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Speaker 2: Let's get a look at where the action is in
Speaker 2: the equity markets with.
Speaker 3: Billy Billy Lipschotz. Thank you're sitting right next to.
Speaker 2: Me, Billy Lipschotz. You can talk all you want about stocks.
Speaker 2: I only have one question. Few Can you explain to
Speaker 2: me what our good friend Bill Akerman is doing here?
Speaker 3: Nothing now, nothing as of now? Walk us through this
Speaker 3: story here. So earlier in the month, well, I guess
Speaker 3: now in August. So in July he filed to launch
Speaker 3: and price a closed end fund that would trade in
Speaker 3: the US. It would be similar, in his words, essentially
Speaker 3: mirror their European offering, which currently trades under the ticker PSH.
Speaker 3: Space NA trades at a twenty percent discount to what
Speaker 3: it actual the assets that it owns it's invested in, Alphabet, Chapotle,
Speaker 3: Howard Hughes, Universal Music, a handful of stocks beating the drum.
Speaker 3: He kind of said, you know, we see this as
Speaker 3: a potential twenty five billion dollar offering going to court retail.
Speaker 3: We're going to court institutions. Basically, I have a lot
Speaker 3: of very wealthy friends. They're going to give us money.
Speaker 3: It's going to be awesome. It's only going to be
Speaker 3: a two percent fee. We won't charge that for a year.
Speaker 3: Then a couple days later, he wrote a letter to
Speaker 3: investors in the hedge fund saying, hey, demand's not as
Speaker 3: strong as we would have expected. Initially. We're thinking that
Speaker 3: maybe we'll raise between two and a half billion and
Speaker 3: four billion dollars, so a sharp drop off from the
Speaker 3: twenty five billion dollar number. He actually name dropped Seth
Speaker 3: Clarmen's bow post. He named dropped Putnam among others, kind
Speaker 3: of alluding to people who are already in for the book, saying,
Speaker 3: get yours in soon. It's going to help us build
Speaker 3: this out. Didn't realize that that had to be filed publicly.
Speaker 3: So the next day we see that in a public filing,
Speaker 3: or at least that's what we're told through the filings.
Speaker 3: Seth Carmon and Bloomberg is reported isn't super happy about that.
Speaker 3: They withdraw their order, they opt out. We see just
Speaker 3: a few days later the fun coming back saying, you know,
Speaker 3: we thought two and a half to four billion, now
Speaker 3: we're actually gonna go after two billion, but don't worry,
Speaker 3: it's gonna price next Monday. So we're still kind of
Speaker 3: full speed ahead, two billion dollars, feeling great, perching squares
Speaker 3: in for five hundred million dollars. Then yesterday we get
Speaker 3: the filing that because to kind of oversimplify, because they
Speaker 3: couldn't answer the question that investors wanted to know, why
Speaker 3: would I buy this at IPO when I can buy
Speaker 3: it at a discount, We're actually gonna pull the offering,
Speaker 3: rework it potentially, and try to come back with a
Speaker 3: different model. So going from twenty five billion to potentially
Speaker 3: four billion to two billion to now nothing as of now,
Speaker 3: though again he did say they plan on coming back
Speaker 3: in some potentially different formation.
Speaker 4: I don't know what to even ask about that. That
Speaker 4: was a great explanation by that one, but it's such
Speaker 4: a nightmare.
Speaker 2: But at Mike angle is there's an angle here. He's
Speaker 2: a really smart guy. How do you misjudge the market?
Speaker 2: How do you misjudge demand? How do you make that
Speaker 2: mistake of putting out a letter. These are things Bill
Speaker 2: Ackman doesn't do well.
Speaker 3: So to start at a high level, the largest closed
Speaker 3: end fund in US history was just over five billion dollars. Okay,
Speaker 3: So he was coming in with the ambition to four
Speaker 3: x that because he has a million and change followers
Speaker 3: on X and he has a strong track record. If
Speaker 3: you even look at and invested in the European offering,
Speaker 3: you've done pretty well over the last few years. But
Speaker 3: to your point, there's so many snags that came out
Speaker 3: of this. And when I talk to people who operate
Speaker 3: in the closed end fund space, they initially were kind
Speaker 3: of saying they don't this has to go through a
Speaker 3: seasoning period. The SEC is going to hold it up,
Speaker 3: which Pershing Square came out and said was actually playing
Speaker 3: a factor in the delayed pricing to the extent that
Speaker 3: I talked to a couple of advisors. You said maybe September,
Speaker 3: just because you need this to cool off. The way
Speaker 3: this is structuring, you can't just kind of ignore these
Speaker 3: warning signs and keep your pedal to the medal. And
Speaker 3: it does seem like a number of miscalculations have kind
Speaker 3: of ended up throwing it into a tailspin. Well, it's
Speaker 3: a fact.
Speaker 4: I mean literally, like yesterday, he was on the exact
Speaker 4: same time. We were talking about the different evolution of
Speaker 4: the story. All right, Billy, you'll be coming back at
Speaker 4: the top of the eleven as well. Billy lipschealz A
Speaker 4: joining us. Bloomberg Senior Equities reporter Joining us.
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Speaker 4: Okay, let's go to the individual movers here. One of
Speaker 4: them is meta. That's not popping ten percent. Did you
Speaker 4: listen to the earnings call on the beach?
Speaker 2: He did part of it, part of it, but then
Speaker 2: then my swell came in, so I had to drop
Speaker 2: an out.
Speaker 5: I understand.
Speaker 6: I mean this priority.
Speaker 4: Mandy pp sing was not at the beach on the
Speaker 4: earnings call. And I know this because he was on
Speaker 4: set with me when the numbers came out. Mandy Singh,
Speaker 4: Bloomberg Intelligence Senior at Tech Industry analyst, you were pretty
Speaker 4: positive on Meta earnings in the street really agrees with you.
Speaker 4: This is AI delivering on helping more targeted ads, meaning
Speaker 4: more revenue straight.
Speaker 7: I mean, look, with all the other AI spend that
Speaker 7: we are seeing from the cloud vendors, they're saying the
Speaker 7: revenue will come in twenty five twenty six, Meta is
Speaker 7: actually delivering AI revenue right now. And that's the big
Speaker 7: surprise that all the large anguid model investments they have done,
Speaker 7: they have infused their apps with AI and it's actually
Speaker 7: yielding tangible returns. And there was a good Macro read too.
Speaker 7: I mean my sense was e commerce spending is strong,
Speaker 7: Gaming spending is strong. That's why their advertisers who are
Speaker 7: spending on Meta platforms. So overall, I think Macro looks
Speaker 7: to be much better than what people talk about, and
Speaker 7: ad spending is strong and that's why Meta did well.
Speaker 2: Is this a cross for Amazon for Google in terms
Speaker 2: of the ad spending angle?
