1 00:00:02,750 --> 00:00:07,690 Speaker 1: Bloomberg Audio Studios Podcasts Radio News. 2 00:00:09,980 --> 00:00:21,380 Speaker 2: Music Hello, and welcome to another live episode of the 3 00:00:21,540 --> 00:00:22,720 Speaker 2: Odd Lots podcast. 4 00:00:22,860 --> 00:00:23,920 Speaker 3: I'm Joe Wiesenthal. 5 00:00:24,100 --> 00:00:25,040 Speaker 4: And I'm Tracy Alloway. 6 00:00:25,239 --> 00:00:28,760 Speaker 2: So we're here at the Vermont Theater in Hollywood. And 7 00:00:28,800 --> 00:00:31,520 Speaker 2: of course, you talk about Hollywood, but you also have 8 00:00:31,540 --> 00:00:34,060 Speaker 2: to talk about the real estate industry. We know this 9 00:00:34,080 --> 00:00:36,840 Speaker 2: has always been a hub of booming real estate industry. 10 00:00:36,880 --> 00:00:40,210 Speaker 2: But what do the changes in economic development and the 11 00:00:40,250 --> 00:00:42,370 Speaker 2: housing market, how does it manifest itself here? 12 00:00:42,690 --> 00:00:42,990 Speaker 5: That's right. 13 00:00:43,030 --> 00:00:44,330 Speaker 3: So we have a real treat for you. 14 00:00:44,370 --> 00:00:47,350 Speaker 4: We're going to be speaking to an absolute legend in 15 00:00:47,390 --> 00:00:50,839 Speaker 4: the world of residential real estate, someone who actually called 16 00:00:50,920 --> 00:00:54,780 Speaker 4: the subprime bubble before 2008, and maybe even more importantly, 17 00:00:55,120 --> 00:00:59,010 Speaker 4: called the bottom of the housing market after 2008. And 18 00:00:59,030 --> 00:01:00,890 Speaker 4: then we're also going to be speaking to a relative 19 00:01:01,010 --> 00:01:04,630 Speaker 4: newcomer in the world of commercial property, someone who's doing 20 00:01:04,690 --> 00:01:07,450 Speaker 4: new things in L.A. and trying to develop basically a 21 00:01:07,490 --> 00:01:08,069 Speaker 4: new neighborhood. 22 00:01:08,310 --> 00:01:12,289 Speaker 2: So enjoy our conversation with the legend Bill McBride of 23 00:01:12,350 --> 00:01:17,819 Speaker 2: Calculated Risk, as well as Zach Lazzari, real estate developer, founder. 24 00:01:17,580 --> 00:01:21,120 Speaker 3: Of The Western Company. Thank you both so much. Zach, 25 00:01:21,140 --> 00:01:23,840 Speaker 3: what do you what do you do? What's your job? 26 00:01:23,940 --> 00:01:25,690 Speaker 5: I'm a real estate professional. 27 00:01:25,970 --> 00:01:26,830 Speaker 3: Okay, what does that mean? 28 00:01:26,870 --> 00:01:28,670 Speaker 2: Because there are a lot of people who could say 29 00:01:28,730 --> 00:01:29,309 Speaker 2: those words. 30 00:01:30,830 --> 00:01:33,770 Speaker 1: So my goal with the Western Company, the goal that 31 00:01:33,790 --> 00:01:37,370 Speaker 1: we have is that being able to say I'm a 32 00:01:37,490 --> 00:01:41,589 Speaker 1: real estate professional is more exciting than it normally is. 33 00:01:42,209 --> 00:01:46,190 Speaker 1: So I come from a theater and acting background. And 34 00:01:46,230 --> 00:01:49,190 Speaker 1: what I noticed was the developments that I was seeing 35 00:01:49,250 --> 00:01:50,670 Speaker 1: in Los Angeles moved here in about 2014. 36 00:01:50,650 --> 00:01:50,890 Speaker 6: Okay. 37 00:01:53,020 --> 00:01:54,720 Speaker 5: You'd have a really exciting neighborhood. 38 00:01:54,380 --> 00:01:56,620 Speaker 1: Pop up in Silver Lake or Echo Park or Highland Park. 39 00:01:57,000 --> 00:02:00,070 Speaker 1: And then whenever scaffolding would go up for a new building, 40 00:02:00,630 --> 00:02:04,230 Speaker 1: there's generally a, oh, oh no, what's that going to be? 41 00:02:04,950 --> 00:02:07,650 Speaker 1: And that's not the reaction that you should have when 42 00:02:07,690 --> 00:02:09,010 Speaker 1: a new building is being built. 43 00:02:09,240 --> 00:02:11,860 Speaker 5: There should be some excitement. What is that going to be? 44 00:02:12,340 --> 00:02:16,859 Speaker 1: What kind of new creative spirit is going to enter 45 00:02:17,020 --> 00:02:19,950 Speaker 1: into that structure? And I just don't think the commercial 46 00:02:19,990 --> 00:02:23,990 Speaker 1: real estate industry is that inspiring in that way? Those 47 00:02:24,070 --> 00:02:26,859 Speaker 1: outcomes haven't been so inspiring. So our goal is to 48 00:02:26,880 --> 00:02:30,370 Speaker 1: sort of infuse development with the art spirit. 49 00:02:32,550 --> 00:02:34,410 Speaker 4: I'm going to ask a very basic L.A. question, and 50 00:02:34,460 --> 00:02:36,080 Speaker 4: I'd be curious to get both your takes on this. 51 00:02:36,160 --> 00:02:38,540 Speaker 4: And again, Joe gave the caveat earlier, which is we've 52 00:02:38,560 --> 00:02:39,980 Speaker 4: been to L.A. a couple of times, but we don't 53 00:02:40,000 --> 00:02:42,730 Speaker 4: know that much about it. Whenever I come here, I 54 00:02:43,550 --> 00:02:49,110 Speaker 4: am sort of stunned by the diversity of independent businesses compared. 55 00:02:48,590 --> 00:02:49,369 Speaker 3: To New York. 56 00:02:49,470 --> 00:02:50,730 Speaker 5: I think about this all the time. 57 00:02:50,750 --> 00:02:52,799 Speaker 7: Yeah, there's so many mom and pop shops. 