peers have done. Was that also positive for the stock?

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Speaker 7: Absolutely? I mean they've learned their lesson last time around.

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Speaker 7: They raised the CAPEX by three billion, the stock reacted negatively.

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Speaker 7: This was more of weight and see approach. They did

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Speaker 7: say twenty twenty five CAPEX will go up like every

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Speaker 7: other hyperscaler. But for this quarter they actually came out

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Speaker 7: below consensus, a billion dollars below consensus when it comes

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Speaker 7: to CAPEX for this quarter. And like you said, you

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Speaker 7: know they reinformed the guide and overall, I feel like

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Speaker 7: everyone keeps talking about how they are gpu constrained and

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Speaker 7: they need to spend more Capex. Meta didn't say that

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Speaker 7: that they are GPU constrained in anyway. At the same time,

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Speaker 7: they expect AI infrastructures spent to go out and they're

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Speaker 7: able to monetize it. WhatsApp to me was the real

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Speaker 7: bright spot.

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Speaker 2: I mean, nobody has any monetizing that yet.

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Speaker 7: Actually, yes, So they did give a data point yesterday

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Speaker 7: where family of apps other revenue grew seventy three percent.

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Speaker 7: Most of it is WhatsApp. So WhatsApp actually is a

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Speaker 7: four hundred million dollar rund reread business.

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Speaker 2: Now really okay, yeah, and taking ten years.

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Speaker 7: And that's where I think they called that the US adoption.

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Speaker 7: So WhatsApp now has one hundred million active users in

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Speaker 7: the US, and that's where they see AI infusing in

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Speaker 7: WhatsApp being a revenue generator.

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Speaker 2: All right, market likes it stacks up nine percent today

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Speaker 2: of forty seven percent year to date. All good in

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Speaker 2: metaaland tonight after the closed Amazon and Apple, let's start

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Speaker 2: with Amazon. What are you gonna be looking for there?

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Speaker 7: I mean cloud aws growth adds growth. I think the

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Speaker 7: one thing that stands out between Google, Microsoft and Meta

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Speaker 7: versus Amazon and Apple is Amazon and Apple don't have

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Speaker 7: their own large anglid model. One thing we realize with

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Speaker 7: Meta is because they own their large anglid model, they've

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Speaker 7: been able to deploy it so quickly. Well, Amazon is

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Speaker 7: relying on Anthropic to give them the large anglid model.

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Speaker 7: Apple announced Apple Intelligence, but they're delaying it. They don't

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Speaker 7: have their own large anglid model. And what everyone is

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Speaker 7: realizing is owning a large anglid model like Microsoft, OpenAI,

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Speaker 7: Google Gemini, that's a big advantage, and that advantage may continue,

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Speaker 7: I think, given everyone is so bullish on generative AI.

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Speaker 5: So how is that going to wind up showing up

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Speaker 5: in the numbers?

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Speaker 7: So, I mean, look at Meta's ad pricing. The reason

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Speaker 7: why ad pricing grew so much is because they actually

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Speaker 7: applied the large anglid model on their own products. Same

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Speaker 7: thing with Microsoft. The reason why their Microsoft's cloud revenue

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Speaker 7: has accelerated is because the workloads are getting deployed, the

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Speaker 7: copilots are getting deployed in their own products. So Amazon

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Speaker 7: has to somehow one leverage the large angliine model in

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Speaker 7: Tropic or somebody else's. In fact, Meta said they are

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Speaker 7: warming up to Amazon more and more to deploy their

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Speaker 7: Lama large anglid model on AWS. That'll be an interesting

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Speaker 7: partnership if that pans out, because Meta doesn't have a

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Speaker 7: cloud facing business, whereas Amazon AWS is the largest cloud provider.

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Speaker 7: If they can leverage Lama model, which Meta owns, that

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Speaker 7: could be a huge, huge driver off revenue for both

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Speaker 7: Amazon as well as paying a licensing fee to Meta.

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Speaker 7: But obviously that nobody called that out, so that's a

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Speaker 7: speculation at this point.

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Speaker 5: Fascinating. All right, really good stuff. Can't wait.

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Speaker 2: It's not just selling ads anymore.

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Speaker 6: It's other stuff.

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Speaker 4: Well, it is about selling ads, but in a more

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Speaker 4: efficient way. I took my notes for those coming out

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Speaker 4: after the closing bell. And you've seeing Bloomberg Technology, Bloomberg

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Speaker 4: Intelligence senior technology analyst.

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Speaker 6: There we go, I got it.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple CarPlay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 5: That im number, that's ugly.

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Speaker 2: That's got my attention there yet.

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Speaker 4: Also the job's number, the employment number in there with

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Speaker 4: forty three, that's definitely that's definitely something interesting that we're

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Speaker 4: seeing the buying really coming in though to the bond market.

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Speaker 5: On that.

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Speaker 4: All right, let's get more into the data because this

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Speaker 4: feels icky. Tim Fiory is chair of the Institute of

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Speaker 4: Supply Management, a manufacturing business Survey committee, and he joins us, Now, okay,

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Speaker 4: we are at an eight month low near any We

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Speaker 4: are contracting the most in about eight months for the

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Speaker 4: m manufacturing. You really had that weak employment data. What

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Speaker 4: is leading this? Does this data surprise for you?

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Speaker 8: Yeah, Alex, So, yeah, this is a disappointment. So the

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Speaker 8: last couple of months we've been stuck, stable, stagnant. We're

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Speaker 8: no longer stuck stable or stagnant. We're declining at a

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Speaker 8: faster rate. We're off almost two points from last month.

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Speaker 8: We're off almost more than two points from expectations, twenty

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Speaker 8: one months into a contraction, and we haven't seen a

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Speaker 8: number at the headline level this low since November twenty two.

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Speaker 3: So, first off, the.

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Speaker 8: Good news, supplier deliveries are starting to stiffen up. It's

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Speaker 8: a little bit harder for them to deliver. That price

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Speaker 8: index number is a marginal expansion, very weak. Happy to

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Speaker 8: see that, Glad to see that if you're looking for

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Speaker 8: a rate activity that supports a rate reduction, no doubt.

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Speaker 8: On the demand side, we still can't find demand. The

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Speaker 8: demand is non existent, backlog is still extremely low, new

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Speaker 8: export orders very weak, and no real end in sight.

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Speaker 8: Our top six industry sectors all showed declines, significant declines

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Speaker 8: like forty five. In the demand side, new orders and production.

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Speaker 8: The big story here for the month is really the

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Speaker 8: production number. We've been talking for the last year and

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Speaker 8: a half. That look, as long as the production number

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Speaker 8: stays around fifty, revenues or expectations are being met, profitability

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Speaker 8: is probably okay. Just have to deal with the out

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Speaker 8: the input side, Well, that's so long in the case here,

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Speaker 8: we've fallen down to a forty five to nine, big drop,

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Speaker 8: disappointing lowest since May of twenty twenty two. And then

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Speaker 8: coupled with that, we've got the employment numbers sagging really strongly.

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Speaker 8: So what it really says, and we've indicated this last

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Speaker 8: month the month before, is that without new orders, we're

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Speaker 8: gonna see a decline in production slash revenue, and we're

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Speaker 8: going to see a decline in employment. And that's exactly

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Speaker 8: what we've see in here from a sentiment standpoint. You know,

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Speaker 8: I track headline sentiment month to month, running at a

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Speaker 8: one to one point four. So I think we're in

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Speaker 8: for a ride here now.

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Speaker 1: You know.

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Speaker 8: The one last thing is we've been looking for a

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Speaker 8: soft landing. That doesn't necessarily mean that manufacturing is going

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Speaker 8: to see a soft landing. We could actually have a

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Speaker 8: moderate landing or even a hard landing. And it doesn't

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Speaker 8: mean that the economy is going to see a hard

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Speaker 8: landing or a moderate landing. So we're at a real

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Speaker 8: strange spot here. I mean, if you're looking for data

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Speaker 8: facts for the fat to support a ray cut, don't

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Speaker 8: look any farther.

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Speaker 2: Don't look any farther than this, right, all right, Tim,

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Speaker 2: thanks for the breakdown, Really appreciated. Tim Fury, Chair for

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Speaker 2: the Institute for Supply Management on their business survey. Again,

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Speaker 2: numbers coming in. Wee can then expect it for the

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Speaker 2: manufacturing front.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on applecar Play and Android

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Speaker 2: Bloomberg Intelligence, Alex Steel, Paul Spooney. Youre live here in

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Speaker 2: our Bloomberg Innactor Broker studio, streaming live on YouTube, so

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Speaker 2: com and search Bloomberg Podcast and that's where you'll find us.

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Speaker 2: One of the stories that you know, Alex ly like

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Speaker 2: to continue to focus on is commercial real estate. It's

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Speaker 2: undergone a tremendous change over the last four five six years,

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Speaker 2: obviously with the pandemic and longer term trends here that

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Speaker 2: still need to be understood and worked out. So we

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Speaker 2: like to talk to smart people to get a little

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Speaker 2: bit smarter on this. Hillaryspond joins us. She's executive vice

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Speaker 2: president at b XP. BXP is a publicly traded real

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Speaker 2: estate investment trust. B XP is the ticker handily market

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Speaker 2: KAP eleven point two billion dollars stock's pretty much unchanged today,

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Speaker 2: up about two percent year to date. Hillary, thanks much

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Speaker 2: for joining us in our studio New York City. Let's

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Speaker 2: focus on on New York City. That's your remit here.

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Speaker 2: A lot of empty space here in New York City

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Speaker 2: in the offices. Tell us where we are and how

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Speaker 2: we're going to get out of this. If at all,

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Speaker 2: explain to us how the commercial real state environment is

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Speaker 2: in New York City today.