Speaker 7: Absolutely, I mean Amazon is que towards e commerce. In fact,
Speaker 7: anybody who is an e commerce provider on Amazon's platform
Speaker 7: has to spend on ads for you know, slotting, and
Speaker 7: so I do think you know, and certain pockets when
Speaker 7: it comes to ads aren't doing well, which is why
Speaker 7: Google didn't have that sort of a lift, because they
Speaker 7: are sort of equal across different sectors. Automotive, insurance, those
Speaker 7: are the weak sectors, so they're probably not spending as
Speaker 7: much on ads, but e commerce, retail, these are the
Speaker 7: pockets where the AD spending is strong. And I think
Speaker 7: Snap should do well.
Speaker 4: Tonight, so the cap X spend also, So they narrowed
Speaker 4: the range specifically to come in for thirty seven to
Speaker 4: forty billion rather than thirty five to forty billion. They
Speaker 4: didn't raise it, yeah, which is not what some of
Speaker 4: the peers have done. Was that also positive for the stock?
Speaker 7: Absolutely? I mean they've learned their lesson last time around.
Speaker 7: They raised the CAPEX by three billion, the stock reacted negatively.
Speaker 7: This was more of weight and see approach. They did
Speaker 7: say twenty twenty five CAPEX will go up like every
Speaker 7: other hyperscaler. But for this quarter they actually came out
Speaker 7: below consensus, a billion dollars below consensus when it comes
Speaker 7: to CAPEX for this quarter. And like you said, you
Speaker 7: know they reinformed the guide and overall, I feel like
Speaker 7: everyone keeps talking about how they are gpu constrained and
Speaker 7: they need to spend more Capex. Meta didn't say that
Speaker 7: that they are GPU constrained in anyway. At the same time,
Speaker 7: they expect AI infrastructures spent to go out and they're
Speaker 7: able to monetize it. WhatsApp to me was the real
Speaker 7: bright spot.
Speaker 2: I mean, nobody has any monetizing that yet.
Speaker 7: Actually, yes, So they did give a data point yesterday
Speaker 7: where family of apps other revenue grew seventy three percent.
Speaker 7: Most of it is WhatsApp. So WhatsApp actually is a
Speaker 7: four hundred million dollar rund reread business.
Speaker 2: Now really okay, yeah, and taking ten years.
Speaker 7: And that's where I think they called that the US adoption.
Speaker 7: So WhatsApp now has one hundred million active users in
Speaker 7: the US, and that's where they see AI infusing in
Speaker 7: WhatsApp being a revenue generator.
Speaker 2: All right, market likes it stacks up nine percent today
Speaker 2: of forty seven percent year to date. All good in
Speaker 2: metaaland tonight after the closed Amazon and Apple, let's start
Speaker 2: with Amazon. What are you gonna be looking for there?
Speaker 7: I mean cloud aws growth adds growth. I think the
Speaker 7: one thing that stands out between Google, Microsoft and Meta
Speaker 7: versus Amazon and Apple is Amazon and Apple don't have
Speaker 7: their own large anglid model. One thing we realize with
Speaker 7: Meta is because they own their large anglid model, they've
Speaker 7: been able to deploy it so quickly. Well, Amazon is
Speaker 7: relying on Anthropic to give them the large anglid model.
Speaker 7: Apple announced Apple Intelligence, but they're delaying it. They don't
Speaker 7: have their own large anglid model. And what everyone is
Speaker 7: realizing is owning a large anglid model like Microsoft, OpenAI,
Speaker 7: Google Gemini, that's a big advantage, and that advantage may continue,
Speaker 7: I think, given everyone is so bullish on generative AI.
Speaker 5: So how is that going to wind up showing up
Speaker 5: in the numbers?
Speaker 7: So, I mean, look at Meta's ad pricing. The reason
Speaker 7: why ad pricing grew so much is because they actually
Speaker 7: applied the large anglid model on their own products. Same
Speaker 7: thing with Microsoft. The reason why their Microsoft's cloud revenue
Speaker 7: has accelerated is because the workloads are getting deployed, the
Speaker 7: copilots are getting deployed in their own products. So Amazon
Speaker 7: has to somehow one leverage the large angliine model in
Speaker 7: Tropic or somebody else's. In fact, Meta said they are
Speaker 7: warming up to Amazon more and more to deploy their
Speaker 7: Lama large anglid model on AWS. That'll be an interesting
Speaker 7: partnership if that pans out, because Meta doesn't have a
Speaker 7: cloud facing business, whereas Amazon AWS is the largest cloud provider.
Speaker 7: If they can leverage Lama model, which Meta owns, that
Speaker 7: could be a huge, huge driver off revenue for both
Speaker 7: Amazon as well as paying a licensing fee to Meta.
Speaker 7: But obviously that nobody called that out, so that's a
Speaker 7: speculation at this point.
Speaker 5: Fascinating. All right, really good stuff. Can't wait.
Speaker 2: It's not just selling ads anymore.
Speaker 6: It's other stuff.
Speaker 4: Well, it is about selling ads, but in a more
Speaker 4: efficient way. I took my notes for those coming out
Speaker 4: after the closing bell. And you've seeing Bloomberg Technology, Bloomberg
Speaker 4: Intelligence senior technology analyst.
Speaker 6: There we go, I got it.
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Speaker 5: That im number, that's ugly.
Speaker 2: That's got my attention there yet.
Speaker 4: Also the job's number, the employment number in there with
Speaker 4: forty three, that's definitely that's definitely something interesting that we're
Speaker 4: seeing the buying really coming in though to the bond market.
Speaker 5: On that.
Speaker 4: All right, let's get more into the data because this
Speaker 4: feels icky. Tim Fiory is chair of the Institute of
Speaker 4: Supply Management, a manufacturing business Survey committee, and he joins us, Now, okay,
Speaker 4: we are at an eight month low near any We
Speaker 4: are contracting the most in about eight months for the
Speaker 4: m manufacturing. You really had that weak employment data. What
Speaker 4: is leading this? Does this data surprise for you?
Speaker 8: Yeah, Alex, So, yeah, this is a disappointment. So the
Speaker 8: last couple of months we've been stuck, stable, stagnant. We're
Speaker 8: no longer stuck stable or stagnant. We're declining at a
Speaker 8: faster rate. We're off almost two points from last month.
Speaker 8: We're off almost more than two points from expectations, twenty
Speaker 8: one months into a contraction, and we haven't seen a
Speaker 8: number at the headline level this low since November twenty two.
Speaker 3: So, first off, the.
Speaker 8: Good news, supplier deliveries are starting to stiffen up. It's
Speaker 8: a little bit harder for them to deliver. That price
Speaker 8: index number is a marginal expansion, very weak. Happy to
Speaker 8: see that, Glad to see that if you're looking for
Speaker 8: a rate activity that supports a rate reduction, no doubt.
Speaker 8: On the demand side, we still can't find demand. The
Speaker 8: demand is non existent, backlog is still extremely low, new
Speaker 8: export orders very weak, and no real end in sight.
Speaker 8: Our top six industry sectors all showed declines, significant declines
Speaker 8: like forty five. In the demand side, new orders and production.