58 00:02:53,660 --> 00:02:57,020 Speaker 4: I passed by a linoleum emporium on the way over here, 59 00:02:57,060 --> 00:02:59,239 Speaker 4: which I just don't think you would ever see in 60 00:02:59,900 --> 00:03:02,340 Speaker 4: New York. And I'm sure the direction of travel for 61 00:03:02,380 --> 00:03:05,980 Speaker 4: a lot of independent businesses isn't that great. But how 62 00:03:06,040 --> 00:03:09,500 Speaker 4: have so many managed to survive in L.A. so far 63 00:03:09,600 --> 00:03:12,460 Speaker 4: compared to other places in the U.S. 64 00:03:14,240 --> 00:03:17,500 Speaker 1: Well, I went to school in New York, went to NYU, 65 00:03:17,700 --> 00:03:22,619 Speaker 1: and a lot of my most talented friends left New 66 00:03:22,660 --> 00:03:25,920 Speaker 1: York and moved to Los Angeles because New York just 67 00:03:25,940 --> 00:03:29,110 Speaker 1: got too expensive and yeah LA it's it's while it's 68 00:03:29,150 --> 00:03:31,510 Speaker 1: expensive to buy a home in LA you can generally 69 00:03:31,570 --> 00:03:33,750 Speaker 1: find a good rental deal in a really exciting neighborhood 70 00:03:33,970 --> 00:03:36,210 Speaker 1: um it's a lot harder to do that in New 71 00:03:36,230 --> 00:03:40,430 Speaker 1: York City so you have people who are just dedicated 72 00:03:40,490 --> 00:03:44,400 Speaker 1: to their craft who can survive in LA and focus 73 00:03:44,460 --> 00:03:47,080 Speaker 1: on their art Versus in New York, it's a lot 74 00:03:47,120 --> 00:03:49,500 Speaker 1: more difficult to be able to focus on your craft 75 00:03:49,740 --> 00:03:52,200 Speaker 1: while being able to pay rent. So I think you 76 00:03:52,220 --> 00:03:55,620 Speaker 1: just have more of an experimental group of people who 77 00:03:55,660 --> 00:03:58,340 Speaker 1: are moving out here and who exist and trying to 78 00:03:58,410 --> 00:04:00,350 Speaker 1: start and create new ideas. 79 00:04:00,990 --> 00:04:01,950 Speaker 3: Bill, thoughts? 80 00:04:02,070 --> 00:04:05,890 Speaker 6: I would also address the density issue. In New York, 81 00:04:06,190 --> 00:04:08,530 Speaker 6: you have really high density and therefore you're going to 82 00:04:08,550 --> 00:04:09,650 Speaker 6: have high rent. 83 00:04:09,430 --> 00:04:12,630 Speaker 7: For a particular location. Here we're really spread out. 84 00:04:12,970 --> 00:04:16,180 Speaker 6: Yeah. which is an issue, by the way. We should 85 00:04:16,480 --> 00:04:19,720 Speaker 6: address zoning in LA because we can't stay spread out 86 00:04:19,740 --> 00:04:22,640 Speaker 6: forever or as spread out as we are. But I 87 00:04:22,680 --> 00:04:24,420 Speaker 6: think that's a reason that you see so many mom 88 00:04:24,440 --> 00:04:28,140 Speaker 6: and pop shops, which is great. In my community, I 89 00:04:28,160 --> 00:04:32,740 Speaker 6: live right off PCH, Pacific Coast Highway, and most of 90 00:04:32,779 --> 00:04:35,560 Speaker 6: the stores are mom and pops. There are some chain 91 00:04:35,720 --> 00:04:40,060 Speaker 6: restaurants and stuff. So I think it's the density. 92 00:04:39,660 --> 00:04:42,490 Speaker 2: That I have to say, I've talked about this. 93 00:04:42,510 --> 00:04:43,549 Speaker 3: I love strip malls. 94 00:04:43,730 --> 00:04:47,950 Speaker 2: I love seeing the Korean restaurant next to the tooth 95 00:04:48,010 --> 00:04:51,250 Speaker 2: whitening place, next to the vape shop, next to the 96 00:04:51,290 --> 00:04:52,450 Speaker 2: karate school. 97 00:04:53,029 --> 00:04:56,870 Speaker 3: To me, that's one of my faves. I love driving by. 98 00:04:56,870 --> 00:04:58,250 Speaker 4: Truly multi-use development. 99 00:04:58,290 --> 00:05:02,330 Speaker 2: But Zach, when you're thinking about, okay, you want this 100 00:05:02,390 --> 00:05:05,230 Speaker 2: to be, you want to create a building that actually 101 00:05:05,250 --> 00:05:07,930 Speaker 2: get people excited rather than another building. 102 00:05:08,430 --> 00:05:09,570 Speaker 3: What are the ingredients to that? 103 00:05:10,190 --> 00:05:13,450 Speaker 1: I think you have to be focused on, so the 104 00:05:13,470 --> 00:05:16,490 Speaker 1: way that we're trying to approach finding tenants, we like 105 00:05:16,510 --> 00:05:18,710 Speaker 1: to think of it like almost like how a 24 106 00:05:18,710 --> 00:05:19,870 Speaker 1: tries to find filmmakers. 107 00:05:19,990 --> 00:05:20,270 Speaker 4: Yeah. 108 00:05:20,330 --> 00:05:20,630 Speaker 2: Okay. 109 00:05:20,730 --> 00:05:23,810 Speaker 1: So how can we find someone who has a vision? 110 00:05:23,990 --> 00:05:26,409 Speaker 1: We're not trying to find another Shake Shack. 111 00:05:26,570 --> 00:05:29,750 Speaker 5: I mean, yeah. So Shake Shack is awesome. 