1 00:00:03,600 --> 00:00:07,120 Speaker 1: This is Bloomberg Surveillance. I countess is in the first 2 00:00:07,200 --> 00:00:10,119 Speaker 1: year of a global expansion with the recession started in 3 00:00:10,200 --> 00:00:13,480 Speaker 1: fourteen in China with a corruption campaign. Policy response was 4 00:00:13,600 --> 00:00:16,720 Speaker 1: last year negative interest rates into valuations, and the growth 5 00:00:16,800 --> 00:00:19,200 Speaker 1: is today as seen in otto and housing, both in 6 00:00:19,239 --> 00:00:21,640 Speaker 1: the United States and in China. Russia has its own 7 00:00:21,680 --> 00:00:24,080 Speaker 1: problem and they're very severe, but I don't think this 8 00:00:24,160 --> 00:00:26,119 Speaker 1: is going to be one of the Panama papers. My 9 00:00:26,239 --> 00:00:29,240 Speaker 1: concern is if you don't have enough nominal growth in 10 00:00:29,280 --> 00:00:31,440 Speaker 1: the world, you're not going to get the returns you 11 00:00:31,480 --> 00:00:35,640 Speaker 1: need to meet your liability stream. Bloomberg Surveillance your link 12 00:00:35,720 --> 00:00:40,120 Speaker 1: to the world of economics, finance, and investment on Bloomberg Radio. 13 00:00:40,200 --> 00:00:43,000 Speaker 1: Good morning everyone, Michael McKee and Tom Kim Bloomberg Surveillance. 14 00:00:43,040 --> 00:00:45,599 Speaker 1: We talked residential real estate earlier. In this hour, one 15 00:00:45,600 --> 00:00:48,519 Speaker 1: of our most popular guests, John Levy, will join us 16 00:00:48,560 --> 00:00:50,960 Speaker 1: and we'll look at commercial real estate and he has 17 00:00:51,080 --> 00:00:55,160 Speaker 1: a really interesting message on commercial real estate. Will do 18 00:00:55,240 --> 00:00:58,080 Speaker 1: that here in a few moments. Four X Front Center 19 00:00:58,160 --> 00:01:02,920 Speaker 1: today with massively I use that word carefully, massively strong 20 00:01:03,000 --> 00:01:05,880 Speaker 1: yend not what it was at five thirty eight this morning, 21 00:01:06,160 --> 00:01:10,240 Speaker 1: but still a whow statistic on dollar uh yen right now. 22 00:01:10,240 --> 00:01:13,200 Speaker 1: The forex brief watched by Interactive Brokers, winner of f 23 00:01:13,400 --> 00:01:16,039 Speaker 1: X reached two thousand and fifteen. Award for the best 24 00:01:16,040 --> 00:01:20,080 Speaker 1: retail forex trading platform visit ib at, I b k 25 00:01:20,640 --> 00:01:24,720 Speaker 1: R dot com slash four x one away thirty three 26 00:01:24,760 --> 00:01:26,880 Speaker 1: on end. We got down to a one or two 27 00:01:26,920 --> 00:01:30,880 Speaker 1: stronger stronger, stronger yen a little bit more going on 28 00:01:30,959 --> 00:01:33,200 Speaker 1: four x a euro. We had a one fourteen print 29 00:01:33,560 --> 00:01:36,800 Speaker 1: right now one seventy four. Michael McKee within this four 30 00:01:37,000 --> 00:01:40,480 Speaker 1: x report, what is the likelihood that the government will 31 00:01:40,640 --> 00:01:44,200 Speaker 1: intervene on the Japanese en? People are debating that in 32 00:01:44,240 --> 00:01:48,200 Speaker 1: the currency markets because several of the officials at the 33 00:01:48,280 --> 00:01:51,680 Speaker 1: Ministry of Finance have suggested, quote unquote, we're watching levels 34 00:01:51,680 --> 00:01:54,120 