Speaker 8: The big story here for the month is really the
Speaker 8: production number. We've been talking for the last year and
Speaker 8: a half. That look, as long as the production number
Speaker 8: stays around fifty, revenues or expectations are being met, profitability
Speaker 8: is probably okay. Just have to deal with the out
Speaker 8: the input side, Well, that's so long in the case here,
Speaker 8: we've fallen down to a forty five to nine, big drop,
Speaker 8: disappointing lowest since May of twenty twenty two. And then
Speaker 8: coupled with that, we've got the employment numbers sagging really strongly.
Speaker 8: So what it really says, and we've indicated this last
Speaker 8: month the month before, is that without new orders, we're
Speaker 8: gonna see a decline in production slash revenue, and we're
Speaker 8: going to see a decline in employment. And that's exactly
Speaker 8: what we've see in here from a sentiment standpoint. You know,
Speaker 8: I track headline sentiment month to month, running at a
Speaker 8: one to one point four. So I think we're in
Speaker 8: for a ride here now.
Speaker 1: You know.
Speaker 8: The one last thing is we've been looking for a
Speaker 8: soft landing. That doesn't necessarily mean that manufacturing is going
Speaker 8: to see a soft landing. We could actually have a
Speaker 8: moderate landing or even a hard landing. And it doesn't
Speaker 8: mean that the economy is going to see a hard
Speaker 8: landing or a moderate landing. So we're at a real
Speaker 8: strange spot here. I mean, if you're looking for data
Speaker 8: facts for the fat to support a ray cut, don't
Speaker 8: look any farther.
Speaker 2: Don't look any farther than this, right, all right, Tim,
Speaker 2: thanks for the breakdown, Really appreciated. Tim Fury, Chair for
Speaker 2: the Institute for Supply Management on their business survey. Again,
Speaker 2: numbers coming in. Wee can then expect it for the
Speaker 2: manufacturing front.
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Speaker 2: Bloomberg Intelligence, Alex Steel, Paul Spooney. Youre live here in
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Speaker 2: One of the stories that you know, Alex ly like
Speaker 2: to continue to focus on is commercial real estate. It's
Speaker 2: undergone a tremendous change over the last four five six years,
Speaker 2: obviously with the pandemic and longer term trends here that
Speaker 2: still need to be understood and worked out. So we
Speaker 2: like to talk to smart people to get a little
Speaker 2: bit smarter on this. Hillaryspond joins us. She's executive vice
Speaker 2: president at b XP. BXP is a publicly traded real
Speaker 2: estate investment trust. B XP is the ticker handily market
Speaker 2: KAP eleven point two billion dollars stock's pretty much unchanged today,
Speaker 2: up about two percent year to date. Hillary, thanks much
Speaker 2: for joining us in our studio New York City. Let's
Speaker 2: focus on on New York City. That's your remit here.
Speaker 2: A lot of empty space here in New York City
Speaker 2: in the offices. Tell us where we are and how
Speaker 2: we're going to get out of this. If at all,
Speaker 2: explain to us how the commercial real state environment is
Speaker 2: in New York City today.
Speaker 9: Sure well, First of all, Alex and Paul, thank you
Speaker 9: for having me this morning. I think that it's fair
Speaker 9: to say that the market is bifurcating itself, and that means.
Speaker 10: That there are groups of properties that are.
Speaker 9: Performing quite well actually, and others that are performing less well.
Speaker 9: Those properties that are newly constructed, that have been reinvested
Speaker 9: in by their ownership, and that are well located are
Speaker 9: generally doing pretty well. And as evidence of that, if
Speaker 9: you look at the vacancy rate in the Park Avenue
Speaker 9: sub market of Manhattan, it's less than ten percent, which
Speaker 9: is quite tight by historical standards. You're seeing landlords there
Speaker 9: with the ability to push rental rates to reduce concessions
Speaker 9: like free rent, like capital that's associated with new leasing,
Speaker 9: and so therefore net effective rents are actually increasing in
Speaker 9: that sub market. The weaker sub markets and some of
Speaker 9: the older buildings, landlords have had more trouble attracting tenants.
Speaker 9: But for those businesses that are generating revenue that have
Speaker 9: clients that need to come visit them, that want to
Speaker 9: attract talent, being in a great building in Manhattan is
Speaker 9: a really good bet for them, and you're seeing strength
Speaker 9: in that segment of the market.
Speaker 6: So we've had some.
Speaker 4: Property people in here who've talked about those older buildings
Speaker 4: and over the last few years, I spent a lot
Speaker 4: of money retrofitting them and updating them to make them
Speaker 4: more appealing. Are we seeing a lot of that still,
Speaker 4: and like, what's the cost profile for that?
Speaker 5: Is it payoff? Like how does that work?
Speaker 9: So I think it's also a little bit location dependent.
Speaker 9: You're certainly seeing some buildings spend money that are would
Speaker 9: be classified as older or maybe less well amenitized, just
Speaker 9: not a newer building. But if they're in a great location,
Speaker 9: they can actually do quite well. And I would point
Speaker 9: to the Grand Central sub market as evidence of that.
Speaker 9: A lot of people who commute in the city are
Speaker 9: really looking for a one seed commute, meaning they get
Speaker 9: off of Metro North or they get off of Long
Speaker 9: Island Railroad.
Speaker 3: They walk to their office.
Speaker 9: So those buildings, despite the fact that they're somewhat older
Speaker 9: in that submarket, are leasing quite well. And a lot
Speaker 9: of the landlords that own in that district are amenetizing
Speaker 9: their buildings to great effect.
Speaker 10: The cost of construction have gone up.
Speaker 9: Radically over the last call it five years, and that
Speaker 9: does definitely have an effect. It tends to favor the
Speaker 9: landlords that are better capitalized, but for those that can
Speaker 9: do it, it really does benefit their leasing velocity.
Speaker 2: How about like I'm going to reference this once again
Speaker 2: I always do when having commercial real estate discussions in
Speaker 2: New York. Bloomberg News put out a piece maybe eighteen
Speaker 2: months ago and just focusing on Third Avenue between Grand
Speaker 2: Central and here we're at fifty eight to fifty ninth Street.
Speaker 2: You can't give that stuff away or talk to us
Speaker 2: about that market. I'm thinking, like the Lipstick Building. When
Speaker 2: I see one of those buildings, trade is there going
Speaker 2: to be a thirty percent discount, forty fifty sixty percent discount?
Speaker 2: Talk just about that kind of market because those are
Speaker 2: more I guess b properties as I understand it.
Speaker 9: Well, So there actually has been some activity on Third Avenue.
Speaker 9: Memorial Song kettering, I believe took some space in the
Speaker 9: Lipstick Building. One of the office buildings that is on
Speaker 9: Third Avenue was recently announced to be a conversion to residential.
Speaker 9: So folks are getting creative with that space. For us
Speaker 9: in our sub markets, we're focused on attracting large corporate
Speaker 9: tenants and investing the capital that's required to attract and
Speaker 9: retain them. But I think there's I think that third
Speaker 9: avenue has hope.
Speaker 5: So let's just game this out for a second.
Speaker 4: So swaps markets pricing in three fed rake cuts now
Speaker 4: for September, right, I mean, excuse me, for the rest
Speaker 4: of the year starting in September, let's say that happens.
Speaker 4: What's the trickle down to the commercial real estate market
Speaker 4: in a short term.