112 00:05:29,790 --> 00:05:31,570 Speaker 1: I love going to Shake Shack when I'm at the airport, 113 00:05:31,589 --> 00:05:35,030 Speaker 1: but I don't necessarily need Shake Shack everywhere else. So 114 00:05:35,130 --> 00:05:37,450 Speaker 1: I think people get a lot more excited when people 115 00:05:37,490 --> 00:05:40,140 Speaker 1: are trying new things and are trying to, to test 116 00:05:40,160 --> 00:05:43,460 Speaker 1: the limits of even pastries, whatever it is, if you're 117 00:05:43,540 --> 00:05:47,890 Speaker 1: passionate about a thing, then that passion usually translates into 118 00:05:47,910 --> 00:05:48,969 Speaker 1: an exciting new result. 119 00:05:49,010 --> 00:05:50,929 Speaker 5: So that's how we approach trying to find tenants. 120 00:05:51,730 --> 00:05:54,150 Speaker 4: How do you think about the trade-off, if there is one, 121 00:05:54,230 --> 00:05:57,720 Speaker 4: between taste and, I guess, profitability? Because I think about A24. 122 00:05:58,330 --> 00:06:00,490 Speaker 4: A24 makes a bunch of really good movies. There are 123 00:06:00,510 --> 00:06:03,440 Speaker 4: a lot of good movies out there that don't necessarily 124 00:06:03,880 --> 00:06:06,240 Speaker 4: make a lot of money. And unfortunately, some of the 125 00:06:06,260 --> 00:06:08,279 Speaker 4: movies that make a lot of money are, you know, 126 00:06:08,730 --> 00:06:11,210 Speaker 4: Marvel superhero things that are the same thing over and 127 00:06:11,290 --> 00:06:13,029 Speaker 4: over as we were discussing with Hayes. 128 00:06:13,670 --> 00:06:14,670 Speaker 5: But how do you. 129 00:06:14,610 --> 00:06:18,349 Speaker 4: Turn taste into actual profit when it comes to property? 130 00:06:19,130 --> 00:06:21,690 Speaker 1: Well, the lucky thing about real estate is even if 131 00:06:22,350 --> 00:06:27,410 Speaker 1: the tenant fails, which is sad, but the real estate 132 00:06:27,490 --> 00:06:28,969 Speaker 1: still maintains its value. 133 00:06:29,050 --> 00:06:30,630 Speaker 5: And then a new tenant generally will come in. 134 00:06:30,680 --> 00:06:32,920 Speaker 1: It's not like a movie where if no one sees 135 00:06:32,960 --> 00:06:35,300 Speaker 1: the movie, you just write off the loss. So the 136 00:06:35,320 --> 00:06:39,150 Speaker 1: real estate generally retains its value. even if there's a failure. 137 00:06:39,750 --> 00:06:41,310 Speaker 3: Bill, you mentioned zoning. 138 00:06:41,710 --> 00:06:44,710 Speaker 2: And one of the questions, you know, we've had a 139 00:06:44,710 --> 00:06:48,430 Speaker 2: lot of conversations about zoning, but, you know, people fight about, oh, 140 00:06:48,970 --> 00:06:50,630 Speaker 2: is this residential? 141 00:06:50,850 --> 00:06:55,359 Speaker 3: Is this business, et cetera? From your perspective, like. 142 00:06:55,260 --> 00:06:57,400 Speaker 2: When you think about we want to crack the puzzle, 143 00:06:57,460 --> 00:06:59,900 Speaker 2: we want to make affordability, et cetera, we want this 144 00:06:59,940 --> 00:07:00,680 Speaker 2: to be lively. 145 00:07:01,400 --> 00:07:04,120 Speaker 3: In your research, how important. 146 00:07:03,880 --> 00:07:07,380 Speaker 2: Is like getting that regulatory piece of the puzzle correct? 147 00:07:08,010 --> 00:07:09,420 Speaker 7: But if you talk to the home builders or the 148 00:07:09,440 --> 00:07:11,040 Speaker 7: apartment builders, it's the biggest piece. 149 00:07:11,280 --> 00:07:11,619 Speaker 5: Okay. 150 00:07:11,660 --> 00:07:16,280 Speaker 6: So I think getting zoning changed. I mean, you know, 151 00:07:16,500 --> 00:07:19,440 Speaker 6: we've passed some things in California. California has. 152 00:07:19,920 --> 00:07:23,250 Speaker 7: But the ADU laws. Yeah. 153 00:07:24,230 --> 00:07:26,890 Speaker 6: ADUs are really taking off in a lot of parts 154 00:07:26,950 --> 00:07:27,670 Speaker 6: of California. 155 00:07:27,730 --> 00:07:30,290 Speaker 7: Yeah. Now, the only problem is that's a. 156 00:07:30,410 --> 00:07:35,040 Speaker 6: Small increase to the housing stock. But, you know, actual 157 00:07:35,100 --> 00:07:39,120 Speaker 6: zoning is really– changing zoning is really hard. You know, 158 00:07:39,800 --> 00:07:42,440 Speaker 6: they have done some things like near transport centers you 159 00:07:42,460 --> 00:07:45,670 Speaker 6: can build a lot higher density. One of the things 160 00:07:45,730 --> 00:07:50,990 Speaker 6: that we're in an official housing crisis in California. So 161 00:07:51,370 --> 00:07:53,150 Speaker 6: I think we're still in it. They announced it four 162 00:07:53,170 --> 00:07:56,510 Speaker 6: or five years ago. And you weren't allowed to reduce density. 163 00:07:57,190 --> 00:08:00,230 Speaker 6: So if you bought a six-unit apartment building, you couldn't 164 00:08:00,270 --> 00:08:05,680 Speaker 6: build four condos. Or in my community, what was happening was... 165 00:08:06,250 --> 00:08:08,400 Speaker 6: People with all kinds of money were buying two or 166 00:08:08,440 --> 00:08:11,980 Speaker 6: three homes in a row and building a real mansion, 167 00:08:12,000 --> 00:08:12,780 Speaker 6: not a McMansion. 