Speaker 1: of the end and we'll take appropriate measures, which is 35 00:01:54,160 --> 00:01:57,240 Speaker 1: their code in the past four we will intervene. But 36 00:01:57,720 --> 00:01:59,520 Speaker 1: the Prime Minister came out yesterday and said we will 37 00:01:59,520 --> 00:02:02,400 Speaker 1: not enter. Mean So does that mean? What did I 38 00:02:02,480 --> 00:02:05,320 Speaker 1: tell you? We are? You know, we have our failures 39 00:02:05,360 --> 00:02:09,000 Speaker 1: here and and I think Michael agree with me that 40 00:02:09,120 --> 00:02:12,120 Speaker 1: we don't do enough on commercial real estate. It's just 41 00:02:12,639 --> 00:02:15,400 Speaker 1: I was in Lake City. You know over the weekend 42 00:02:15,480 --> 00:02:18,679 Speaker 1: we talked about that, UM and that was somebody said 43 00:02:18,720 --> 00:02:20,839 Speaker 1: that to me. You know, we want to hear more 44 00:02:20,880 --> 00:02:23,720 Speaker 1: about commercial reals. Well, John Levy hops us with this, 45 00:02:23,840 --> 00:02:27,480 Speaker 1: John B. Levy and Company, UM, with terrific perspective. John, 46 00:02:27,520 --> 00:02:31,880 Speaker 1: I have never seen such a cautious note from you. 47 00:02:32,240 --> 00:02:36,800 Speaker 1: We are building multi family like we haven't in forty 48 00:02:36,840 --> 00:02:40,080 Speaker 1: two years. Yeah, that's right. Is that true? Yeah, that's right. 49 00:02:40,080 --> 00:02:43,000 Speaker 1: Good morning time, Good morning Mike. Right now, it's kind 50 00:02:43,000 --> 00:02:46,920 Speaker 1: of interesting. We have some five and fifty thousand units 51 00:02:46,919 --> 00:02:51,560 Speaker 1: across the country under construction, the most since nine four. 52 00:02:52,320 --> 00:02:54,560 Speaker 1: So this is and just to kind of put it 53 00:02:54,600 --> 00:02:58,760 Speaker 1: in right in your backyard, Uh, some fifty thousand units 54 00:02:58,760 --> 00:03:06,440 Speaker 1: in New York, some forty thousand between Houston and Dallas. UM. So, 55 00:03:06,720 --> 00:03:09,240 Speaker 1: multi family has been the darling of the business for 56 00:03:09,280 --> 00:03:11,720 Speaker 1: the last five or six years. And when you have 57 00:03:11,840 --> 00:03:15,000 Speaker 1: something that's on a run like that, people really run 58 00:03:15,200 --> 00:03:17,239 Speaker 1: to build more of it. And they are building more. 59 00:03:17,560 --> 00:03:21,120 Speaker 1: Sixteen thousand in the DC suburbs. Uh, these are a 60 00:03:21,120 --> 00:03:25,280 Speaker 1: lot of units. So yeah, we're we're we've been priced 61 00:03:25,360 --> 00:03:28,960 Speaker 1: to perfection. We were talking with Jonathan Miller a short 62 00:03:29,000 --> 00:03:31,720 Speaker 1: time ago and he shorted that one of the big 63 00:03:32,919 --> 00:03:36,480 Speaker 1: residential projects for people who use them as safe deposit 64 00:03:36,560 --> 00:03:38,600 Speaker 1: boxes in New York has been put on hold for 65 00:03:38,680 --> 00:03:44,240 Speaker 1: a year. Are we approaching uh saturation point around the country? Well, 66 00:03:44,280 --> 00:03:48,520 Speaker 1: I think where where we are is, uh, Mike, I 67 00:03:48,520 --> 00:03:50,800 Speaker 1: don't know whether we're taking a breather, whether we've hit 68 00:03:50,880 --> 00:03:54,760 Speaker 1: the pause button, whether it's time out, but it's very definite. 