Speaker 9: So the transaction volume acquisitions, dispositions has been somewhat muted,
Speaker 9: not so much as a result of where treasuries are trading,
Speaker 9: I think, but how quickly they went from practically.
Speaker 10: Zero to where they are today.
Speaker 9: Any relief on the ten year I think would tend
Speaker 9: to support higher transaction volumes in our space, which is
Speaker 9: again the sort of higher end of the market. There's
Speaker 9: been very very little transactions because in general, landlords are
Speaker 9: not distressed and are not willing.
Speaker 10: To sell at depressed prices.
Speaker 9: So I think it would tend to tend to support
Speaker 9: a higher transaction volume going forward.
Speaker 2: You guys, BXP well capitalized, well experienced owner of real estate.
Speaker 2: Are you buying in New York City today?
Speaker 9: At the moment, we don't have active acquisitions, but we're
Speaker 9: constantly looking for new opportunities.
Speaker 10: The real gating.
Speaker 9: Issue for us is quality. So if we cannot find
Speaker 9: something that is at least equal to the quality of
Speaker 9: what we already own, we are not buyers. And the
Speaker 9: fact of the matter is there's relatively little available in
Speaker 9: the market for purchase that is consistent with our quality.
Speaker 9: That having been said, we do have a couple of
Speaker 9: development sites in New York City, the most active of
Speaker 9: which will be three forty three Madison this year. It
Speaker 9: is it's between forty fourth and forty fifth on Madison,
Speaker 9: and it will we will begin constructing the east side
Speaker 9: access to the Long Island Railroad in Grand Central between
Speaker 9: now and the end of the year. Solk will actually
Speaker 9: see cranes and construction on the site.
Speaker 5: So I live in Brooklyn, What about in Brooklyn?
Speaker 4: All the good kids? No, but they're like retrofitted, like
Speaker 4: that sugar factory. Not you guys, but sugar Factory is retrofitted.
Speaker 4: Like they're there, we go dominoes. Well, it is Brooklyn
Speaker 4: becoming a place where commercial real estate can truly thrive.
Speaker 9: So I would say that the demand for Brooklyn right
Speaker 9: now is a local demand. People that need to be
Speaker 9: in Brooklyn for a reason. Their manufacturers are located there,
Speaker 9: their talent base is located there. Those tend to be
Speaker 9: the companies that are expanding in Brooklyn. We own a
Speaker 9: building called DOC seventy two in the Brooklyn Navy Yard
Speaker 9: and we've had success in that building with leasing two Huge,
Speaker 9: which is a marketing company that was formerly based in Dumbo,
Speaker 9: has moved to the Navy Yard, the Pratt Institute, and
Speaker 9: other large sort of Brooklyn based institutions. I would say
Speaker 9: that DOC seventy two has attracted the majority of the
Speaker 9: large tenants that are active in the Brooklyn market now.
Speaker 9: But no question, it's sort of a local demand market
Speaker 9: at the moment.
Speaker 2: You guys own the General Motors Building, one of the
Speaker 2: most iconic buildings in the city. Tell us about that building.
Speaker 9: So the building is ninety six and a half percent least.
Speaker 9: We recently had a client expand by one hundred thousand
Speaker 9: square feet in the building, taking up most of the
Speaker 9: availability in the building. We recently spent a lot of
Speaker 9: time and effort of minetizing the second floor of the
Speaker 9: building with wellness, with food and beverage options, and with conferencing,
Speaker 9: which I think is increasingly important to clients today. And
Speaker 9: it's really borne itself out in the leasing that we've
Speaker 9: been able to achieve there. So the building is basically full.
Speaker 6: So what's when we say wellness?
Speaker 5: What does that mean?
Speaker 9: We have a seventeen thousand square foot gym that has
Speaker 9: personal training, it has physical therapy, it has massage available,
Speaker 9: It has locker rooms that are like a spy.
Speaker 6: I'm in a massage. I didn't any time you want to?
Speaker 6: So there we go. What would you guys like?
Speaker 11: Not?
Speaker 6: What doesn't make sense right now?
Speaker 4: Like if people, I'm clearly sellers are going to want
Speaker 4: to be out there selling their property.
Speaker 5: It's obviously the price is going to be a problem.
Speaker 4: What have you been pitched to that You're like, no way,
Speaker 4: Why would anyone think that's a good idea?
Speaker 5: Or is it just a price situation?
Speaker 7: No?
Speaker 10: For us, Again, I think it gets back to quality.
Speaker 9: There are certain assets that we would not want to
Speaker 9: own just because we don't think that they can be
Speaker 9: made into a premiere workplace, which is where we're focused.
Speaker 10: That's our segment of the market, and so.
Speaker 9: We are gating issue is is it already premiere or
Speaker 9: can it be made to be premiere through reinvestment? And
Speaker 9: those are the assets that we're interested in nothing else.
Speaker 2: Are your clients where are they in terms of back
Speaker 2: to work? Are we now at the new normal? Whether
Speaker 2: it's three days a week or Bloomberg's four days a
Speaker 2: week for example, are we added new normal? Is that
Speaker 2: what your clients are telling you?
Speaker 9: So in our space again, our buildings tend to have
Speaker 9: people who are revenue generators for their company occupying the space.
Speaker 9: They have been back to work, and it's really not
Speaker 9: so much a topic of conversation in our office at
Speaker 9: all anymore. We are at or above physical occupancy that
Speaker 9: existed pre pandemic.
Speaker 10: Today. Now it's off a little bit.
Speaker 9: On Fridays and Mondays, but in the middle of the
Speaker 9: week we actually are right back where we were before
Speaker 9: the pandemic.
Speaker 4: You guys also own the five ninety nine Lexington that
Speaker 4: a beautiful building has like a like a tower.
Speaker 9: It's like, well that's six oh one, I think on
Speaker 9: five Nimes right across the street.
Speaker 5: Yeah, how are those doing?
Speaker 10: They're great?
Speaker 9: So six ZHO one Lex has nine thousand square feet available.
Speaker 9: It's a two million square foot building. Plus remind us
Speaker 9: and five nine Lex is where our offices are actually
Speaker 9: and that building is very well leased as well. We
Speaker 9: do have a little bit of space coming available in
Speaker 9: that building and there is a lot of demand for it.
Speaker 9: People are calling us and saying we want it and
Speaker 9: can we have it now?
Speaker 2: But you know, right here Election fifty eighth and fifty nine,
Speaker 2: all these stores are empty except the chocolate store because
Speaker 2: that everybody needs chocolate. Yeah, what's going on in your buildings?
Speaker 2: Do you have that ground floor retail is out a
Speaker 2: component of your buildings?
Speaker 10: We do.
Speaker 9: We have lots of retail in our buildings. We built
Speaker 9: out of food Hall and six someone Lex, we also
Speaker 9: have street level retail. Look, we think of our retail
Speaker 9: as complementary to the office experience and for our clients
Speaker 9: that have office space with us, we want to make
Speaker 9: sure that they have a great experience going out and
Speaker 9: grabbing something healthy and fresh and convenient for lunch.