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Speaker 9: Sure well, First of all, Alex and Paul, thank you

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Speaker 9: for having me this morning. I think that it's fair

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Speaker 9: to say that the market is bifurcating itself, and that means.

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Speaker 10: That there are groups of properties that are.

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Speaker 9: Performing quite well actually, and others that are performing less well.

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Speaker 9: Those properties that are newly constructed, that have been reinvested

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Speaker 9: in by their ownership, and that are well located are

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Speaker 9: generally doing pretty well. And as evidence of that, if

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Speaker 9: you look at the vacancy rate in the Park Avenue

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Speaker 9: sub market of Manhattan, it's less than ten percent, which

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Speaker 9: is quite tight by historical standards. You're seeing landlords there

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Speaker 9: with the ability to push rental rates to reduce concessions

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Speaker 9: like free rent, like capital that's associated with new leasing,

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Speaker 9: and so therefore net effective rents are actually increasing in

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Speaker 9: that sub market. The weaker sub markets and some of

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Speaker 9: the older buildings, landlords have had more trouble attracting tenants.

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Speaker 9: But for those businesses that are generating revenue that have

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Speaker 9: clients that need to come visit them, that want to

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Speaker 9: attract talent, being in a great building in Manhattan is

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Speaker 9: a really good bet for them, and you're seeing strength

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Speaker 9: in that segment of the market.

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Speaker 6: So we've had some.

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Speaker 4: Property people in here who've talked about those older buildings

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Speaker 4: and over the last few years, I spent a lot

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Speaker 4: of money retrofitting them and updating them to make them

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Speaker 4: more appealing. Are we seeing a lot of that still,

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Speaker 4: and like, what's the cost profile for that?

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Speaker 5: Is it payoff? Like how does that work?

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Speaker 9: So I think it's also a little bit location dependent.

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Speaker 9: You're certainly seeing some buildings spend money that are would

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Speaker 9: be classified as older or maybe less well amenitized, just

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Speaker 9: not a newer building. But if they're in a great location,

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Speaker 9: they can actually do quite well. And I would point

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Speaker 9: to the Grand Central sub market as evidence of that.

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Speaker 9: A lot of people who commute in the city are

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Speaker 9: really looking for a one seed commute, meaning they get

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Speaker 9: off of Metro North or they get off of Long

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Speaker 9: Island Railroad.

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Speaker 3: They walk to their office.

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Speaker 9: So those buildings, despite the fact that they're somewhat older

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Speaker 9: in that submarket, are leasing quite well. And a lot

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Speaker 9: of the landlords that own in that district are amenetizing

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Speaker 9: their buildings to great effect.

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Speaker 10: The cost of construction have gone up.

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Speaker 9: Radically over the last call it five years, and that

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Speaker 9: does definitely have an effect. It tends to favor the

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Speaker 9: landlords that are better capitalized, but for those that can

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Speaker 9: do it, it really does benefit their leasing velocity.

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Speaker 2: How about like I'm going to reference this once again

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Speaker 2: I always do when having commercial real estate discussions in

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Speaker 2: New York. Bloomberg News put out a piece maybe eighteen

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Speaker 2: months ago and just focusing on Third Avenue between Grand

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Speaker 2: Central and here we're at fifty eight to fifty ninth Street.

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Speaker 2: You can't give that stuff away or talk to us

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Speaker 2: about that market. I'm thinking, like the Lipstick Building. When

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Speaker 2: I see one of those buildings, trade is there going

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Speaker 2: to be a thirty percent discount, forty fifty sixty percent discount?

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Speaker 2: Talk just about that kind of market because those are

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Speaker 2: more I guess b properties as I understand it.

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Speaker 9: Well, So there actually has been some activity on Third Avenue.

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Speaker 9: Memorial Song kettering, I believe took some space in the

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Speaker 9: Lipstick Building. One of the office buildings that is on

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Speaker 9: Third Avenue was recently announced to be a conversion to residential.

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Speaker 9: So folks are getting creative with that space. For us

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Speaker 9: in our sub markets, we're focused on attracting large corporate

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Speaker 9: tenants and investing the capital that's required to attract and

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Speaker 9: retain them. But I think there's I think that third

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Speaker 9: avenue has hope.

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Speaker 5: So let's just game this out for a second.

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Speaker 4: So swaps markets pricing in three fed rake cuts now

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Speaker 4: for September, right, I mean, excuse me, for the rest

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Speaker 4: of the year starting in September, let's say that happens.

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Speaker 4: What's the trickle down to the commercial real estate market

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Speaker 4: in a short term.

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Speaker 9: So the transaction volume acquisitions, dispositions has been somewhat muted,

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Speaker 9: not so much as a result of where treasuries are trading,

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Speaker 9: I think, but how quickly they went from practically.

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Speaker 10: Zero to where they are today.

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Speaker 9: Any relief on the ten year I think would tend

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Speaker 9: to support higher transaction volumes in our space, which is

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Speaker 9: again the sort of higher end of the market. There's

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Speaker 9: been very very little transactions because in general, landlords are

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Speaker 9: not distressed and are not willing.

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Speaker 10: To sell at depressed prices.

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Speaker 9: So I think it would tend to tend to support

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Speaker 9: a higher transaction volume going forward.

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Speaker 2: You guys, BXP well capitalized, well experienced owner of real estate.

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Speaker 2: Are you buying in New York City today?

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Speaker 9: At the moment, we don't have active acquisitions, but we're

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Speaker 9: constantly looking for new opportunities.

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Speaker 10: The real gating.

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Speaker 9: Issue for us is quality. So if we cannot find

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Speaker 9: something that is at least equal to the quality of

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Speaker 9: what we already own, we are not buyers. And the

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Speaker 9: fact of the matter is there's relatively little available in

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Speaker 9: the market for purchase that is consistent with our quality.

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Speaker 9: That having been said, we do have a couple of

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Speaker 9: development sites in New York City, the most active of

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Speaker 9: which will be three forty three Madison this year. It

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Speaker 9: is it's between forty fourth and forty fifth on Madison,

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Speaker 9: and it will we will begin constructing the east side

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Speaker 9: access to the Long Island Railroad in Grand Central between

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Speaker 9: now and the end of the year. Solk will actually

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Speaker 9: see cranes and construction on the site.

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Speaker 5: So I live in Brooklyn, What about in Brooklyn?

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Speaker 4: All the good kids? No, but they're like retrofitted, like

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Speaker 4: that sugar factory. Not you guys, but sugar Factory is retrofitted.

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Speaker 4: Like they're there, we go dominoes. Well, it is Brooklyn

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Speaker 4: becoming a place where commercial real estate can truly thrive.

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Speaker 9: So I would say that the demand for Brooklyn right

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Speaker 9: now is a local demand. People that need to be

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Speaker 9: in Brooklyn for a reason. Their manufacturers are located there,

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Speaker 9: their talent base is located there. Those tend to be

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Speaker 9: the companies that are expanding in Brooklyn. We own a

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Speaker 9: building called DOC seventy two in the Brooklyn Navy Yard

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Speaker 9: and we've had success in that building with leasing two Huge,

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Speaker 9: which is a marketing company that was formerly based in Dumbo,

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Speaker 9: has moved to the Navy Yard, the Pratt Institute, and

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Speaker 9: other large sort of Brooklyn based institutions. I would say

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Speaker 9: that DOC seventy two has attracted the majority of the

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Speaker 9: large tenants that are active in the Brooklyn market now.

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Speaker 9: But no question, it's sort of a local demand market

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Speaker 9: at the moment.

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Speaker 2: You guys own the General Motors Building, one of the

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Speaker 2: most iconic buildings in the city. Tell us about that building.

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Speaker 9: So the building is ninety six and a half percent least.

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Speaker 9: We recently had a client expand by one hundred thousand

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Speaker 9: square feet in the building, taking up most of the

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Speaker 9: availability in the building. We recently spent a lot of

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Speaker 9: time and effort of minetizing the second floor of the

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Speaker 9: building with wellness, with food and beverage options, and with conferencing,

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Speaker 9: which I think is increasingly important to clients today. And

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Speaker 9: it's really borne itself out in the leasing that we've

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Speaker 9: been able to achieve there. So the building is basically full.

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Speaker 6: So what's when we say wellness?

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Speaker 5: What does that mean?

437
00:21:44,480 --> 00:21:47,399
Speaker 9: We have a seventeen thousand square foot gym that has

438
00:21:48,400 --> 00:21:53,000
Speaker 9: personal training, it has physical therapy, it has massage available,

439
00:21:53,880 --> 00:21:57,200
Speaker 9: It has locker rooms that are like a spy.

440
00:21:57,359 --> 00:22:00,000
Speaker 6: I'm in a massage. I didn't any time you want to?

441
00:22:00,440 --> 00:22:03,960
Speaker 6: So there we go. What would you guys like?

442
00:22:04,119 --> 00:22:04,199
Speaker 11: Not?

443
00:22:04,600 --> 00:22:05,920
Speaker 6: What doesn't make sense right now?

444
00:22:06,000 --> 00:22:08,040
Speaker 4: Like if people, I'm clearly sellers are going to want

445
00:22:08,040 --> 00:22:09,639
Speaker 4: to be out there selling their property.

446
00:22:09,640 --> 00:22:11,400
Speaker 5: It's obviously the price is going to be a problem.

447
00:22:11,840 --> 00:22:14,880
Speaker 4: What have you been pitched to that You're like, no way,

448
00:22:15,040 --> 00:22:16,560
Speaker 4: Why would anyone think that's a good idea?

449
00:22:16,720 --> 00:22:17,880
Speaker 5: Or is it just a price situation?

450
00:22:18,200 --> 00:22:18,280
Speaker 7: No?

451
00:22:18,760 --> 00:22:20,960
Speaker 10: For us, Again, I think it gets back to quality.