69 00:03:54,880 --> 00:03:58,560 Speaker 1: You can see that we have really really flattened, for example, 70 00:03:59,120 --> 00:04:02,839 Speaker 1: apartment value as we're up you know, last year, last 71 00:04:02,880 --> 00:04:06,800 Speaker 1: couple of months, or up two. And we're actually looking 72 00:04:06,800 --> 00:04:10,920 Speaker 1: in some areas where we think rents are starting to soften. Miami, Uh, 73 00:04:11,080 --> 00:04:14,640 Speaker 1: no surprise there. They've added fourteen thousand units. Uh. The 74 00:04:14,720 --> 00:04:18,640 Speaker 1: d C Starbs, they've added sixteen thousand units. My guess 75 00:04:18,720 --> 00:04:22,320 Speaker 1: is in your town, Um, you've always had such a 76 00:04:22,320 --> 00:04:26,719 Speaker 1: tight market that maybe the market gets a little looser, 77 00:04:26,760 --> 00:04:30,520 Speaker 1: but loose is really an overstatement. But it's going to 78 00:04:30,600 --> 00:04:34,599 Speaker 1: be much harder to finance uh multi family or anything 79 00:04:34,640 --> 00:04:39,600 Speaker 1: for that matter, because um, the biggest provider of capital 80 00:04:39,640 --> 00:04:43,679 Speaker 1: to commercial real estates are the commercial banks, and they're 81 00:04:43,760 --> 00:04:47,479 Speaker 1: now coming in the cross airs of the federal regulators. 82 00:04:47,520 --> 00:04:50,480 Speaker 1: So I do think we're at an inflection point. Um, 83 00:04:50,600 --> 00:04:53,440 Speaker 1: We've had five or six years of really good growth 84 00:04:53,839 --> 00:04:57,240 Speaker 1: and it is time for a pause. We are seeing 85 00:04:57,440 --> 00:05:00,920 Speaker 1: um signs of housing in the Housing Star. It's multifamily 86 00:05:01,120 --> 00:05:04,279 Speaker 1: as a percentage of the total of starting fall in 87 00:05:04,320 --> 00:05:06,760 Speaker 1: the last couple of months. And I'm just pointing out 88 00:05:06,760 --> 00:05:11,039 Speaker 1: the time the Dodge Momentum Index UH just a few 89 00:05:11,040 --> 00:05:15,039 Speaker 1: moments ago UH in its lower down seven percent in March. 90 00:05:15,120 --> 00:05:18,240 Speaker 1: So it's not just multifamily housing, but it looks like 91 00:05:18,520 --> 00:05:23,040 Speaker 1: commercial real estate construction in general. Yeah, I think that's right. 92 00:05:23,200 --> 00:05:26,680 Speaker 1: And again I kind of go back and look at 93 00:05:27,200 --> 00:05:29,760 Speaker 1: at the federal regulators memo, and that's the memo from 94 00:05:29,760 --> 00:05:31,520 Speaker 1: the joint o C C, F D I C and 95 00:05:31,560 --> 00:05:34,200 Speaker 1: said and what they basically said at the end of 96 00:05:34,240 --> 00:05:37,800 Speaker 1: the year was we're going to quote reinforce prudent risk 97 00:05:38,000 --> 00:05:41,240 Speaker 1: management practices. Now, there's not a single banker in the 98 00:05:41,240 --> 00:05:45,280 Speaker 1: country that wants to hear that, but the regulators have said, 99 00:05:45,520 --> 00:05:49,280 Speaker 1: you're in the crosshairs. We've noted an easing of lending standards, 100 00:05:49,520 --> 00:05:54,040 Speaker 1: and by the way, we provide of commercial real estate capital. 