Speaker 10: And so we've really looked.
Speaker 9: At our retail as a way to complement our premiere
Speaker 9: workplace and not just as a revenue generator. In and
Speaker 9: of itself, and we've been able to attract really really
Speaker 9: great options. So I think you know, our approach has
Speaker 9: been very successful. But it's very it's very much done
Speaker 9: with our clients in mind.
Speaker 4: Really great stuff, really interesting. Thank you so much for
Speaker 4: coming in, come back, keep us updated. We love touching
Speaker 4: on this topic.
Speaker 5: It's all so important.
Speaker 12: An architectural oddity along Park Avenue.
Speaker 6: Sound like my husband, but yes, no, it's true.
Speaker 12: Because the lobbies are all raised kind of if you
Speaker 12: go down there, and that's because the lack I suppose
Speaker 12: the lack of elevator wells because underneath the buildings you
Speaker 12: can't go down there are railroad tracks.
Speaker 10: You are exactly right.
Speaker 2: John Tucker, bringing out some mercy college.
Speaker 6: Just did you research time while we were there? Was different?
Speaker 2: Just now he saw a YouTube video and that's all
Speaker 2: his knowledge.
Speaker 10: Lobbies are wrong, but you're exactly correct.
Speaker 12: That's very okay.
Speaker 6: Thank you, very John Tucker.
Speaker 2: The brilliant city all my life. Thank you very much
Speaker 2: for join us. Hell respond Executive Vice President b XP
Speaker 2: joining us live here in our interactive broker studio talking
Speaker 2: about commercial real estate again. I guess the story I'm
Speaker 2: learning as if you've got your properties are in good shape.
Speaker 2: If you have something less than good, then perhaps still
Speaker 2: a struggle out there.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, car Play and
Speaker 1: and Roight Outo with the Bloomberg Business. You can also
Speaker 1: listen live on Amazon Alexa from our flagship New York
Speaker 1: station Just Say Alexa playing Bloomberg eleven thirty.
Speaker 3: Busy earning cycle Here for the tech games.
Speaker 2: We had met a last night, some good numbers that
Speaker 2: stock trading up, and big big afternoon today after the
Speaker 2: close Apple and Amazon report, let's check in with one
Speaker 2: of our go to tech folks, Dan Ives, managing director
Speaker 2: and senior equity analyst, What Bush Security. He's not in
Speaker 2: your studio and he's not even zoom, so we can't
Speaker 2: even see what is outlandish outfit.
Speaker 4: He's probably wearing like a black suit at this point,
Speaker 4: and I mean, we can't see it.
Speaker 2: It's upsetting exactly, Dan, thanks so much for joining us here.
Speaker 2: Let's start with Apple here. I kind of feel like
Speaker 2: they need some more explaining to do in terms of,
Speaker 2: you know, some of their strategies here in terms of
Speaker 2: the market in China, what are you going to be
Speaker 2: looking for from Apple.
Speaker 13: I mean, it's really about the China growth. We think
Speaker 13: it's the last negative quarter for China and then that
Speaker 13: starts to now have a tailwind going into the AI
Speaker 13: driven supercycle. And I think this is this is the
Speaker 13: beginning of what's going to be a historic period for
Speaker 13: Apple and I think broader tech as this week's Nowaday,
Speaker 13: the AI revolution is real and now the consumer piece
Speaker 13: comes to Apple.
Speaker 4: So this is still going to be a show me
Speaker 4: story though, Dan, because all the indications we've gotten from
Speaker 4: China from any sector is not good.
Speaker 13: Well, our I mean our checks in terms of units,
Speaker 13: which originally five phone sixteen was what's called eighty four millions,
Speaker 13: which is now up to ninety. So the point is
Speaker 13: like for iPhone sixteen that continues to wratch up, but
Speaker 13: it speaks to our point. The haters hate Apple at
Speaker 13: one sixty, despise it at two hundred, and will absolutely
Speaker 13: hated at two fifty. So as we're going into this phase,
Speaker 13: it will be proved. Me but betting against Apple and
Speaker 13: Coupertino has been the wrong movie.
Speaker 2: So talk to us about the services side of the business, Dan,
Speaker 2: because for you know, a long time, a lot of
Speaker 2: bulls were saying, you got to focus on services because
Speaker 2: that's the high margin business and it takes you away
Speaker 2: from the replacement cycle risk and all that is. Service
Speaker 2: is still a key story for the Apple stock.
Speaker 13: Oh, I mean me, and you've thought about it a lot.
Speaker 13: I mean services is key to the valuation of Apple.
Speaker 13: It's been big to the sum of the part story.
Speaker 13: And actually, I'd say the biggest way that maybe people
Speaker 13: have missed Apple is not recognizing that this essential was
Speaker 13: a reading story wed by services the last two years.
Speaker 4: So when it comes to their indications on their own
Speaker 4: Apple Intelligence, you know, Man Deep saying are from Bloomberg
Speaker 4: Intelligence was pointing out that, you know, Apple doesn't have
Speaker 4: its large language model.
Speaker 6: So what do you think we're going to What are the.
Speaker 4: Questions that you and other analysts are going to have
Speaker 4: on the call about LLM.
Speaker 13: Big focus is really developers. Developers now will start the
Speaker 13: process of building hundreds of apps on the Apple ecosystem.
Speaker 13: So I think Cook talking about what initial feedback is
Speaker 13: from developers maybe given some breadcrumbs into iPhone sixteen, that's
Speaker 13: going to be the important thing. But if you take
Speaker 13: a step back two hundred and seventy millions have not
Speaker 13: upgraded their phone. Paul could be included in the last
Speaker 13: four years. And I think now you go into what
Speaker 13: should be is an AI driven supercycle.
Speaker 2: So from your perspective, Dan, has Tim Cook and Apple?
Speaker 2: Have they allayed the concerns of investors or some investors
Speaker 2: that Apple's really not going to be a prime beneficiary
Speaker 2: of AI? Have they allayed those concerns? Do you think?
Speaker 7: Oh?
Speaker 13: I think they have. I mean book goes back to
Speaker 13: WWDC stock was one ninety, right, yep, everyone thought it's
Speaker 13: over the din't showing it look at today. And the
Speaker 13: point is because I think now the street recognizes that
Speaker 13: the AI revolution on the consumer side goes to Apple Park.
Speaker 13: On the enterprise side, it's godfather of AI, Jensen and
Speaker 13: Vidio as well as Madella, But on consumer it's Apple.
Speaker 6: Yeah, it's such a good point.
Speaker 4: And I think you made that point with us on
Speaker 4: our show a few weeks ago, and that was a
Speaker 4: good distinction, right, which kind of brings us then to
Speaker 4: Amazon because Amazon has the consumer side when it comes
Speaker 4: to e commerce, and then it obviously has the cloud.
Speaker 4: Then that AI side, what are you expecting after the
Speaker 4: bell that's not as flat now on a pretty heavy tape.