452
00:22:21,200 --> 00:22:23,879
Speaker 9: There are certain assets that we would not want to

453
00:22:23,920 --> 00:22:26,080
Speaker 9: own just because we don't think that they can be

454
00:22:26,119 --> 00:22:29,080
Speaker 9: made into a premiere workplace, which is where we're focused.

455
00:22:29,080 --> 00:22:30,880
Speaker 10: That's our segment of the market, and so.

456
00:22:32,280 --> 00:22:35,639
Speaker 9: We are gating issue is is it already premiere or

457
00:22:35,680 --> 00:22:38,320
Speaker 9: can it be made to be premiere through reinvestment? And

458
00:22:38,400 --> 00:22:40,920
Speaker 9: those are the assets that we're interested in nothing else.

459
00:22:41,520 --> 00:22:43,880
Speaker 2: Are your clients where are they in terms of back

460
00:22:43,920 --> 00:22:47,040
Speaker 2: to work? Are we now at the new normal? Whether

461
00:22:47,080 --> 00:22:49,639
Speaker 2: it's three days a week or Bloomberg's four days a

462
00:22:49,680 --> 00:22:53,000
Speaker 2: week for example, are we added new normal? Is that

463
00:22:53,040 --> 00:22:53,959
Speaker 2: what your clients are telling you?

464
00:22:54,240 --> 00:22:57,720
Speaker 9: So in our space again, our buildings tend to have

465
00:22:57,760 --> 00:23:01,600
Speaker 9: people who are revenue generators for their company occupying the space.

466
00:23:01,920 --> 00:23:03,960
Speaker 9: They have been back to work, and it's really not

467
00:23:04,080 --> 00:23:06,399
Speaker 9: so much a topic of conversation in our office at

468
00:23:06,400 --> 00:23:11,719
Speaker 9: all anymore. We are at or above physical occupancy that

469
00:23:11,800 --> 00:23:13,119
Speaker 9: existed pre pandemic.

470
00:23:13,200 --> 00:23:15,160
Speaker 10: Today. Now it's off a little bit.

471
00:23:15,080 --> 00:23:16,879
Speaker 9: On Fridays and Mondays, but in the middle of the

472
00:23:16,920 --> 00:23:18,920
Speaker 9: week we actually are right back where we were before

473
00:23:18,960 --> 00:23:19,560
Speaker 9: the pandemic.

474
00:23:19,680 --> 00:23:22,760
Speaker 4: You guys also own the five ninety nine Lexington that

475
00:23:22,880 --> 00:23:26,399
Speaker 4: a beautiful building has like a like a tower.

476
00:23:26,520 --> 00:23:29,560
Speaker 9: It's like, well that's six oh one, I think on

477
00:23:30,520 --> 00:23:31,840
Speaker 9: five Nimes right across the street.

478
00:23:32,160 --> 00:23:33,560
Speaker 5: Yeah, how are those doing?

479
00:23:33,840 --> 00:23:34,399
Speaker 10: They're great?

480
00:23:34,920 --> 00:23:38,200
Speaker 9: So six ZHO one Lex has nine thousand square feet available.

481
00:23:38,200 --> 00:23:40,440
Speaker 9: It's a two million square foot building. Plus remind us

482
00:23:41,280 --> 00:23:45,000
Speaker 9: and five nine Lex is where our offices are actually

483
00:23:45,080 --> 00:23:47,560
Speaker 9: and that building is very well leased as well. We

484
00:23:47,640 --> 00:23:49,359
Speaker 9: do have a little bit of space coming available in

485
00:23:49,400 --> 00:23:51,560
Speaker 9: that building and there is a lot of demand for it.

486
00:23:51,600 --> 00:23:53,479
Speaker 9: People are calling us and saying we want it and

487
00:23:53,520 --> 00:23:54,399
Speaker 9: can we have it now?

488
00:23:54,480 --> 00:23:57,440
Speaker 2: But you know, right here Election fifty eighth and fifty nine,

489
00:23:57,480 --> 00:24:00,240
Speaker 2: all these stores are empty except the chocolate store because

490
00:24:00,240 --> 00:24:03,720
Speaker 2: that everybody needs chocolate. Yeah, what's going on in your buildings?

491
00:24:03,720 --> 00:24:06,000
Speaker 2: Do you have that ground floor retail is out a

492
00:24:06,000 --> 00:24:07,000
Speaker 2: component of your buildings?

493
00:24:07,080 --> 00:24:07,440
Speaker 10: We do.

494
00:24:07,520 --> 00:24:09,359
Speaker 9: We have lots of retail in our buildings. We built

495
00:24:09,359 --> 00:24:11,480
Speaker 9: out of food Hall and six someone Lex, we also

496
00:24:11,560 --> 00:24:14,440
Speaker 9: have street level retail. Look, we think of our retail

497
00:24:14,480 --> 00:24:19,159
Speaker 9: as complementary to the office experience and for our clients

498
00:24:19,240 --> 00:24:21,960
Speaker 9: that have office space with us, we want to make

499
00:24:22,000 --> 00:24:24,960
Speaker 9: sure that they have a great experience going out and

500
00:24:25,000 --> 00:24:27,879
Speaker 9: grabbing something healthy and fresh and convenient for lunch.

501
00:24:28,440 --> 00:24:30,840
Speaker 10: And so we've really looked.

502
00:24:30,520 --> 00:24:33,919
Speaker 9: At our retail as a way to complement our premiere

503
00:24:34,000 --> 00:24:37,000
Speaker 9: workplace and not just as a revenue generator. In and

504
00:24:37,000 --> 00:24:39,600
Speaker 9: of itself, and we've been able to attract really really

505
00:24:39,600 --> 00:24:42,520
Speaker 9: great options. So I think you know, our approach has

506
00:24:42,560 --> 00:24:45,360
Speaker 9: been very successful. But it's very it's very much done

507
00:24:45,440 --> 00:24:46,760
Speaker 9: with our clients in mind.

508
00:24:47,320 --> 00:24:49,479
Speaker 4: Really great stuff, really interesting. Thank you so much for

509
00:24:49,520 --> 00:24:51,879
Speaker 4: coming in, come back, keep us updated. We love touching

510
00:24:51,880 --> 00:24:52,440
Speaker 4: on this topic.

511
00:24:52,480 --> 00:24:53,960
Speaker 5: It's all so important.

512
00:24:54,119 --> 00:24:57,600
Speaker 12: An architectural oddity along Park Avenue.

513
00:24:57,760 --> 00:24:59,960
Speaker 6: Sound like my husband, but yes, no, it's true.

514
00:25:00,040 --> 00:25:04,280
Speaker 12: Because the lobbies are all raised kind of if you

515
00:25:04,320 --> 00:25:07,880
Speaker 12: go down there, and that's because the lack I suppose

516
00:25:07,960 --> 00:25:12,119
Speaker 12: the lack of elevator wells because underneath the buildings you

517
00:25:12,200 --> 00:25:14,200
Speaker 12: can't go down there are railroad tracks.

518
00:25:14,200 --> 00:25:15,560
Speaker 10: You are exactly right.

519
00:25:15,520 --> 00:25:17,840
Speaker 2: John Tucker, bringing out some mercy college.

520
00:25:18,359 --> 00:25:20,879
Speaker 6: Just did you research time while we were there? Was different?

521
00:25:21,320 --> 00:25:24,679
Speaker 2: Just now he saw a YouTube video and that's all

522
00:25:24,720 --> 00:25:25,240
Speaker 2: his knowledge.

523
00:25:27,880 --> 00:25:29,960
Speaker 10: Lobbies are wrong, but you're exactly correct.

524
00:25:30,000 --> 00:25:30,760
Speaker 12: That's very okay.

525
00:25:30,840 --> 00:25:32,320
Speaker 6: Thank you, very John Tucker.

526
00:25:32,760 --> 00:25:36,240
Speaker 2: The brilliant city all my life. Thank you very much

527
00:25:36,240 --> 00:25:39,320
Speaker 2: for join us. Hell respond Executive Vice President b XP

528
00:25:39,800 --> 00:25:41,960
Speaker 2: joining us live here in our interactive broker studio talking

529
00:25:41,960 --> 00:25:44,760
Speaker 2: about commercial real estate again. I guess the story I'm

530
00:25:44,800 --> 00:25:46,760
Speaker 2: learning as if you've got your properties are in good shape.

531
00:25:46,760 --> 00:25:49,480
Speaker 2: If you have something less than good, then perhaps still

532
00:25:49,520 --> 00:25:50,360
Speaker 2: a struggle out there.

533
00:25:51,880 --> 00:25:55,760
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

534
00:25:55,840 --> 00:25:58,720
Speaker 1: weekdays at ten am Eastern on Apple, car Play and

535
00:25:58,880 --> 00:26:01,800
Speaker 1: and Roight Outo with the Bloomberg Business. You can also

536
00:26:01,880 --> 00:26:05,040
Speaker 1: listen live on Amazon Alexa from our flagship New York

537
00:26:05,119 --> 00:26:08,760
Speaker 1: station Just Say Alexa playing Bloomberg eleven thirty.

538
00:26:10,280 --> 00:26:12,600
Speaker 3: Busy earning cycle Here for the tech games.

539
00:26:12,600 --> 00:26:14,679
Speaker 2: We had met a last night, some good numbers that

540
00:26:14,720 --> 00:26:18,000
Speaker 2: stock trading up, and big big afternoon today after the

541
00:26:18,000 --> 00:26:21,960
Speaker 2: close Apple and Amazon report, let's check in with one

542
00:26:21,960 --> 00:26:24,600
Speaker 2: of our go to tech folks, Dan Ives, managing director

543
00:26:24,600 --> 00:26:27,879
Speaker 2: and senior equity analyst, What Bush Security. He's not in

544
00:26:27,960 --> 00:26:29,880
Speaker 2: your studio and he's not even zoom, so we can't

545
00:26:29,880 --> 00:26:32,200
Speaker 2: even see what is outlandish outfit.