168 00:08:13,820 --> 00:08:17,780 Speaker 7: And they've stopped that. 169 00:08:16,440 --> 00:08:20,710 Speaker 6: Because density was actually decreasing in the beach communities, which. 170 00:08:20,910 --> 00:08:23,730 Speaker 7: You know, is kind of the opposite of what we 171 00:08:23,750 --> 00:08:24,290 Speaker 7: kind of need. 172 00:08:24,890 --> 00:08:26,950 Speaker 6: And I'm speaking a little bit against my own interest 173 00:08:27,040 --> 00:08:29,380 Speaker 6: in that because we'll have more traffic and stuff. 174 00:08:29,400 --> 00:08:30,740 Speaker 3: Thank you for your public interest. 175 00:08:30,840 --> 00:08:32,740 Speaker 6: By the way, just to add to Zach's comment, when 176 00:08:32,800 --> 00:08:35,100 Speaker 6: I'm talking with him, I think one of the things 177 00:08:35,120 --> 00:08:38,210 Speaker 6: that really adds value to what he's doing is he's 178 00:08:38,230 --> 00:08:42,750 Speaker 6: taking an area and building it into a community and 179 00:08:42,809 --> 00:08:45,490 Speaker 6: making it kind of like you go into that community 180 00:08:45,510 --> 00:08:49,750 Speaker 6: and it's like a symphony. And I thought it was 181 00:08:49,770 --> 00:08:54,120 Speaker 6: an incredibly exciting idea to do. not just build one building, 182 00:08:54,140 --> 00:08:56,380 Speaker 6: which is what a lot of people do, but they 183 00:08:56,920 --> 00:08:59,390 Speaker 6: are taking multiple buildings and trying to build a whole 184 00:08:59,410 --> 00:09:02,950 Speaker 6: community with new restaurants and a real vision for that. 185 00:09:02,970 --> 00:09:06,929 Speaker 6: And I think that will have a real big impact. 186 00:09:07,390 --> 00:09:09,610 Speaker 4: Wait, Zach, say more about that. So what happens when 187 00:09:09,630 --> 00:09:12,910 Speaker 4: you're buying multiple buildings in a single neighborhood and sort 188 00:09:12,929 --> 00:09:17,030 Speaker 4: of aggregating those developments versus maybe just like cherry picking 189 00:09:17,070 --> 00:09:19,230 Speaker 4: a few properties that are scattered across the city? 190 00:09:20,120 --> 00:09:23,000 Speaker 1: So yes, the idea for what we're doing on Western 191 00:09:23,059 --> 00:09:26,359 Speaker 1: and Melrose came mostly from reading this book, The Death 192 00:09:26,400 --> 00:09:29,480 Speaker 1: and Life of Great American Cities by Jane Jacobs. And 193 00:09:29,840 --> 00:09:33,140 Speaker 1: she was talking about the sidewalk ballet in Greenwich Village. 194 00:09:33,679 --> 00:09:37,650 Speaker 1: And growing up in New York City, I'd seen that firsthand. 195 00:09:37,970 --> 00:09:40,090 Speaker 1: And Greenwich Village is one of the most exciting neighborhoods 196 00:09:40,130 --> 00:09:43,370 Speaker 1: to just walk around and do nothing because you're experiencing 197 00:09:43,450 --> 00:09:46,829 Speaker 1: culture by just existing. And that was the one thing 198 00:09:46,890 --> 00:09:49,830 Speaker 1: I felt like was missing in Los Angeles. There are 199 00:09:49,850 --> 00:09:53,100 Speaker 1: a few of these great main streets in LA, but 200 00:09:53,700 --> 00:09:58,270 Speaker 1: there's very few. And generally when they exist, they end 201 00:09:58,330 --> 00:09:59,970 Speaker 1: up sort of turning into airport shopping malls. 202 00:10:00,230 --> 00:10:00,770 Speaker 5: Eventually. 203 00:10:01,110 --> 00:10:04,790 Speaker 1: And that's just very disappointing because speaking of zoning, New 204 00:10:04,840 --> 00:10:08,600 Speaker 1: York is basically all mixed use. So if there's a street, 205 00:10:08,620 --> 00:10:11,120 Speaker 1: I mean, Manhattan at this point is so expensive that 206 00:10:11,140 --> 00:10:13,300 Speaker 1: it's hard to have independent businesses. But for a while, 207 00:10:13,860 --> 00:10:17,120 Speaker 1: even if there were a lot of chains on one street, 208 00:10:17,140 --> 00:10:18,939 Speaker 1: you could go to a side street and see something interesting. 209 00:10:19,000 --> 00:10:22,179 Speaker 1: LA doesn't have the luxury of doing that because roughly 95% 210 00:10:22,179 --> 00:10:24,720 Speaker 1: of the city is residentially zoned. 211 00:10:24,760 --> 00:10:26,520 Speaker 5: So if you have a community that. 212 00:10:26,450 --> 00:10:28,810 Speaker 1: Has their main street, have all of the culture and 213 00:10:28,850 --> 00:10:31,110 Speaker 1: life taken out of it, then that's it. 214 00:10:32,150 --> 00:10:34,510 Speaker 5: You got nothing because it's just residential around you. 215 00:10:35,130 --> 00:10:37,569 Speaker 2: You know, sometimes there are these fights on Twitter where 216 00:10:37,590 --> 00:10:40,880 Speaker 2: they talk about like, what are the best, most walkable cities? 217 00:10:42,020 --> 00:10:44,439 Speaker 2: And it's like, oh, New York is very, very walkable. 218 00:10:45,630 --> 00:10:47,530 Speaker 2: And then there's like, oh, LA is at the bottom. 