Speaker 13: Big focus is AWS. Look at the cloud strength we
Speaker 13: saw from Alphabet by the knee jerk react right to
Speaker 13: continue to be as the adscratcher. Look at the Microsoft
Speaker 13: cloud number. I think Amazon's going to be on AWS
Speaker 13: and that's important for them to show. Don't forget about
Speaker 13: us when it comes to the AI revolution. That's what
Speaker 13: Jassi is really going to be focused on the call.
Speaker 2: So give us a sense, Dan about how how investors
Speaker 2: should position, you know, Amazon Web Services in the context
Speaker 2: of the AI play. How do they fit in?
Speaker 13: Really that's a great question. I view it as if
Speaker 13: Apples could show, and I believe they can, that they
Speaker 13: can monetize that leadership position in cloud and actually monetize
Speaker 13: from an AI perspective very somewhere what Microsoft's doing to Google.
Speaker 13: That that then all of a sudden from some of
Speaker 13: the parts could add significant value some of the parts
Speaker 13: of the Amazon stories. So that's really what they need
Speaker 13: to focus on. Consumer is what it is. I don't
Speaker 13: I mean advertising and margins and you could kind of
Speaker 13: you there's some focus there, but it's really about cloud
Speaker 13: improven that they will be an AI beneficiar.
Speaker 5: How did we see that in the line items When
Speaker 5: it comes across.
Speaker 13: It's really around the eight I WUS strength. We expect upside.
Speaker 13: And then on the call, walking through not just anthrophics,
Speaker 13: but like the overall AI strategy and what they're starting
Speaker 13: to see in their customer base. You triangulate that with
Speaker 13: alphabet Microsoft AMD. It's nine pm in the AI party,
Speaker 13: goes to four am.
Speaker 3: There we go.
Speaker 5: There's the headline for you. What about cap X for Amazon?
Speaker 13: I want to see them continue to accelerate it. To me,
Speaker 13: it's an arms race that's going on. So as much
Speaker 13: as you could fret about some of maybe the cap X,
Speaker 13: that's what you want to see from Meta. You want
Speaker 13: to see Microsoft. You want to see from Amazon. Now
Speaker 13: Investors be like, Okay, where's the payback room? Wasn't built
Speaker 13: in a day? This is going to take six, nine, twelve,
Speaker 13: eighteen months. But at the end of it Fourth Industrial Revolution,
Speaker 13: Amazon wants to be a huge part of that, and
Speaker 13: that's what investors want to see. Even though bad is good,
Speaker 13: good as bad.
Speaker 2: Microsoft just you know one segment on that, Dan, how
Speaker 2: do you how's the Microsoft story shaping up for you?
Speaker 2: I know you've always been very supportive and of the
Speaker 2: stock where are they right now?
Speaker 13: It was a validation movement. I mean the reason tech
Speaker 13: went green yesterday and all the white knuckle fields were alight,
Speaker 13: it was because in Thedella it's talking about the acceleration
Speaker 13: and azure and talking about AI monization is now here
Speaker 13: because there's two people that everyone in the world's focused on.
Speaker 13: What they say on AI, godfather of AI, Jensen Nadella.
Speaker 13: And when you heard from Theadella that n Rubik's cube
Speaker 13: that you're trying to figure out, that was bullish in
Speaker 13: terms of AI validation combined with the Elisha shoe talked
Speaker 13: about from me and be very polish.
Speaker 4: So before I let you go, Dan, we're looking at
Speaker 4: a day where stocks are selling off. We definitely had
Speaker 4: a bad news is bad news when it came to
Speaker 4: the ISM manufacturing dat at the top.
Speaker 5: Of the ten o'clock hour, how much how much.
Speaker 4: Leg do you think this maybe next move of the
Speaker 4: tech selloff can have.
Speaker 13: I think this rotations big tech, the small cap we
Speaker 13: think is very short lived. Said next move to cut
Speaker 13: in that cycle with big big tech earnings that we're saying,
Speaker 13: I'm not saying that you're not going to have some
Speaker 13: speed bumps here. We weive we are still in the
Speaker 13: early stages of this techical market and that's how we've
Speaker 13: handheld investors through some of the roller coaster.
Speaker 2: All Right, Dan, thanks so much for joining us. Dan
Speaker 2: I've C's a managing director senior equity analyst at web
Speaker 2: Bush Securities, giving us his thoughts on big tech again
Speaker 2: after the close today, Amazon and Apple, I'll be paying
Speaker 2: attention from Yeah, I.
Speaker 5: Think it's been really fun. I was really surprised about Meta.
Speaker 4: I mean, you know, I was really skeptical going in
Speaker 4: in terms of they don't have the same kind of
Speaker 4: cloud plus AI to deliver, but that ad impressions and
Speaker 4: that in terms of the quality of the ads was
Speaker 4: really quite impressive. So I was surprised, and that's not
Speaker 4: holding up despite the sell off in the equity market.
Speaker 2: Yeah, so, I mean, I think for for Meta and
Speaker 2: for Google as well, anybody who's advertising, what AI does
Speaker 2: is allows you to target better target your audience, which
Speaker 2: is important for advertisers because they don't want to waste
Speaker 2: their advertising dollars. They want to make sure every advertising
Speaker 2: dollar is going to someone who they really want to reach,
Speaker 2: and that's one of the advantages of digital advertising overall,
Speaker 2: versus say, buying a TV at or buying it at
Speaker 2: the newspaper or something like that. You're getting everybody people
Speaker 2: you don't want as well. Digital does it better. Targeting
Speaker 2: AI just makes it even better.
Speaker 6: Yeah, so has a premium? Does digital have a premium
Speaker 6: to TV?
Speaker 3: Oh?
Speaker 2: Yeah?
Speaker 4: Okay, all right, so well it always has, hasn't it
Speaker 4: last ten years or so?
Speaker 1: Yeah?
Speaker 2: I mean it's it's interesting. It's they target different advertisers.
Speaker 2: But the CPI is the cost per point is really interesting.
Speaker 2: So it's just a premium. You're taking share across the board.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple car Play and
Speaker 1: Android Auto with the Bloomberg Business app. You can also
Speaker 1: listen live on Amazon Alexa from our flagship New York
Speaker 1: station just Say Alexa playing Bloomberg eleven thirty.
Speaker 2: Let's continue our conversation on commercial real estate. I heard
Speaker 2: from someone earlier today, I guess who really is focusing
Speaker 2: on the New York market In New York. If you've
Speaker 2: got a list of properties, you're fine. If you've got
Speaker 2: B and C not so fine. Here let's broaden it
Speaker 2: out a little bit. We can do that with Greg Friedman,
Speaker 2: managing principle and CEO of Peachtree Group. I'm just guessing
Speaker 2: it's Atlanta. He joined us live here in our Bloomberg
Speaker 2: and Arrective Brokers studio. Abigail do little joints as well.
Speaker 2: We appreciate that. Abigail Dottle, markets reporter for Bloomberg News. Greg,
Speaker 2: thanks so much for joining us here talk to us
Speaker 2: about Peachtree. How do you guys play the commercial real
Speaker 2: estate business? Equity, debt, regional? Where do you guys go?