546
00:26:32,280 --> 00:26:34,600
Speaker 4: He's probably wearing like a black suit at this point,

547
00:26:34,640 --> 00:26:36,040
Speaker 4: and I mean, we can't see it.

548
00:26:36,040 --> 00:26:38,640
Speaker 2: It's upsetting exactly, Dan, thanks so much for joining us here.

549
00:26:38,720 --> 00:26:41,879
Speaker 2: Let's start with Apple here. I kind of feel like

550
00:26:42,359 --> 00:26:44,600
Speaker 2: they need some more explaining to do in terms of,

551
00:26:45,200 --> 00:26:47,560
Speaker 2: you know, some of their strategies here in terms of

552
00:26:47,560 --> 00:26:49,760
Speaker 2: the market in China, what are you going to be

553
00:26:49,800 --> 00:26:50,639
Speaker 2: looking for from Apple.

554
00:26:51,200 --> 00:26:53,760
Speaker 13: I mean, it's really about the China growth. We think

555
00:26:53,800 --> 00:26:57,359
Speaker 13: it's the last negative quarter for China and then that

556
00:26:57,560 --> 00:27:00,920
Speaker 13: starts to now have a tailwind going into the AI

557
00:27:01,080 --> 00:27:04,760
Speaker 13: driven supercycle. And I think this is this is the

558
00:27:04,800 --> 00:27:07,320
Speaker 13: beginning of what's going to be a historic period for

559
00:27:07,640 --> 00:27:11,960
Speaker 13: Apple and I think broader tech as this week's Nowaday,

560
00:27:12,080 --> 00:27:15,560
Speaker 13: the AI revolution is real and now the consumer piece

561
00:27:15,600 --> 00:27:16,320
Speaker 13: comes to Apple.

562
00:27:17,080 --> 00:27:18,399
Speaker 4: So this is still going to be a show me

563
00:27:18,440 --> 00:27:20,880
Speaker 4: story though, Dan, because all the indications we've gotten from

564
00:27:20,920 --> 00:27:23,359
Speaker 4: China from any sector is not good.

565
00:27:25,000 --> 00:27:28,760
Speaker 13: Well, our I mean our checks in terms of units,

566
00:27:29,480 --> 00:27:33,720
Speaker 13: which originally five phone sixteen was what's called eighty four millions,

567
00:27:33,920 --> 00:27:37,240
Speaker 13: which is now up to ninety. So the point is

568
00:27:37,240 --> 00:27:40,800
Speaker 13: like for iPhone sixteen that continues to wratch up, but

569
00:27:40,920 --> 00:27:44,320
Speaker 13: it speaks to our point. The haters hate Apple at

570
00:27:44,359 --> 00:27:48,720
Speaker 13: one sixty, despise it at two hundred, and will absolutely

571
00:27:48,800 --> 00:27:53,040
Speaker 13: hated at two fifty. So as we're going into this phase,

572
00:27:53,320 --> 00:27:56,679
Speaker 13: it will be proved. Me but betting against Apple and

573
00:27:56,760 --> 00:27:58,440
Speaker 13: Coupertino has been the wrong movie.

574
00:28:00,280 --> 00:28:03,399
Speaker 2: So talk to us about the services side of the business, Dan,

575
00:28:03,520 --> 00:28:06,159
Speaker 2: because for you know, a long time, a lot of

576
00:28:06,200 --> 00:28:08,320
Speaker 2: bulls were saying, you got to focus on services because

577
00:28:08,320 --> 00:28:10,560
Speaker 2: that's the high margin business and it takes you away

578
00:28:10,560 --> 00:28:13,520
Speaker 2: from the replacement cycle risk and all that is. Service

579
00:28:13,560 --> 00:28:15,960
Speaker 2: is still a key story for the Apple stock.

580
00:28:16,880 --> 00:28:18,800
Speaker 13: Oh, I mean me, and you've thought about it a lot.

581
00:28:18,880 --> 00:28:23,800
Speaker 13: I mean services is key to the valuation of Apple.

582
00:28:24,400 --> 00:28:26,600
Speaker 13: It's been big to the sum of the part story.

583
00:28:27,400 --> 00:28:30,160
Speaker 13: And actually, I'd say the biggest way that maybe people

584
00:28:30,160 --> 00:28:34,480
Speaker 13: have missed Apple is not recognizing that this essential was

585
00:28:34,520 --> 00:28:39,240
Speaker 13: a reading story wed by services the last two years.

586
00:28:40,840 --> 00:28:45,000
Speaker 4: So when it comes to their indications on their own

587
00:28:45,080 --> 00:28:48,400
Speaker 4: Apple Intelligence, you know, Man Deep saying are from Bloomberg

588
00:28:48,440 --> 00:28:50,520
Speaker 4: Intelligence was pointing out that, you know, Apple doesn't have

589
00:28:50,600 --> 00:28:51,920
Speaker 4: its large language model.

590
00:28:52,360 --> 00:28:54,520
Speaker 6: So what do you think we're going to What are the.

591
00:28:54,520 --> 00:28:56,360
Speaker 4: Questions that you and other analysts are going to have

592
00:28:56,400 --> 00:28:58,360
Speaker 4: on the call about LLM.

593
00:28:59,200 --> 00:29:04,760
Speaker 13: Big focus is really developers. Developers now will start the

594
00:29:04,760 --> 00:29:08,800
Speaker 13: process of building hundreds of apps on the Apple ecosystem.

595
00:29:09,280 --> 00:29:12,200
Speaker 13: So I think Cook talking about what initial feedback is

596
00:29:12,240 --> 00:29:18,600
Speaker 13: from developers maybe given some breadcrumbs into iPhone sixteen, that's

597
00:29:18,640 --> 00:29:21,080
Speaker 13: going to be the important thing. But if you take

598
00:29:21,120 --> 00:29:25,520
Speaker 13: a step back two hundred and seventy millions have not

599
00:29:25,760 --> 00:29:28,600
Speaker 13: upgraded their phone. Paul could be included in the last

600
00:29:28,640 --> 00:29:33,479
Speaker 13: four years. And I think now you go into what

601
00:29:33,640 --> 00:29:36,600
Speaker 13: should be is an AI driven supercycle.

602
00:29:37,720 --> 00:29:42,760
Speaker 2: So from your perspective, Dan, has Tim Cook and Apple?

603
00:29:42,840 --> 00:29:46,320
Speaker 2: Have they allayed the concerns of investors or some investors

604
00:29:46,320 --> 00:29:49,000
Speaker 2: that Apple's really not going to be a prime beneficiary

605
00:29:49,040 --> 00:29:51,080
Speaker 2: of AI? Have they allayed those concerns? Do you think?

606
00:29:51,440 --> 00:29:51,640
Speaker 7: Oh?

607
00:29:51,680 --> 00:29:53,320
Speaker 13: I think they have. I mean book goes back to

608
00:29:53,400 --> 00:29:57,400
Speaker 13: WWDC stock was one ninety, right, yep, everyone thought it's

609
00:29:57,480 --> 00:30:00,760
Speaker 13: over the din't showing it look at today. And the

610
00:30:00,800 --> 00:30:04,280
Speaker 13: point is because I think now the street recognizes that

611
00:30:04,360 --> 00:30:09,040
Speaker 13: the AI revolution on the consumer side goes to Apple Park.

612
00:30:09,320 --> 00:30:12,480
Speaker 13: On the enterprise side, it's godfather of AI, Jensen and

613
00:30:12,520 --> 00:30:15,240
Speaker 13: Vidio as well as Madella, But on consumer it's Apple.

614
00:30:15,600 --> 00:30:16,720
Speaker 6: Yeah, it's such a good point.

615
00:30:17,080 --> 00:30:18,600
Speaker 4: And I think you made that point with us on

616
00:30:18,600 --> 00:30:20,520
Speaker 4: our show a few weeks ago, and that was a

617
00:30:20,520 --> 00:30:22,520
Speaker 4: good distinction, right, which kind of brings us then to

618
00:30:22,600 --> 00:30:26,560
Speaker 4: Amazon because Amazon has the consumer side when it comes

619
00:30:26,600 --> 00:30:28,920
Speaker 4: to e commerce, and then it obviously has the cloud.

620
00:30:29,320 --> 00:30:31,680
Speaker 4: Then that AI side, what are you expecting after the

621
00:30:31,680 --> 00:30:34,360
Speaker 4: bell that's not as flat now on a pretty heavy tape.

622
00:30:35,040 --> 00:30:38,960
Speaker 13: Big focus is AWS. Look at the cloud strength we

623
00:30:39,000 --> 00:30:41,960
Speaker 13: saw from Alphabet by the knee jerk react right to

624
00:30:42,040 --> 00:30:44,920
Speaker 13: continue to be as the adscratcher. Look at the Microsoft

625
00:30:45,000 --> 00:30:49,880
Speaker 13: cloud number. I think Amazon's going to be on AWS

626
00:30:49,880 --> 00:30:54,400
Speaker 13: and that's important for them to show. Don't forget about

627
00:30:54,480 --> 00:30:57,480
Speaker 13: us when it comes to the AI revolution. That's what

628
00:30:57,560 --> 00:30:59,360
Speaker 13: Jassi is really going to be focused on the call.

629
00:31:00,720 --> 00:31:05,200
Speaker 2: So give us a sense, Dan about how how investors

630
00:31:05,200 --> 00:31:09,000
Speaker 2: should position, you know, Amazon Web Services in the context

631
00:31:09,040 --> 00:31:12,200
Speaker 2: of the AI play. How do they fit in?