219 00:10:47,670 --> 00:10:50,609 Speaker 2: Except it's always so nice, the weather out here. 220 00:10:50,690 --> 00:10:53,600 Speaker 3: I don't mind walking an hour. So I'm actually totally fine. 221 00:10:53,720 --> 00:10:56,780 Speaker 2: I actually think LA is a great walking city because 222 00:10:56,820 --> 00:10:58,460 Speaker 2: I never have to worry about the weather. 223 00:10:58,500 --> 00:11:00,010 Speaker 3: I think it's one of the most walkable cities. It's 224 00:11:00,050 --> 00:11:04,480 Speaker 3: so pleasant to walk here. But can I... No, I 225 00:11:04,520 --> 00:11:08,180 Speaker 3: love walking here. But it does not, I guess, suppose... 226 00:11:08,040 --> 00:11:09,559 Speaker 3: You'll be walking for a long time. 227 00:11:09,580 --> 00:11:10,240 Speaker 4: Yeah, it's great. 228 00:11:10,340 --> 00:11:11,910 Speaker 3: I love walking for a long time here, and I've 229 00:11:11,929 --> 00:11:12,650 Speaker 3: taken many. 230 00:11:12,510 --> 00:11:14,590 Speaker 2: Long walks in L.A., but I know it does not 231 00:11:14,929 --> 00:11:17,150 Speaker 2: meet what most people are talking about when they say walkable. 232 00:11:33,110 --> 00:11:34,670 Speaker 5: Okay, you have this vision, this. 233 00:11:34,510 --> 00:11:35,750 Speaker 3: Community, et cetera. 234 00:11:36,410 --> 00:11:39,770 Speaker 2: How much right now is your business being affected or 235 00:11:39,830 --> 00:11:43,850 Speaker 2: how much when you're thinking about this, are you thinking 236 00:11:43,870 --> 00:11:45,110 Speaker 2: about the headwinds. 237 00:11:44,690 --> 00:11:46,910 Speaker 5: That we talked about with Hayes right before it? 238 00:11:47,170 --> 00:11:48,600 Speaker 3: The fact that there is this very. 239 00:11:48,460 --> 00:11:50,600 Speaker 2: Big industry that is on the decline and how does 240 00:11:50,620 --> 00:11:54,180 Speaker 2: that make you think about the business, the opportunity set? 241 00:11:55,040 --> 00:11:58,380 Speaker 1: So I think the commercial real estate industry is having 242 00:11:58,400 --> 00:12:01,579 Speaker 1: a really tough time because for a long time we've 243 00:12:01,620 --> 00:12:07,339 Speaker 1: been able to make money by financially engineering outcomes. And 244 00:12:07,940 --> 00:12:12,140 Speaker 1: now the financial conditions are not super great for those 245 00:12:12,260 --> 00:12:15,710 Speaker 1: financially engineered outcomes. You can't get a cap rate and 246 00:12:15,730 --> 00:12:18,609 Speaker 1: an interest rate arbitrage and make money. You can't throw 247 00:12:18,650 --> 00:12:19,849 Speaker 1: a bunch of people in a room of 140 IQ 248 00:12:19,910 --> 00:12:22,850 Speaker 1: and do some spreadsheets and figure out how to make 249 00:12:22,910 --> 00:12:25,550 Speaker 1: money when the interest rates are higher than what you 250 00:12:25,790 --> 00:12:30,270 Speaker 1: bought the building for on a cap rate. So now 251 00:12:30,309 --> 00:12:31,630 Speaker 1: you actually have to make the product good. 252 00:12:32,230 --> 00:12:32,730 Speaker 5: I see what you're saying. 253 00:12:32,929 --> 00:12:35,110 Speaker 1: And I think that's what's really exciting about what we're 254 00:12:35,150 --> 00:12:39,850 Speaker 1: doing is we're seeing rents increase where we are because 255 00:12:39,890 --> 00:12:43,949 Speaker 1: I think we've made a really exciting product by investing 256 00:12:44,030 --> 00:12:47,260 Speaker 1: in talent. There's a lot of new apartment buildings in LA. 257 00:12:47,290 --> 00:12:49,280 Speaker 1: I don't think many people go around going, wow, that's 258 00:12:49,300 --> 00:12:52,120 Speaker 1: such a beautiful, cool new apartment building. I think most 259 00:12:52,140 --> 00:12:55,300 Speaker 1: people are like, oh God, not another one of those boring, 260 00:12:55,340 --> 00:12:57,880 Speaker 1: generic apartment buildings. So I think the commercial real estate industry, 261 00:12:57,920 --> 00:13:00,340 Speaker 1: now we have to actually make good products if we want. 262 00:13:00,280 --> 00:13:00,719 Speaker 5: To make money. 263 00:13:01,600 --> 00:13:04,620 Speaker 4: Okay, so speaking of making good products, I read one 264 00:13:04,640 --> 00:13:07,420 Speaker 4: of the things you're doing as part of your developing 265 00:13:07,600 --> 00:13:11,070 Speaker 4: is you're building city infrastructure as well. So installing things 266 00:13:11,110 --> 00:13:16,550 Speaker 4: like crosswalks. What's the process of creating a crosswalk in LA? 267 00:13:21,410 --> 00:13:24,250 Speaker 5: It's like a Kafka novel. It's just horrible. 268 00:13:24,510 --> 00:13:25,210 Speaker 3: Tell us more. 269 00:13:25,290 --> 00:13:27,569 Speaker 1: Oh, we got a great email. We got approved for 270 00:13:27,590 --> 00:13:31,860 Speaker 1: a crosswalk on Clinton and Western. And it said it'll 271 00:13:31,900 --> 00:13:36,050 Speaker 1: be built in a few years or more. 272 00:13:36,070 --> 00:13:40,469 Speaker 3: Wait, what's the constraint? 273 00:13:40,830 --> 00:13:44,150 Speaker 4: Like what is the actual holdup? What's your sense of 274 00:13:44,190 --> 00:13:44,709 Speaker 4: the holdup? 