Speaker 11: Yeah, so we invest across the US, so it's just domestic,
Speaker 11: but we invest up and down the capital stacks. We
Speaker 11: invest on the credit side as well as the equity
Speaker 11: side of commercial real estate. So we're a little bit
Speaker 11: unique in the sense that we do as part of
Speaker 11: our company. We have different verticals that go out and
Speaker 11: actually lend to commercial real estate. We buy a lot
Speaker 11: of debt from financial institutions and banks and regional banks.
Speaker 11: We also buy and develop, you know, real estate. We
Speaker 11: buy and develop primarily hotel assets that are you know,
Speaker 11: select service, limited service type hotel properties on the equity side,
Speaker 11: but the CREDITSIBE, We're diversified.
Speaker 3: All right.
Speaker 2: I'm trying to get a sense, I think a lot
Speaker 2: of people are trying to get a sense is how
Speaker 2: bad is a commercial real estate out there? And where
Speaker 2: are we going to see it? Where are we going
Speaker 2: to feel it? Where are we in the kind of
Speaker 2: this nine innings of trying to normalize this market when
Speaker 2: people's behavior has really changed, whether it's working or traveling
Speaker 2: and that kind of stuff. How do you guys think
Speaker 2: about that?
Speaker 11: Yeah, I think commercial real estate's very bifurcated today. If
Speaker 11: you have like a long term fixed rate loan, you
Speaker 11: bought an asset several years ago, you feel really good
Speaker 11: about where you sit in life, assuming that loan's not
Speaker 11: maturing here, you know, in the near term. If you
Speaker 11: have loan maturity issues, if you're you know, if you're
Speaker 11: dealing with you know, loans that are floating rate, that
Speaker 11: are on hedge, you're dealing with a lot of that
Speaker 11: balance sheet stress. You hear a lot of the headlines
Speaker 11: talk about the stress that's going on in office, which
Speaker 11: is really just that secular stress. You take office out
Speaker 11: of the equation, you know, real estate with loans that
Speaker 11: are maturing are under heavy pressure right now because these
Speaker 11: rates are resetting in most cases, you know, double or
Speaker 11: even trouble what they were paying, you know, from the
Speaker 11: previous loan.
Speaker 14: Well, let's talk more about that, because by the end
Speaker 14: of twenty twenty five, let's call it, more than one
Speaker 14: hundred one trillion to one point five trillion cnbs coming due.
Speaker 14: Because you are on the credit side, you're really seeing
Speaker 14: the plumbing a little bit more closely. It's interesting there's
Speaker 14: this debate among some of the commercial real estate people
Speaker 14: that we speak to, and some are a little bit
Speaker 14: more optimistic saying it's just office, and then there's others.
Speaker 14: And Josh Ziegan is coming to mind strictly on the
Speaker 14: credit side, very close to the banks, saying it's much
Speaker 14: much more negative than people think.
Speaker 10: Where do you stand on that?
Speaker 14: Do you think it's a much more difficult position than
Speaker 14: say some of the Blackstone activity might suggest.
Speaker 11: Personally? I think it is. I think it's it's a
Speaker 11: lot more negative. There's a lot of negative leverage. So
Speaker 11: if you're buying assets today, in a lot of cases,
Speaker 11: you're having negative leverage because rates are so much higher
Speaker 11: than where a lot of these assets are trading on
Speaker 11: a cap rate basis. Even though cap rates have moved up,
Speaker 11: and not to mention, if you bought an asset pre
Speaker 11: twenty twenty two, especially during the pandemic, cap rates had
Speaker 11: compressed down to this like unsustainable level where a lot
Speaker 11: of assets, if it was like a multifamily asset industrial,
Speaker 11: we're trading in this three to four percent range, in
Speaker 11: some cases a little bit higher, but renal growth rates
Speaker 11: haven't really allowed for those cap rates to grow enough
Speaker 11: to sustain interest rates that are you know, again, in
Speaker 11: most cases you're in the you know, mid single digits
Speaker 11: at a minimum, if not higher single digits. And that's
Speaker 11: what's causing you know, a big challenge across commercial real estate.
Speaker 2: All right, So what I'm sitting on a piece of
Speaker 2: real estate down in Peachtree Street, Southwest and Atlanta the
Speaker 2: worst city in the country for naming streets by right,
Speaker 2: I mean it's a bunch of second graders. I'm sitting
Speaker 2: on a piece of property. My mortgage is coming up.
Speaker 2: I got a refinance it twice or maybe three? What
Speaker 2: do I do?
Speaker 11: Yeah, I mean, there's so there's definitely dead out there today.
Speaker 11: The reality is regional banks, community banks, the national banks
Speaker 11: make up fifty percent of the commercial real estate lending market.
Speaker 11: They're not lending at the same level that they once were.
Speaker 11: Groups like us on the credit side, we're doing lending today.
Speaker 11: We've done about a billion dollars of loans this year
Speaker 11: so far. So we're actually providing loans to groups that
Speaker 11: need to recapitalize or refinance as loans are maturing. In
Speaker 11: a lot of cases though using that example, they're going
Speaker 11: to have to come in with additional liquidity, so they're
Speaker 11: gon'n have to do it potentially cassion exactly, don't have
Speaker 11: to come in with capital to allow for that refinance.
Speaker 11: SI curd that equity.
Speaker 14: So speaking to the other side of your credit business,
Speaker 14: you also buy, and during the pandemic, you were one
Speaker 14: of the biggest buyers of loans. I would imagine there's
Speaker 14: a lot of bargains out there today. Are you super active?
Speaker 11: Yeah, so, I mean we bought over one hundred and
Speaker 11: eighty loans during the pandemic, so we were super active.
Speaker 11: As you mentioned today, we've bought you know, this year,
Speaker 11: we bought close to about a dozen loans since the
Speaker 11: end of last year to you today, so we haven't
Speaker 11: bought as much paper as I would expect.
Speaker 14: Where are you buying that on the dollar, although I
Speaker 14: know some folks say that's not a good way to
Speaker 14: look at it, but like in terms of what kind
Speaker 14: of bargain are you.
Speaker 11: Guys, Yes, so what we filned and what assets? Yes,
Speaker 11: So it's not huge discounts because what we're finding is
Speaker 11: unlike during like the Great Financial Crisis, because we bought
Speaker 11: a bunch of loans, then we got huge discounts. And
Speaker 11: you know, back then banks had done higher leverage lending,
Speaker 11: you know, going into this cycle and even into the pandemic,
Speaker 11: you know, leverage levels were much more i would say
Speaker 11: conservative by most you know, banks and financial institutions. So
Speaker 11: the discounts weren't as large. But we're finding that the
Speaker 11: banks that are trading paper, they're usually selling off their
Speaker 11: better paper, which means that it's loans that were the
Speaker 11: asset values greater than the loan balance, and so the
Speaker 11: discounts just aren't as large given that factor.
Speaker 5: So how hard is it to come to agree on pricing?
Speaker 4: It's it's very challenging because it easier or harder now
Speaker 4: than like I don't know, eight months ago or something.
Speaker 3: It's still hard. Yeah, it's still very hard.