632
00:31:12,520 --> 00:31:17,440
Speaker 13: Really that's a great question. I view it as if

633
00:31:17,560 --> 00:31:21,160
Speaker 13: Apples could show, and I believe they can, that they

634
00:31:21,200 --> 00:31:26,880
Speaker 13: can monetize that leadership position in cloud and actually monetize

635
00:31:26,920 --> 00:31:30,320
Speaker 13: from an AI perspective very somewhere what Microsoft's doing to Google.

636
00:31:31,360 --> 00:31:33,000
Speaker 13: That that then all of a sudden from some of

637
00:31:33,000 --> 00:31:36,800
Speaker 13: the parts could add significant value some of the parts

638
00:31:36,320 --> 00:31:40,280
Speaker 13: of the Amazon stories. So that's really what they need

639
00:31:40,320 --> 00:31:43,600
Speaker 13: to focus on. Consumer is what it is. I don't

640
00:31:43,680 --> 00:31:46,440
Speaker 13: I mean advertising and margins and you could kind of

641
00:31:46,800 --> 00:31:48,960
Speaker 13: you there's some focus there, but it's really about cloud

642
00:31:49,000 --> 00:31:52,360
Speaker 13: improven that they will be an AI beneficiar.

643
00:31:52,800 --> 00:31:54,600
Speaker 5: How did we see that in the line items When

644
00:31:54,640 --> 00:31:56,000
Speaker 5: it comes across.

645
00:31:56,360 --> 00:32:00,080
Speaker 13: It's really around the eight I WUS strength. We expect upside.

646
00:32:00,120 --> 00:32:04,600
Speaker 13: And then on the call, walking through not just anthrophics,

647
00:32:04,680 --> 00:32:07,760
Speaker 13: but like the overall AI strategy and what they're starting

648
00:32:07,760 --> 00:32:11,960
Speaker 13: to see in their customer base. You triangulate that with

649
00:32:12,080 --> 00:32:17,760
Speaker 13: alphabet Microsoft AMD. It's nine pm in the AI party,

650
00:32:17,840 --> 00:32:18,960
Speaker 13: goes to four am.

651
00:32:19,000 --> 00:32:19,520
Speaker 3: There we go.

652
00:32:20,000 --> 00:32:22,960
Speaker 5: There's the headline for you. What about cap X for Amazon?

653
00:32:24,320 --> 00:32:28,840
Speaker 13: I want to see them continue to accelerate it. To me,

654
00:32:29,480 --> 00:32:32,200
Speaker 13: it's an arms race that's going on. So as much

655
00:32:32,240 --> 00:32:35,680
Speaker 13: as you could fret about some of maybe the cap X,

656
00:32:36,640 --> 00:32:38,840
Speaker 13: that's what you want to see from Meta. You want

657
00:32:38,840 --> 00:32:41,959
Speaker 13: to see Microsoft. You want to see from Amazon. Now

658
00:32:42,120 --> 00:32:45,320
Speaker 13: Investors be like, Okay, where's the payback room? Wasn't built

659
00:32:45,360 --> 00:32:47,840
Speaker 13: in a day? This is going to take six, nine, twelve,

660
00:32:47,920 --> 00:32:51,560
Speaker 13: eighteen months. But at the end of it Fourth Industrial Revolution,

661
00:32:51,960 --> 00:32:53,800
Speaker 13: Amazon wants to be a huge part of that, and

662
00:32:53,800 --> 00:32:56,600
Speaker 13: that's what investors want to see. Even though bad is good,

663
00:32:56,720 --> 00:32:57,360
Speaker 13: good as bad.

664
00:32:58,040 --> 00:33:01,280
Speaker 2: Microsoft just you know one segment on that, Dan, how

665
00:33:01,320 --> 00:33:03,480
Speaker 2: do you how's the Microsoft story shaping up for you?

666
00:33:03,560 --> 00:33:05,840
Speaker 2: I know you've always been very supportive and of the

667
00:33:05,880 --> 00:33:07,600
Speaker 2: stock where are they right now?

668
00:33:08,560 --> 00:33:12,760
Speaker 13: It was a validation movement. I mean the reason tech

669
00:33:12,840 --> 00:33:16,400
Speaker 13: went green yesterday and all the white knuckle fields were alight,

670
00:33:16,480 --> 00:33:18,840
Speaker 13: it was because in Thedella it's talking about the acceleration

671
00:33:18,920 --> 00:33:22,760
Speaker 13: and azure and talking about AI monization is now here

672
00:33:23,720 --> 00:33:27,120
Speaker 13: because there's two people that everyone in the world's focused on.

673
00:33:27,200 --> 00:33:31,280
Speaker 13: What they say on AI, godfather of AI, Jensen Nadella.

674
00:33:31,360 --> 00:33:34,840
Speaker 13: And when you heard from Theadella that n Rubik's cube

675
00:33:34,960 --> 00:33:37,200
Speaker 13: that you're trying to figure out, that was bullish in

676
00:33:37,240 --> 00:33:40,720
Speaker 13: terms of AI validation combined with the Elisha shoe talked

677
00:33:40,720 --> 00:33:42,680
Speaker 13: about from me and be very polish.

678
00:33:42,760 --> 00:33:44,720
Speaker 4: So before I let you go, Dan, we're looking at

679
00:33:45,160 --> 00:33:47,600
Speaker 4: a day where stocks are selling off. We definitely had

680
00:33:47,600 --> 00:33:49,200
Speaker 4: a bad news is bad news when it came to

681
00:33:49,240 --> 00:33:50,960
Speaker 4: the ISM manufacturing dat at the top.

682
00:33:50,840 --> 00:33:53,800
Speaker 5: Of the ten o'clock hour, how much how much.

683
00:33:53,720 --> 00:33:56,320
Speaker 4: Leg do you think this maybe next move of the

684
00:33:56,400 --> 00:33:57,520
Speaker 4: tech selloff can have.

685
00:33:58,800 --> 00:34:02,520
Speaker 13: I think this rotations big tech, the small cap we

686
00:34:02,600 --> 00:34:06,880
Speaker 13: think is very short lived. Said next move to cut

687
00:34:08,000 --> 00:34:11,400
Speaker 13: in that cycle with big big tech earnings that we're saying,

688
00:34:11,640 --> 00:34:13,319
Speaker 13: I'm not saying that you're not going to have some

689
00:34:13,360 --> 00:34:16,279
Speaker 13: speed bumps here. We weive we are still in the

690
00:34:16,400 --> 00:34:19,919
Speaker 13: early stages of this techical market and that's how we've

691
00:34:19,920 --> 00:34:23,120
Speaker 13: handheld investors through some of the roller coaster.

692
00:34:24,040 --> 00:34:25,640
Speaker 2: All Right, Dan, thanks so much for joining us. Dan

693
00:34:25,680 --> 00:34:28,040
Speaker 2: I've C's a managing director senior equity analyst at web

694
00:34:28,040 --> 00:34:31,720
Speaker 2: Bush Securities, giving us his thoughts on big tech again

695
00:34:31,800 --> 00:34:36,759
Speaker 2: after the close today, Amazon and Apple, I'll be paying

696
00:34:36,760 --> 00:34:38,080
Speaker 2: attention from Yeah, I.

697
00:34:38,040 --> 00:34:40,120
Speaker 5: Think it's been really fun. I was really surprised about Meta.

698
00:34:40,280 --> 00:34:42,759
Speaker 4: I mean, you know, I was really skeptical going in

699
00:34:42,760 --> 00:34:44,520
Speaker 4: in terms of they don't have the same kind of

700
00:34:44,560 --> 00:34:49,080
Speaker 4: cloud plus AI to deliver, but that ad impressions and

701
00:34:49,120 --> 00:34:51,480
Speaker 4: that in terms of the quality of the ads was

702
00:34:51,520 --> 00:34:54,040
Speaker 4: really quite impressive. So I was surprised, and that's not

703
00:34:54,160 --> 00:34:55,839
Speaker 4: holding up despite the sell off in the equity market.

704
00:34:55,960 --> 00:34:58,239
Speaker 2: Yeah, so, I mean, I think for for Meta and

705
00:34:58,280 --> 00:35:01,359
Speaker 2: for Google as well, anybody who's advertising, what AI does

706
00:35:01,440 --> 00:35:04,719
Speaker 2: is allows you to target better target your audience, which

707
00:35:04,760 --> 00:35:07,279
Speaker 2: is important for advertisers because they don't want to waste

708
00:35:07,280 --> 00:35:09,280
Speaker 2: their advertising dollars. They want to make sure every advertising

709
00:35:09,320 --> 00:35:12,280
Speaker 2: dollar is going to someone who they really want to reach,

710
00:35:13,120 --> 00:35:15,880
Speaker 2: and that's one of the advantages of digital advertising overall,

711
00:35:16,040 --> 00:35:18,120
Speaker 2: versus say, buying a TV at or buying it at

712
00:35:18,200 --> 00:35:20,760
Speaker 2: the newspaper or something like that. You're getting everybody people

713
00:35:20,800 --> 00:35:24,240
Speaker 2: you don't want as well. Digital does it better. Targeting

714
00:35:24,360 --> 00:35:25,879
Speaker 2: AI just makes it even better.

715
00:35:26,000 --> 00:35:28,520
Speaker 6: Yeah, so has a premium? Does digital have a premium

716
00:35:28,800 --> 00:35:29,200
Speaker 6: to TV?

717
00:35:29,480 --> 00:35:29,560
Speaker 3: Oh?

718
00:35:29,680 --> 00:35:30,000
Speaker 2: Yeah?

719
00:35:30,160 --> 00:35:32,640
Speaker 4: Okay, all right, so well it always has, hasn't it

720
00:35:33,160 --> 00:35:33,960
Speaker 4: last ten years or so?

721
00:35:34,120 --> 00:35:34,279
Speaker 1: Yeah?

722
00:35:34,320 --> 00:35:37,760
Speaker 2: I mean it's it's interesting. It's they target different advertisers.