275 00:13:45,929 --> 00:13:50,130 Speaker 1: They, uh, there's no really process to get one. You can, 276 00:13:50,730 --> 00:13:53,000 Speaker 1: you have to pay for it. That's they're like, Oh yeah, we'll, 277 00:13:53,050 --> 00:13:55,219 Speaker 1: we'll totally approve that for you, but it's going to 278 00:13:55,260 --> 00:13:58,120 Speaker 1: cost a million dollars. And then we're like, just to 279 00:13:58,160 --> 00:14:01,520 Speaker 1: put a, stop like a light and they're like well 280 00:14:01,559 --> 00:14:05,569 Speaker 1: the engineering the electrical and then you got to go 281 00:14:05,650 --> 00:14:08,350 Speaker 1: put a vault underneath for us so it's like they're 282 00:14:08,370 --> 00:14:10,540 Speaker 1: like what are you going to do for us interesting 283 00:14:10,970 --> 00:14:12,890 Speaker 1: It's funny to think a few years are up. It 284 00:14:12,910 --> 00:14:15,190 Speaker 1: reminds me of when I used to, as a young kid, 285 00:14:15,210 --> 00:14:17,809 Speaker 1: like be a vinyl record collector and you'd see the 286 00:14:17,809 --> 00:14:21,810 Speaker 1: 99 cents and up bins. And it's like, so this 287 00:14:21,890 --> 00:14:24,290 Speaker 1: is the bin that contained, you could have a hundred 288 00:14:24,330 --> 00:14:26,670 Speaker 1: dollar record in the 99 cents and up bins. 289 00:14:27,710 --> 00:14:31,330 Speaker 2: I'm curious, Bill, you talk to the home builders. Have 290 00:14:31,390 --> 00:14:35,780 Speaker 2: they become more of the product mindset? Like, do they, 291 00:14:35,880 --> 00:14:38,560 Speaker 2: are they going in the same direction where it's like, okay, 292 00:14:38,580 --> 00:14:40,979 Speaker 2: it's not just good enough to have like a master 293 00:14:41,020 --> 00:14:42,320 Speaker 2: plan community or something. 294 00:14:42,680 --> 00:14:43,760 Speaker 3: We have to think about. 295 00:14:43,960 --> 00:14:47,760 Speaker 2: The freestanding home as a desirable product rather than just 296 00:14:47,820 --> 00:14:48,400 Speaker 2: a place to live. 297 00:14:48,460 --> 00:14:49,260 Speaker 5: Is that a thing yet? 298 00:14:49,500 --> 00:14:52,740 Speaker 6: Well, you know, most of the home builders that I 299 00:14:52,760 --> 00:14:56,000 Speaker 6: speak to are infill builders. I do talk to some 300 00:14:56,040 --> 00:14:58,880 Speaker 6: of the larger builders that the number one thing I've 301 00:14:58,900 --> 00:15:00,540 Speaker 6: heard from them is they're concerned. 302 00:15:00,580 --> 00:15:05,120 Speaker 7: They were really into the build to rent model. Yes, yes. 303 00:15:05,740 --> 00:15:09,560 Speaker 6: And that's kind of under pressure right now. So as 304 00:15:09,600 --> 00:15:11,760 Speaker 6: far as building a community, I still think they're sticking 305 00:15:11,780 --> 00:15:12,740 Speaker 6: with their master plan. 306 00:15:12,760 --> 00:15:13,140 Speaker 7: Got it. 307 00:15:13,560 --> 00:15:16,359 Speaker 6: So it's interesting to hear him say that about the 308 00:15:16,840 --> 00:15:22,780 Speaker 6: crosswalk because policy and zoning and regulatory issues are the 309 00:15:22,830 --> 00:15:25,510 Speaker 6: number one thing I hear from home builders. 310 00:15:26,790 --> 00:15:30,210 Speaker 7: They all feel right across. Of course, good times, bad times, 311 00:15:30,250 --> 00:15:31,910 Speaker 7: that's always their number one issue. 312 00:15:32,030 --> 00:15:37,290 Speaker 4: I have another basic LA question. despite what Joe says 313 00:15:37,390 --> 00:15:40,910 Speaker 4: about this being a walkable city, lots of people drive, right? 314 00:15:40,970 --> 00:15:43,190 Speaker 4: Which means you have to have parking if you're doing 315 00:15:43,230 --> 00:15:46,850 Speaker 4: a commercial development, right? Everyone needs to get there. And 316 00:15:46,910 --> 00:15:50,250 Speaker 4: at the same time, I imagine having huge portions of 317 00:15:50,290 --> 00:15:53,650 Speaker 4: the city as designated parking lots is not that attractive 318 00:15:53,770 --> 00:15:56,220 Speaker 4: if you're trying to create a neighborhood or maybe even 319 00:15:56,300 --> 00:15:58,340 Speaker 4: if you're trying to produce profit. How do you think 320 00:15:58,380 --> 00:16:04,500 Speaker 4: about the trade-off between parking versus creating a beautiful neighborhood 321 00:16:04,540 --> 00:16:06,000 Speaker 4: with many tasteful buildings? 322 00:16:07,090 --> 00:16:11,360 Speaker 1: It's definitely my biggest blind spot because I didn't drive 323 00:16:11,400 --> 00:16:14,060 Speaker 1: for most of my life living in New York. So 324 00:16:14,880 --> 00:16:17,020 Speaker 1: people who are from L.A. are always asking me what 325 00:16:17,040 --> 00:16:21,050 Speaker 1: the parking situation is. And I'm like, why do you 326 00:16:21,090 --> 00:16:23,490 Speaker 1: keep asking me about the parking? Don't you want to 327 00:16:23,510 --> 00:16:25,330 Speaker 1: know what the restaurants are? And they're like, well, where 328 00:16:25,350 --> 00:16:26,050 Speaker 1: am I going to park? 329 00:16:26,710 --> 00:16:28,510 Speaker 5: I had a friend. I have a friend from L.A. 330 00:16:28,550 --> 00:16:30,200 Speaker 5: who will park. 331 00:16:31,050 --> 00:16:33,360 Speaker 1: And then we're going half a block north and he'll 332 00:16:33,400 --> 00:16:35,900 Speaker 1: get out, he'll drive his car and then park half 333 00:16:35,920 --> 00:16:36,560 Speaker 1: a block north. 