Speaker 11: I think that's going to change towards the end of
Speaker 11: this year because part of the challenge the losses that
Speaker 11: different banks need to take. They don't have the reserves
Speaker 11: to take them, and they're not will want to take
Speaker 11: those losses today. I think that's going to change as
Speaker 11: our lone loss reserves are increasing over the next couple
Speaker 11: of quarters. And I wouldn't be surprised if you saw
Speaker 11: a lot of regional banks sell off a lot of
Speaker 11: paper in the fourth quarter this year.
Speaker 2: Do you think the commercial real estate business, I don't
Speaker 2: know to pick however you want to answer this. Has
Speaker 2: it found its bottom yet? Or are we still searching
Speaker 2: for a bot of evaluation?
Speaker 1: Yeah?
Speaker 11: So I think a lot of people believe we found
Speaker 11: a bottom. I question it just because we don't have
Speaker 11: a very active transaction market. It's very muted on the
Speaker 11: transaction side. I do think you're probably closer to the bottom,
Speaker 11: although I wouldn't be surprised depending on where rates settle
Speaker 11: over the next six to twelve months. That will be
Speaker 11: a big indicator. When I say rates, really the ten
Speaker 11: year treasury rate, I mean the ten year treasury rates
Speaker 11: come down below four percent today but that's still double
Speaker 11: where we were pre twenty twenty two when you look
Speaker 11: over that decade, where we average closer to two percent.
Speaker 11: So that's putting a lot of pressure on the underlying
Speaker 11: values of these assets, and that potentially means values could
Speaker 11: potentially reset higher the ten years stays above four percent.
Speaker 14: So in terms of that bottom no matter who you
Speaker 14: talk to you whether they think that things have already
Speaker 14: bottomed out or if they're going to bottom out in
Speaker 14: six months or twelve months, one thing that everybody, everybody
Speaker 14: involved in commercial real estate, seems to agree that this
Speaker 14: is going to take a long, long, long time to
Speaker 14: work out.
Speaker 10: Do you agree?
Speaker 14: And if you do, how long is it is? Are
Speaker 14: we looking at a couple of years just scuttling along
Speaker 14: the bottom of and why is everything so logjammed? When
Speaker 14: does it break up?
Speaker 1: Yeah?
Speaker 11: So I'm a big believer that we're going to have
Speaker 11: a sluggish It's been sluggish over the last couple of years,
Speaker 11: so starting you know, going back to the end of
Speaker 11: the first quarter of twenty twenty two, so now for
Speaker 11: commercial real estate, it's been a very sluggish period and
Speaker 11: I think we're going to continue to have that. Unfortunately,
Speaker 11: that sluggish period for commercial real estate over the next
Speaker 11: several years, and it's just going to take time as
Speaker 11: these loans are maturing, asset values continue to sort of
Speaker 11: you know, recal or really ownership groups have to recalibrate
Speaker 11: to where the new interest cass is. So it's just
Speaker 11: going to take time to get through this slug.
Speaker 4: Well, that's not really interested in because let's just say
Speaker 4: we get seventy five basis points it cuts this year
Speaker 4: right as swaps market are now pricing. And how immediately
Speaker 4: does that affect what you see?
Speaker 11: Yeah, I personally, I think it doesn't really move the
Speaker 11: needle that much. I mean, I think it helps a
Speaker 11: little bit, but it doesn't really it's not as impactful
Speaker 11: as you think. I mean, it obviously brings down debt
Speaker 11: service costs, you know, floating rate debt, you know by
Speaker 11: call it fifteen percent, which is helpful. You know, if
Speaker 11: it went down seventy five BIPs, you know, roughly about
Speaker 11: fifteen percent. But your interest costs, if you think about
Speaker 11: pre twenty twenty two, you're still up caught seventeen x
Speaker 11: because I mean you're next to zero, right like what
Speaker 11: people are paying off of sofa and now all of
Speaker 11: a sudden, you know, you move down seventy five BIPs,
Speaker 11: it's not going to be you know, probably as helpful.
Speaker 10: The so going a little bit more macro.
Speaker 14: I know that about thirty percent of your portfolio on
Speaker 14: the equity side hotels, mid scale, mid level hotels you own,
Speaker 14: I think ninety of them or so, although some of
Speaker 14: that might be credit. Sean Hair of Trinity Investments joined
Speaker 14: us last week and also joined Alex and Paul, and
Speaker 14: he was saying, for luxury hotels right now, the growth
Speaker 14: is eight percent, but for lower level hotels it's down
Speaker 14: two percent. Are you seeing this and what does it
Speaker 14: say about the consumer because we continue to see this
Speaker 14: bifurcation on the consumer between the high end and the
Speaker 14: low end. Are you seeing that relative to your hotels?
Speaker 11: Yeah, I think without question, I think consumers that are
Speaker 11: you know, on the lower inside obviously are impacted by inflation,
Speaker 11: higher debt expense. You know, the luxury segment hasn't been
Speaker 11: as impacted. And that's you know, that's because consumers held
Speaker 11: up much better, you know, this time around. I do believe,
Speaker 11: you know, when you look at our portfolio, we're in
Speaker 11: the mid you know, the mid segment and so we
Speaker 11: have a lot of Selex service hotels that are like
Speaker 11: Marriott Hilton branded assets, and those hotels are continue to
Speaker 11: have positive rep par growth. So we're up about three percent,
Speaker 11: you know, year to date. But you're definitely seeing you know,
Speaker 11: I can see slow down a red pars.
Speaker 2: I know, I know, revenue for an available room.
Speaker 3: That's right.
Speaker 2: I'm just going to show it out to Alex and
Speaker 2: Abigail just real quickly. If you were to go buy
Speaker 2: a piece of commercial real estate and office park in
Speaker 2: suburban Atlanta, what kind of discount do you think you'd
Speaker 2: get off of the pre pandemic evaluation.
Speaker 11: That's I mean, it really depends on this because it's
Speaker 11: only seventy I've seen his property thousand times in a
Speaker 11: thousand towns.
Speaker 2: It's seventy percent occupied, it's parking lots half empty, all
Speaker 2: that kind of stuff.
Speaker 11: I mean, you're if it's going to trade, you're getting
Speaker 11: like fifty percent discounts. Wow, is my you know, just
Speaker 11: high level number without going through the nuances, and potentially
Speaker 11: you're even seeing larger discounts for some of these assets
Speaker 11: to trade. I mean, there's one big asset in Buckheat,
Speaker 11: Atlanta right now, that's you know, coming to market. That's
Speaker 11: or at least the debt's coming out to market. It's
Speaker 11: going to trade out a pretty substantial discount to where
Speaker 11: it was.
Speaker 14: You know.
Speaker 2: Buckhett still bucket, buckets, still bucket. Yeah, it's just it
Speaker 2: just shows you that it's called a buckhead.
Speaker 3: They loved me back the love they loved you back.
Speaker 4: Yeah, now not so much. This is a really fun conversation.
Speaker 4: Thank you both so much. Greg Freeman, a Peachtree Group
Speaker 4: managing principal and CEO. Abigail do Little Bloomberg News markets
Speaker 4: reporter who also has her real estate beat as well.
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