723
00:35:37,800 --> 00:35:42,600
Speaker 2: But the CPI is the cost per point is really interesting.

724
00:35:42,680 --> 00:35:44,919
Speaker 2: So it's just a premium. You're taking share across the board.

725
00:35:46,400 --> 00:35:50,279
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

726
00:35:50,360 --> 00:35:53,439
Speaker 1: weekdays at ten am Eastern on Apple car Play and

727
00:35:53,440 --> 00:35:56,360
Speaker 1: Android Auto with the Bloomberg Business app. You can also

728
00:35:56,400 --> 00:35:59,600
Speaker 1: listen live on Amazon Alexa from our flagship New York

729
00:35:59,600 --> 00:36:03,000
Speaker 1: station just Say Alexa playing Bloomberg eleven thirty.

730
00:36:04,560 --> 00:36:07,640
Speaker 2: Let's continue our conversation on commercial real estate. I heard

731
00:36:07,640 --> 00:36:11,200
Speaker 2: from someone earlier today, I guess who really is focusing

732
00:36:11,239 --> 00:36:13,160
Speaker 2: on the New York market In New York. If you've

733
00:36:13,200 --> 00:36:14,920
Speaker 2: got a list of properties, you're fine. If you've got

734
00:36:14,920 --> 00:36:16,920
Speaker 2: B and C not so fine. Here let's broaden it

735
00:36:16,960 --> 00:36:18,600
Speaker 2: out a little bit. We can do that with Greg Friedman,

736
00:36:18,880 --> 00:36:21,960
Speaker 2: managing principle and CEO of Peachtree Group. I'm just guessing

737
00:36:21,960 --> 00:36:24,480
Speaker 2: it's Atlanta. He joined us live here in our Bloomberg

738
00:36:24,520 --> 00:36:28,000
Speaker 2: and Arrective Brokers studio. Abigail do little joints as well.

739
00:36:28,000 --> 00:36:32,879
Speaker 2: We appreciate that. Abigail Dottle, markets reporter for Bloomberg News. Greg,

740
00:36:32,880 --> 00:36:34,400
Speaker 2: thanks so much for joining us here talk to us

741
00:36:34,400 --> 00:36:37,640
Speaker 2: about Peachtree. How do you guys play the commercial real

742
00:36:37,719 --> 00:36:41,799
Speaker 2: estate business? Equity, debt, regional? Where do you guys go?

743
00:36:41,960 --> 00:36:45,000
Speaker 11: Yeah, so we invest across the US, so it's just domestic,

744
00:36:45,080 --> 00:36:47,200
Speaker 11: but we invest up and down the capital stacks. We

745
00:36:47,239 --> 00:36:49,400
Speaker 11: invest on the credit side as well as the equity

746
00:36:49,440 --> 00:36:51,680
Speaker 11: side of commercial real estate. So we're a little bit

747
00:36:51,840 --> 00:36:54,000
Speaker 11: unique in the sense that we do as part of

748
00:36:54,000 --> 00:36:57,319
Speaker 11: our company. We have different verticals that go out and

749
00:36:57,360 --> 00:36:59,640
Speaker 11: actually lend to commercial real estate. We buy a lot

750
00:36:59,680 --> 00:37:02,760
Speaker 11: of debt from financial institutions and banks and regional banks.

751
00:37:03,000 --> 00:37:05,759
Speaker 11: We also buy and develop, you know, real estate. We

752
00:37:05,800 --> 00:37:08,480
Speaker 11: buy and develop primarily hotel assets that are you know,

753
00:37:08,520 --> 00:37:12,160
Speaker 11: select service, limited service type hotel properties on the equity side,

754
00:37:12,200 --> 00:37:14,320
Speaker 11: but the CREDITSIBE, We're diversified.

755
00:37:14,120 --> 00:37:14,440
Speaker 3: All right.

756
00:37:14,480 --> 00:37:15,960
Speaker 2: I'm trying to get a sense, I think a lot

757
00:37:16,000 --> 00:37:18,640
Speaker 2: of people are trying to get a sense is how

758
00:37:18,680 --> 00:37:21,319
Speaker 2: bad is a commercial real estate out there? And where

759
00:37:21,320 --> 00:37:22,480
Speaker 2: are we going to see it? Where are we going

760
00:37:22,560 --> 00:37:24,840
Speaker 2: to feel it? Where are we in the kind of

761
00:37:24,840 --> 00:37:28,239
Speaker 2: this nine innings of trying to normalize this market when

762
00:37:28,280 --> 00:37:31,320
Speaker 2: people's behavior has really changed, whether it's working or traveling

763
00:37:31,320 --> 00:37:32,680
Speaker 2: and that kind of stuff. How do you guys think

764
00:37:32,680 --> 00:37:33,000
Speaker 2: about that?

765
00:37:33,080 --> 00:37:35,759
Speaker 11: Yeah, I think commercial real estate's very bifurcated today. If

766
00:37:35,760 --> 00:37:37,800
Speaker 11: you have like a long term fixed rate loan, you

767
00:37:37,880 --> 00:37:40,719
Speaker 11: bought an asset several years ago, you feel really good

768
00:37:40,760 --> 00:37:43,319
Speaker 11: about where you sit in life, assuming that loan's not

769
00:37:43,360 --> 00:37:45,640
Speaker 11: maturing here, you know, in the near term. If you

770
00:37:45,800 --> 00:37:49,200
Speaker 11: have loan maturity issues, if you're you know, if you're

771
00:37:49,239 --> 00:37:51,040
Speaker 11: dealing with you know, loans that are floating rate, that

772
00:37:51,080 --> 00:37:53,000
Speaker 11: are on hedge, you're dealing with a lot of that

773
00:37:53,120 --> 00:37:55,880
Speaker 11: balance sheet stress. You hear a lot of the headlines

774
00:37:55,920 --> 00:37:58,759
Speaker 11: talk about the stress that's going on in office, which

775
00:37:58,800 --> 00:38:01,520
Speaker 11: is really just that secular stress. You take office out

776
00:38:01,520 --> 00:38:03,719
Speaker 11: of the equation, you know, real estate with loans that

777
00:38:03,760 --> 00:38:06,960
Speaker 11: are maturing are under heavy pressure right now because these

778
00:38:07,040 --> 00:38:09,880
Speaker 11: rates are resetting in most cases, you know, double or

779
00:38:09,880 --> 00:38:12,279
Speaker 11: even trouble what they were paying, you know, from the

780
00:38:12,280 --> 00:38:12,920
Speaker 11: previous loan.

781
00:38:13,320 --> 00:38:15,640
Speaker 14: Well, let's talk more about that, because by the end

782
00:38:15,760 --> 00:38:19,400
Speaker 14: of twenty twenty five, let's call it, more than one

783
00:38:19,480 --> 00:38:23,280
Speaker 14: hundred one trillion to one point five trillion cnbs coming due.

784
00:38:23,280 --> 00:38:26,080
Speaker 14: Because you are on the credit side, you're really seeing

785
00:38:26,120 --> 00:38:28,959
Speaker 14: the plumbing a little bit more closely. It's interesting there's

786
00:38:29,000 --> 00:38:32,080
Speaker 14: this debate among some of the commercial real estate people

787
00:38:32,120 --> 00:38:34,200
Speaker 14: that we speak to, and some are a little bit

788
00:38:34,239 --> 00:38:37,160
Speaker 14: more optimistic saying it's just office, and then there's others.

789
00:38:37,200 --> 00:38:40,759
Speaker 14: And Josh Ziegan is coming to mind strictly on the

790
00:38:40,800 --> 00:38:43,480
Speaker 14: credit side, very close to the banks, saying it's much

791
00:38:43,560 --> 00:38:45,000
Speaker 14: much more negative than people think.

792
00:38:45,040 --> 00:38:46,040
Speaker 10: Where do you stand on that?

793
00:38:46,080 --> 00:38:48,759
Speaker 14: Do you think it's a much more difficult position than

794
00:38:48,800 --> 00:38:51,280
Speaker 14: say some of the Blackstone activity might suggest.

795
00:38:52,000 --> 00:38:53,840
Speaker 11: Personally? I think it is. I think it's it's a

796
00:38:53,880 --> 00:38:56,840
Speaker 11: lot more negative. There's a lot of negative leverage. So

797
00:38:56,880 --> 00:38:59,280
Speaker 11: if you're buying assets today, in a lot of cases,

798
00:38:59,520 --> 00:39:02,360
Speaker 11: you're having negative leverage because rates are so much higher

799
00:39:02,800 --> 00:39:04,560
Speaker 11: than where a lot of these assets are trading on

800
00:39:04,600 --> 00:39:07,160
Speaker 11: a cap rate basis. Even though cap rates have moved up,

801
00:39:07,640 --> 00:39:09,839
Speaker 11: and not to mention, if you bought an asset pre

802
00:39:09,960 --> 00:39:13,040
Speaker 11: twenty twenty two, especially during the pandemic, cap rates had

803
00:39:13,080 --> 00:39:16,440
Speaker 11: compressed down to this like unsustainable level where a lot

804
00:39:16,440 --> 00:39:19,239
Speaker 11: of assets, if it was like a multifamily asset industrial,

805
00:39:19,520 --> 00:39:21,799
Speaker 11: we're trading in this three to four percent range, in

806
00:39:21,840 --> 00:39:24,520
Speaker 11: some cases a little bit higher, but renal growth rates

807
00:39:24,560 --> 00:39:27,840
Speaker 11: haven't really allowed for those cap rates to grow enough

808
00:39:28,160 --> 00:39:30,719
Speaker 11: to sustain interest rates that are you know, again, in

809
00:39:30,719 --> 00:39:33,320
Speaker 11: most cases you're in the you know, mid single digits

810
00:39:33,360 --> 00:39:36,239
Speaker 11: at a minimum, if not higher single digits. And that's

811
00:39:36,280 --> 00:39:39,399
Speaker 11: what's causing you know, a big challenge across commercial real estate.