334 00:16:36,680 --> 00:16:36,900 Speaker 4: Wow. 335 00:16:37,200 --> 00:16:37,440 Speaker 7: Yeah. 336 00:16:37,740 --> 00:16:39,020 Speaker 5: But no, it's a thing. 337 00:16:39,200 --> 00:16:39,560 Speaker 7: It's a thing. 338 00:16:39,600 --> 00:16:41,680 Speaker 1: Especially if you have kids, like you got to get 339 00:16:41,700 --> 00:16:42,800 Speaker 1: them in the car seats, get them out of the 340 00:16:42,840 --> 00:16:46,040 Speaker 1: car seats. So if you can't park, it's like Fairfax 341 00:16:46,120 --> 00:16:49,970 Speaker 1: is like just horrendous parking. And sometimes you'll just not 342 00:16:50,870 --> 00:16:52,410 Speaker 1: go to the business if the parking's that bad. 343 00:16:52,430 --> 00:16:54,370 Speaker 5: But you can you can make it work with valet. 344 00:16:55,700 --> 00:16:58,970 Speaker 6: Let me add something here too. I mentioned the ADUs 345 00:16:59,510 --> 00:17:01,650 Speaker 6: and that they have picked up a little bit. But 346 00:17:01,890 --> 00:17:03,610 Speaker 6: one of the rules with the ADUs is you don't 347 00:17:03,650 --> 00:17:06,670 Speaker 6: have to have off-street parking. So what's happening in a 348 00:17:06,730 --> 00:17:09,210 Speaker 6: lot of the communities where they are building a lot 349 00:17:09,250 --> 00:17:11,290 Speaker 6: of ADUs is the streets are just packed. 350 00:17:11,990 --> 00:17:13,949 Speaker 7: So even worse than they were before. 351 00:17:14,410 --> 00:17:19,070 Speaker 6: So parking, until we get real self-driving cars and nobody 352 00:17:19,109 --> 00:17:21,889 Speaker 6: has to have a car anymore, parking is a huge issue. 353 00:17:22,280 --> 00:17:26,220 Speaker 5: Koreatown. is one of the craziest parking situations, maybe on 354 00:17:26,240 --> 00:17:26,719 Speaker 5: the planet. 355 00:17:27,080 --> 00:17:27,399 Speaker 6: Really? 356 00:17:27,680 --> 00:17:28,060 Speaker 7: Oh, yeah. 357 00:17:28,380 --> 00:17:32,540 Speaker 1: People will, there'll be no spots. My wife lived in 358 00:17:32,560 --> 00:17:36,520 Speaker 1: Koreatown for a little while. And then there's people who are, like, 359 00:17:36,660 --> 00:17:39,869 Speaker 1: just sitting there all day. And then once someone leaves, they're, like, 360 00:17:39,910 --> 00:17:41,590 Speaker 1: coordinating how to get all the spots. 361 00:17:41,750 --> 00:17:43,270 Speaker 5: So Koreatown's pretty rough. 362 00:17:43,450 --> 00:17:46,330 Speaker 1: But I do think with self-driving cars, parking will become 363 00:17:46,369 --> 00:17:46,909 Speaker 1: less important. 364 00:17:47,090 --> 00:17:49,869 Speaker 2: No, I'm fascinated by this question because it's like the 365 00:17:49,910 --> 00:17:51,670 Speaker 2: car drives you to work and then goes to some 366 00:17:51,750 --> 00:17:54,970 Speaker 2: centralized lot, like, I want to do like a bunch 367 00:17:55,030 --> 00:17:58,730 Speaker 2: of episodes because it could just end up meaningfully restructuring 368 00:17:58,810 --> 00:18:00,189 Speaker 2: cities and how they're organized. 369 00:18:00,210 --> 00:18:02,689 Speaker 7: Let me just interrupt you quickly. It also would change 370 00:18:03,359 --> 00:18:05,230 Speaker 7: the way houses look. Yeah, right. 371 00:18:05,260 --> 00:18:07,219 Speaker 6: Because right now in a lot of communities, you've got 372 00:18:07,260 --> 00:18:09,240 Speaker 6: these garages in front and they're really ugly. 373 00:18:09,440 --> 00:18:09,740 Speaker 3: Yeah. 374 00:18:09,820 --> 00:18:11,660 Speaker 7: You know, and it would be really nice if those 375 00:18:11,700 --> 00:18:12,280 Speaker 7: all went away. 376 00:18:12,300 --> 00:18:14,919 Speaker 6: And my brother pointed out to me one of the 377 00:18:14,940 --> 00:18:17,270 Speaker 6: biggest changes, of course, would be self-driving would be. 378 00:18:18,380 --> 00:18:19,780 Speaker 7: Police interactions go way down. 379 00:18:20,340 --> 00:18:21,139 Speaker 4: Yes, right. 380 00:18:22,500 --> 00:18:25,620 Speaker 2: It also means lower speeding ticket revenue. There are all 381 00:18:25,680 --> 00:18:28,740 Speaker 2: kinds of, there are going to be no speeding tickets anymore, 382 00:18:28,760 --> 00:18:29,300 Speaker 2: which is going to hurt. 383 00:18:29,320 --> 00:18:31,119 Speaker 7: I hope this happens in my lifetime. 384 00:18:31,770 --> 00:18:34,610 Speaker 2: I have a question, you know, this is a question 385 00:18:34,630 --> 00:18:37,870 Speaker 2: that I probably would have asked very first off in 386 00:18:38,030 --> 00:18:40,369 Speaker 2: like 2021 or 2022, then it faded. 387 00:18:40,930 --> 00:18:44,889 Speaker 3: But I'm curious now, how hard is it to like. 388 00:18:44,770 --> 00:18:49,600 Speaker 2: Find construction materials or like HVAC things or all or 389 00:18:49,619 --> 00:18:53,340 Speaker 2: the electricity transformers yeah like because what now we know 390 00:18:53,359 --> 00:18:55,500 Speaker 2: there's incredible competition for a lot of that stuff is 391 00:18:55,540 --> 00:19:00,209 Speaker 2: that showing up in your development timelines transformers yeah so what's. 392 00:19:00,070 --> 00:19:02,570 Speaker 5: Happening up with that you got to fight for it 393 00:19:03,290 --> 00:19:04,650 Speaker 5: yeah yeah what does. 394 00:19:04,609 --> 00:19:07,449 Speaker 4: That actually mean though do you pay a higher price 395 00:19:07,590 --> 00:19:09,930 Speaker 4: or do you I don't everyone always talks about building 396 00:19:09,970 --> 00:19:12,440 Speaker 4: the relationship with the supplier do you become their best 397 00:19:12,500 --> 00:19:14,000 Speaker 4: friend how does fight for it. 398 00:19:13,960 --> 00:19:15,950 Speaker 5: Mean Yeah, you got to find a guy who knows 399 00:19:15,990 --> 00:19:16,409 Speaker 5: a guy. 400 00:19:16,670 --> 00:19:17,190 Speaker 7: Find the guy. 401 00:19:17,210 --> 00:19:19,109 Speaker 5: And then you got to buy it in advance and 402 00:19:19,150 --> 00:19:20,669 Speaker 5: then store it somewhere. 403 00:19:20,690 --> 00:19:20,760 Speaker 6: Huh. 404 00:19:20,770 --> 00:19:23,050 Speaker 5: Yeah, it's like, yeah, it gets weird. 405 00:19:23,210 --> 00:19:25,149 Speaker 4: So do you have a garage just like full of 406 00:19:25,190 --> 00:19:26,250 Speaker 4: Transformers somewhere? 407 00:19:26,270 --> 00:19:27,510 Speaker 5: I might. 408 00:19:27,530 --> 00:19:29,170 Speaker 3: No, like when you were like. 409 00:19:30,730 --> 00:19:31,889 Speaker 3: It's a very valuable. 410 00:19:32,310 --> 00:19:37,020 Speaker 2: Tracy's going to add that to her prepper. I probably will. 411 00:19:37,130 --> 00:19:39,430 Speaker 2: As my fellow prepper, yeah, got to have a garage 412 00:19:39,540 --> 00:19:41,480 Speaker 2: full of Transformers. 413 00:19:41,700 --> 00:19:42,560 Speaker 5: Got to do it together. 414 00:19:43,470 --> 00:19:46,390 Speaker 3: Long term, people are always going to love living around here. 415 00:19:46,570 --> 00:19:51,230 Speaker 2: We can talk about Hollywood, sure, but this is heaven 416 00:19:51,310 --> 00:19:51,810 Speaker 2: on earth here. 417 00:19:51,850 --> 00:19:52,810 Speaker 5: This is God's country. 418 00:19:53,050 --> 00:19:54,510 Speaker 3: In the end, it's. 419 00:19:54,380 --> 00:19:55,619 Speaker 5: Always going to be great, right? 420 00:19:57,430 --> 00:19:58,160 Speaker 7: That's my. 421 00:19:59,880 --> 00:20:00,320 Speaker 1: L.A. 422 00:20:00,380 --> 00:20:00,640 Speaker 7: Take. 423 00:20:01,600 --> 00:20:04,580 Speaker 1: I think Los Angeles has the highest ceiling of any 424 00:20:04,640 --> 00:20:05,600 Speaker 1: city in the world. 425 00:20:05,820 --> 00:20:08,300 Speaker 3: I completely agree. I'm such an L.A. 426 00:20:10,600 --> 00:20:17,510 Speaker 6: We have two problems. One is the cost of housing, 427 00:20:17,590 --> 00:20:21,410 Speaker 6: which we need to address, and the other is water. 428 00:20:21,450 --> 00:20:23,450 Speaker 7: Water in California is a huge, huge issue. 429 00:20:23,730 --> 00:20:26,390 Speaker 2: Another topic we could talk for a long time, but 430 00:20:27,190 --> 00:20:29,629 Speaker 2: Bill and Zach, thank you so much for joining us 431 00:20:29,730 --> 00:20:30,270 Speaker 2: at OzLots Live. 432 00:20:30,369 --> 00:20:33,429 Speaker 3: We really appreciate you and both of you. 433 00:20:41,060 --> 00:20:43,240 Speaker 7: Thank you. 434 00:20:48,650 --> 00:20:51,580 Speaker 4: That was our conversation with Bill McBride and Zach Lasry, 435 00:20:51,660 --> 00:20:54,960 Speaker 4: recorded live in L.A. I'm Tracy Alloway. You can follow 436 00:20:54,980 --> 00:20:56,080 Speaker 4: me at Tracy Alloway. 437 00:20:56,220 --> 00:20:59,060 Speaker 3: And I'm Joe Wiesenthal. You can follow me at The Stalwart. 438 00:20:59,140 --> 00:21:02,639 Speaker 2: Follow our producers, Carmen Rodriguez at Carmen Armand, Dash O'Bennett 439 00:21:02,740 --> 00:21:05,870 Speaker 2: at Dashbot, Kale Brooks at Kale Brooks, and Kevin Lozano 440 00:21:05,990 --> 00:21:07,130 Speaker 2: at Kevin Lloyd Lozano. 441 00:21:07,450 --> 00:21:09,510 Speaker 4: And for more OddLots content, you should check out our 442 00:21:09,550 --> 00:21:13,170 Speaker 4: daily newsletter. You can find that at Bloomberg.com forward slash OddLots. 443 00:21:13,270 --> 00:21:15,530 Speaker 2: And you can chat about all of these topics, including 444 00:21:15,590 --> 00:21:19,410 Speaker 2: real estate, in our Discord, discord.gg. 445 00:21:19,750 --> 00:21:22,230 Speaker 4: And if you enjoyed this conversation, then please leave a 446 00:21:22,260 --> 00:21:25,150 Speaker 4: comment or like the video, or better yet, subscribe. 447 00:21:25,470 --> 00:21:26,600 Speaker 3: Thanks for watching and listening. 448 00:21:43,380 --> 00:21:43,830 Speaker 7: Thank you.