812
00:39:39,400 --> 00:39:41,239
Speaker 2: All right, So what I'm sitting on a piece of

813
00:39:41,280 --> 00:39:44,719
Speaker 2: real estate down in Peachtree Street, Southwest and Atlanta the

814
00:39:44,760 --> 00:39:48,000
Speaker 2: worst city in the country for naming streets by right,

815
00:39:48,080 --> 00:39:51,920
Speaker 2: I mean it's a bunch of second graders. I'm sitting

816
00:39:51,920 --> 00:39:54,000
Speaker 2: on a piece of property. My mortgage is coming up.

817
00:39:55,600 --> 00:39:58,160
Speaker 2: I got a refinance it twice or maybe three? What

818
00:39:58,160 --> 00:39:58,640
Speaker 2: do I do?

819
00:39:59,120 --> 00:40:03,000
Speaker 11: Yeah, I mean, there's so there's definitely dead out there today.

820
00:40:03,280 --> 00:40:06,200
Speaker 11: The reality is regional banks, community banks, the national banks

821
00:40:06,520 --> 00:40:09,200
Speaker 11: make up fifty percent of the commercial real estate lending market.

822
00:40:09,440 --> 00:40:12,040
Speaker 11: They're not lending at the same level that they once were.

823
00:40:12,440 --> 00:40:15,680
Speaker 11: Groups like us on the credit side, we're doing lending today.

824
00:40:15,680 --> 00:40:18,000
Speaker 11: We've done about a billion dollars of loans this year

825
00:40:18,080 --> 00:40:20,920
Speaker 11: so far. So we're actually providing loans to groups that

826
00:40:21,040 --> 00:40:24,719
Speaker 11: need to recapitalize or refinance as loans are maturing. In

827
00:40:24,760 --> 00:40:27,400
Speaker 11: a lot of cases though using that example, they're going

828
00:40:27,440 --> 00:40:29,600
Speaker 11: to have to come in with additional liquidity, so they're

829
00:40:29,600 --> 00:40:32,239
Speaker 11: gon'n have to do it potentially cassion exactly, don't have

830
00:40:32,280 --> 00:40:34,600
Speaker 11: to come in with capital to allow for that refinance.

831
00:40:34,640 --> 00:40:35,520
Speaker 11: SI curd that equity.

832
00:40:35,719 --> 00:40:38,040
Speaker 14: So speaking to the other side of your credit business,

833
00:40:38,040 --> 00:40:40,080
Speaker 14: you also buy, and during the pandemic, you were one

834
00:40:40,120 --> 00:40:43,759
Speaker 14: of the biggest buyers of loans. I would imagine there's

835
00:40:43,760 --> 00:40:46,720
Speaker 14: a lot of bargains out there today. Are you super active?

836
00:40:47,120 --> 00:40:49,000
Speaker 11: Yeah, so, I mean we bought over one hundred and

837
00:40:49,040 --> 00:40:52,000
Speaker 11: eighty loans during the pandemic, so we were super active.

838
00:40:52,000 --> 00:40:54,520
Speaker 11: As you mentioned today, we've bought you know, this year,

839
00:40:54,520 --> 00:40:56,440
Speaker 11: we bought close to about a dozen loans since the

840
00:40:56,680 --> 00:40:58,959
Speaker 11: end of last year to you today, so we haven't

841
00:40:58,960 --> 00:41:01,240
Speaker 11: bought as much paper as I would expect.

842
00:41:00,920 --> 00:41:02,920
Speaker 14: Where are you buying that on the dollar, although I

843
00:41:02,920 --> 00:41:04,400
Speaker 14: know some folks say that's not a good way to

844
00:41:04,400 --> 00:41:05,600
Speaker 14: look at it, but like in terms of what kind

845
00:41:05,600 --> 00:41:06,120
Speaker 14: of bargain are you.

846
00:41:06,120 --> 00:41:08,279
Speaker 11: Guys, Yes, so what we filned and what assets? Yes,

847
00:41:08,280 --> 00:41:10,680
Speaker 11: So it's not huge discounts because what we're finding is

848
00:41:10,760 --> 00:41:13,160
Speaker 11: unlike during like the Great Financial Crisis, because we bought

849
00:41:13,160 --> 00:41:16,279
Speaker 11: a bunch of loans, then we got huge discounts. And

850
00:41:16,400 --> 00:41:19,240
Speaker 11: you know, back then banks had done higher leverage lending,

851
00:41:19,360 --> 00:41:21,840
Speaker 11: you know, going into this cycle and even into the pandemic,

852
00:41:22,120 --> 00:41:24,600
Speaker 11: you know, leverage levels were much more i would say

853
00:41:24,600 --> 00:41:27,560
Speaker 11: conservative by most you know, banks and financial institutions. So

854
00:41:27,600 --> 00:41:30,120
Speaker 11: the discounts weren't as large. But we're finding that the

855
00:41:30,120 --> 00:41:32,600
Speaker 11: banks that are trading paper, they're usually selling off their

856
00:41:32,680 --> 00:41:35,600
Speaker 11: better paper, which means that it's loans that were the

857
00:41:35,640 --> 00:41:38,440
Speaker 11: asset values greater than the loan balance, and so the

858
00:41:38,440 --> 00:41:40,480
Speaker 11: discounts just aren't as large given that factor.

859
00:41:40,719 --> 00:41:43,280
Speaker 5: So how hard is it to come to agree on pricing?

860
00:41:43,920 --> 00:41:47,000
Speaker 4: It's it's very challenging because it easier or harder now

861
00:41:47,080 --> 00:41:49,040
Speaker 4: than like I don't know, eight months ago or something.

862
00:41:48,920 --> 00:41:52,439
Speaker 3: It's still hard. Yeah, it's still very hard.

863
00:41:52,480 --> 00:41:54,000
Speaker 11: I think that's going to change towards the end of

864
00:41:54,000 --> 00:41:56,359
Speaker 11: this year because part of the challenge the losses that

865
00:41:56,560 --> 00:41:58,800
Speaker 11: different banks need to take. They don't have the reserves

866
00:41:58,800 --> 00:42:01,360
Speaker 11: to take them, and they're not will want to take

867
00:42:01,400 --> 00:42:04,279
Speaker 11: those losses today. I think that's going to change as

868
00:42:04,360 --> 00:42:06,960
Speaker 11: our lone loss reserves are increasing over the next couple

869
00:42:07,000 --> 00:42:08,680
Speaker 11: of quarters. And I wouldn't be surprised if you saw

870
00:42:08,680 --> 00:42:11,200
Speaker 11: a lot of regional banks sell off a lot of

871
00:42:11,200 --> 00:42:12,680
Speaker 11: paper in the fourth quarter this year.

872
00:42:13,040 --> 00:42:15,239
Speaker 2: Do you think the commercial real estate business, I don't

873
00:42:15,280 --> 00:42:17,640
Speaker 2: know to pick however you want to answer this. Has

874
00:42:17,680 --> 00:42:20,120
Speaker 2: it found its bottom yet? Or are we still searching

875
00:42:20,160 --> 00:42:21,520
Speaker 2: for a bot of evaluation?

876
00:42:21,719 --> 00:42:21,959
Speaker 1: Yeah?

877
00:42:22,000 --> 00:42:24,040
Speaker 11: So I think a lot of people believe we found

878
00:42:24,040 --> 00:42:26,200
Speaker 11: a bottom. I question it just because we don't have

879
00:42:26,239 --> 00:42:29,239
Speaker 11: a very active transaction market. It's very muted on the

880
00:42:29,239 --> 00:42:32,960
Speaker 11: transaction side. I do think you're probably closer to the bottom,

881
00:42:33,160 --> 00:42:36,200
Speaker 11: although I wouldn't be surprised depending on where rates settle

882
00:42:36,200 --> 00:42:38,560
Speaker 11: over the next six to twelve months. That will be

883
00:42:38,560 --> 00:42:40,560
Speaker 11: a big indicator. When I say rates, really the ten

884
00:42:40,640 --> 00:42:42,959
Speaker 11: year treasury rate, I mean the ten year treasury rates

885
00:42:42,960 --> 00:42:46,600
Speaker 11: come down below four percent today but that's still double

886
00:42:46,640 --> 00:42:49,000
Speaker 11: where we were pre twenty twenty two when you look

887
00:42:49,200 --> 00:42:51,880
Speaker 11: over that decade, where we average closer to two percent.

888
00:42:52,239 --> 00:42:54,320
Speaker 11: So that's putting a lot of pressure on the underlying

889
00:42:54,400 --> 00:42:57,839
Speaker 11: values of these assets, and that potentially means values could

890
00:42:57,920 --> 00:43:01,240
Speaker 11: potentially reset higher the ten years stays above four percent.

891
00:43:01,480 --> 00:43:03,440
Speaker 14: So in terms of that bottom no matter who you

892
00:43:03,480 --> 00:43:05,400
Speaker 14: talk to you whether they think that things have already

893
00:43:05,400 --> 00:43:07,440
Speaker 14: bottomed out or if they're going to bottom out in

894
00:43:07,520 --> 00:43:10,280
Speaker 14: six months or twelve months, one thing that everybody, everybody

895
00:43:10,280 --> 00:43:12,200
Speaker 14: involved in commercial real estate, seems to agree that this

896
00:43:12,280 --> 00:43:14,719
Speaker 14: is going to take a long, long, long time to

897
00:43:14,800 --> 00:43:15,279
Speaker 14: work out.

898
00:43:15,600 --> 00:43:16,320
Speaker 10: Do you agree?

899
00:43:16,400 --> 00:43:18,920
Speaker 14: And if you do, how long is it is? Are

900
00:43:18,920 --> 00:43:21,040
Speaker 14: we looking at a couple of years just scuttling along

901
00:43:21,080 --> 00:43:24,680
Speaker 14: the bottom of and why is everything so logjammed? When

902
00:43:24,719 --> 00:43:25,359
Speaker 14: does it break up?

903
00:43:25,520 --> 00:43:25,759
Speaker 1: Yeah?

904
00:43:25,800 --> 00:43:27,880
Speaker 11: So I'm a big believer that we're going to have

905
00:43:27,920 --> 00:43:30,520
Speaker 11: a sluggish It's been sluggish over the last couple of years,

906
00:43:30,560 --> 00:43:32,080
Speaker 11: so starting you know, going back to the end of

907
00:43:32,120 --> 00:43:34,239
Speaker 11: the first quarter of twenty twenty two, so now for

908
00:43:34,239 --> 00:43:36,880
Speaker 11: commercial real estate, it's been a very sluggish period and

909
00:43:36,960 --> 00:43:39,839
Speaker 11: I think we're going to continue to have that. Unfortunately,

910
00:43:39,880 --> 00:43:42,239
Speaker 11: that sluggish period for commercial real estate over the next

911
00:43:42,280 --> 00:43:44,879
Speaker 11: several years, and it's just going to take time as

912
00:43:44,920 --> 00:43:47,960
Speaker 11: these loans are maturing, asset values continue to sort of

913
00:43:48,000 --> 00:43:50,680
Speaker 11: you know, recal or really ownership groups have to recalibrate

914
00:43:50,680 --> 00:43:52,880
Speaker 11: to where the new interest cass is. So it's just

915
00:43:52,920 --> 00:43:54,680
Speaker 11: going to take time to get through this slug.

916
00:43:54,719 --> 00:43:56,799
Speaker 4: Well, that's not really interested in because let's just say

917
00:43:56,840 --> 00:43:59,399
Speaker 4: we get seventy five basis points it cuts this year

918
00:44:00,080 --> 00:44:02,880
Speaker 4: right as swaps market are now pricing. And how immediately

919
00:44:02,920 --> 00:44:05,160
Speaker 4: does that affect what you see?

920
00:44:05,440 --> 00:44:08,239
Speaker 11: Yeah, I personally, I think it doesn't really move the

921
00:44:08,280 --> 00:44:10,360
Speaker 11: needle that much. I mean, I think it helps a

922
00:44:10,400 --> 00:44:13,800
Speaker 11: little bit, but it doesn't really it's not as impactful

923
00:44:13,800 --> 00:44:15,919
Speaker 11: as you think. I mean, it obviously brings down debt

924
00:44:15,920 --> 00:44:18,520
Speaker 11: service costs, you know, floating rate debt, you know by

925
00:44:18,719 --> 00:44:21,359
Speaker 11: call it fifteen percent, which is helpful. You know, if

926
00:44:21,400 --> 00:44:23,719
Speaker 11: it went down seventy five BIPs, you know, roughly about

927
00:44:23,719 --> 00:44:26,439
Speaker 11: fifteen percent. But your interest costs, if you think about

928
00:44:26,440 --> 00:44:29,840
Speaker 11: pre twenty twenty two, you're still up caught seventeen x

929
00:44:30,160 --> 00:44:32,759
Speaker 11: because I mean you're next to zero, right like what

930
00:44:32,800 --> 00:44:35,160
Speaker 11: people are paying off of sofa and now all of

931
00:44:35,160 --> 00:44:37,080
Speaker 11: a sudden, you know, you move down seventy five BIPs,

932
00:44:37,080 --> 00:44:40,040
Speaker 11: it's not going to be you know, probably as helpful.

933
00:44:39,000 --> 00:44:41,120
Speaker 10: The so going a little bit more macro.

934
00:44:41,200 --> 00:44:43,160
Speaker 14: I know that about thirty percent of your portfolio on

935
00:44:43,200 --> 00:44:46,960
Speaker 14: the equity side hotels, mid scale, mid level hotels you own,

936
00:44:47,040 --> 00:44:48,759
Speaker 14: I think ninety of them or so, although some of

937
00:44:48,800 --> 00:44:52,120
Speaker 14: that might be credit. Sean Hair of Trinity Investments joined

938
00:44:52,200 --> 00:44:54,319
Speaker 14: us last week and also joined Alex and Paul, and

939
00:44:54,360 --> 00:44:56,840
Speaker 14: he was saying, for luxury hotels right now, the growth

940
00:44:56,880 --> 00:45:00,600
Speaker 14: is eight percent, but for lower level hotels it's down

941
00:45:00,640 --> 00:45:03,200
Speaker 14: two percent. Are you seeing this and what does it

942
00:45:03,239 --> 00:45:05,200
Speaker 14: say about the consumer because we continue to see this

943
00:45:05,200 --> 00:45:07,480
Speaker 14: bifurcation on the consumer between the high end and the

944
00:45:07,520 --> 00:45:10,440
Speaker 14: low end. Are you seeing that relative to your hotels?

945
00:45:10,520 --> 00:45:13,360
Speaker 11: Yeah, I think without question, I think consumers that are

946
00:45:13,400 --> 00:45:16,400
Speaker 11: you know, on the lower inside obviously are impacted by inflation,

947
00:45:16,520 --> 00:45:20,319
Speaker 11: higher debt expense. You know, the luxury segment hasn't been

948
00:45:20,320 --> 00:45:24,200
Speaker 11: as impacted. And that's you know, that's because consumers held

949
00:45:24,239 --> 00:45:27,160
Speaker 11: up much better, you know, this time around. I do believe,

950
00:45:27,360 --> 00:45:28,880
Speaker 11: you know, when you look at our portfolio, we're in

951
00:45:28,960 --> 00:45:31,840
Speaker 11: the mid you know, the mid segment and so we

952
00:45:31,880 --> 00:45:33,560
Speaker 11: have a lot of Selex service hotels that are like

953
00:45:33,640 --> 00:45:36,600
Speaker 11: Marriott Hilton branded assets, and those hotels are continue to

954
00:45:36,640 --> 00:45:39,440
Speaker 11: have positive rep par growth. So we're up about three percent,

955
00:45:39,480 --> 00:45:41,840
Speaker 11: you know, year to date. But you're definitely seeing you know,

956
00:45:41,880 --> 00:45:45,480
Speaker 11: I can see slow down a red pars.

957
00:45:45,560 --> 00:45:48,560
Speaker 2: I know, I know, revenue for an available room.

958
00:45:48,600 --> 00:45:48,920
Speaker 3: That's right.

959
00:45:48,920 --> 00:45:50,239
Speaker 2: I'm just going to show it out to Alex and

960
00:45:50,840 --> 00:45:54,880
Speaker 2: Abigail just real quickly. If you were to go buy

961
00:45:54,960 --> 00:45:56,960
Speaker 2: a piece of commercial real estate and office park in

962
00:45:57,760 --> 00:46:01,759
Speaker 2: suburban Atlanta, what kind of discount do you think you'd

963
00:46:01,800 --> 00:46:03,680
Speaker 2: get off of the pre pandemic evaluation.

964
00:46:04,320 --> 00:46:06,520
Speaker 11: That's I mean, it really depends on this because it's

965
00:46:06,560 --> 00:46:09,960
Speaker 11: only seventy I've seen his property thousand times in a

966
00:46:10,000 --> 00:46:10,880
Speaker 11: thousand towns.

967
00:46:11,000 --> 00:46:14,400
Speaker 2: It's seventy percent occupied, it's parking lots half empty, all

968
00:46:14,400 --> 00:46:14,960
Speaker 2: that kind of stuff.

969
00:46:14,960 --> 00:46:16,800
Speaker 11: I mean, you're if it's going to trade, you're getting

970
00:46:16,840 --> 00:46:20,120
Speaker 11: like fifty percent discounts. Wow, is my you know, just

971
00:46:20,440 --> 00:46:23,080
Speaker 11: high level number without going through the nuances, and potentially

972
00:46:23,080 --> 00:46:25,440
Speaker 11: you're even seeing larger discounts for some of these assets

973
00:46:25,480 --> 00:46:28,320
Speaker 11: to trade. I mean, there's one big asset in Buckheat,

974
00:46:28,320 --> 00:46:31,120
Speaker 11: Atlanta right now, that's you know, coming to market. That's

975
00:46:31,239 --> 00:46:33,239
Speaker 11: or at least the debt's coming out to market. It's

976
00:46:33,239 --> 00:46:35,319
Speaker 11: going to trade out a pretty substantial discount to where

977
00:46:35,360 --> 00:46:35,640
Speaker 11: it was.

978
00:46:35,760 --> 00:46:35,880
Speaker 14: You know.

979
00:46:36,239 --> 00:46:39,799
Speaker 2: Buckhett still bucket, buckets, still bucket. Yeah, it's just it

980
00:46:39,920 --> 00:46:42,320
Speaker 2: just shows you that it's called a buckhead.

981
00:46:43,000 --> 00:46:44,799
Speaker 3: They loved me back the love they loved you back.

982
00:46:45,160 --> 00:46:47,960
Speaker 4: Yeah, now not so much. This is a really fun conversation.

983
00:46:48,040 --> 00:46:50,799
Speaker 4: Thank you both so much. Greg Freeman, a Peachtree Group

984
00:46:50,960 --> 00:46:55,160
Speaker 4: managing principal and CEO. Abigail do Little Bloomberg News markets

985
00:46:55,239 --> 00:46:58,680
Speaker 4: reporter who also has her real estate beat as well.

986
00:46:58,800 --> 00:47:03,319
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987
00:47:03,520 --> 00:47:06,719
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988
00:47:06,760 --> 00:47:10,160
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989
00:47:10,239 --> 00:47:13,640
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990
00:47:13,760 --> 00:47:16,760
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991
00:47:16,960 --> 00:47:18,840
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