101 00:05:54,240 --> 00:05:56,479 Speaker 1: So it's going to be harder to get alone. Is 102 00:05:56,520 --> 00:05:59,920 Speaker 1: the difference now, and I'm looking at developer in Atlanta 103 00:06:00,000 --> 00:06:04,000 Speaker 1: putting up forty stories of something this time around quote 104 00:06:04,040 --> 00:06:08,240 Speaker 1: unquote commercial real estate is really apartment real estate. That 105 00:06:08,279 --> 00:06:14,719 Speaker 1: they're not building acres of office square footage. Is that true? Uh? Tom? 106 00:06:14,720 --> 00:06:17,480 Speaker 1: I think that we've we've certainly had more activity and 107 00:06:17,560 --> 00:06:21,520 Speaker 1: multi family than in any other sector. And the reason 108 00:06:21,680 --> 00:06:25,400 Speaker 1: is because uh, we we've we we we went through 109 00:06:25,400 --> 00:06:28,520 Speaker 1: a time period where we didn't build any in you know, oh, eight, 110 00:06:28,640 --> 00:06:31,760 Speaker 1: o nine and ten. We've got the young millennials who 111 00:06:31,760 --> 00:06:34,080 Speaker 1: want a place to live. They still don't want to 112 00:06:34,080 --> 00:06:37,120 Speaker 1: buy houses, so there's been more action there. The other 113 00:06:37,200 --> 00:06:40,719 Speaker 1: thing that's kind of interesting is that we're continuing to 114 00:06:40,800 --> 00:06:45,719 Speaker 1: have a real push from the g scs Freddie Mackins, 115 00:06:45,720 --> 00:06:50,880 Speaker 1: Fannie May into only uh multi family. Let me just 116 00:06:50,920 --> 00:06:52,880 Speaker 1: put a number on that, which is kind of interesting. 117 00:06:53,320 --> 00:06:56,760 Speaker 1: Um So, if you look at all the insurers in 118 00:06:56,800 --> 00:06:59,680 Speaker 1: the country and and all the money they put into 119 00:07:00,160 --> 00:07:05,160 Speaker 1: all of the various property types apartments, multi, uh, industrial, 120 00:07:05,440 --> 00:07:07,920 Speaker 1: it doesn't really matter. You take that number and then 121 00:07:07,960 --> 00:07:10,960 Speaker 1: you look and compare that to the money that's going 122 00:07:11,040 --> 00:07:14,640 Speaker 1: into multi family from Freddie and Fannie. Freddie and Fannie 123 00:07:14,640 --> 00:07:18,680 Speaker 1: are putting fifty percent more money the multi family than 124 00:07:18,800 --> 00:07:23,320 Speaker 1: the entire insurance industry is putting into all property types. 125 00:07:24,040 --> 00:07:28,240 Speaker 1: So if you say, is it going up? Uh, that's that. 126 00:07:28,600 --> 00:07:33,000 Speaker 1: The summary here from John Levy is the basic idea 127 00:07:33,080 --> 00:07:36,480 Speaker 1: that the government is still in the commercial real estate business. Oh, well, 128 00:07:36,480 --> 00:07:39,320 Speaker 1: they're in one sector of the commercial real estate. They're 129 00:07:39,360 --> 00:07:42,920 Speaker 1: in multi family. But maybe that's the boom sector. Absolutely, 130 00:07:42,960 --> 00:07:44,600 Speaker 1: and we see it in New York, there's no question 131 00:07:44,640 --> 00:07:47,960 Speaker 1: about that. What's the shift down between I'm speaking as 132 00:07:47,960 --> 00:07:52,640 Speaker 1: an amateur, between Class A and Class B commercial real estate? 133 00:07:53,080 --> 00:07:55,720 Speaker 1: You know, we had meetings thirty years ago were strip malls? Oh, 134 00:07:55,760 --> 00:07:57,960 Speaker 1: we don't talk about those, they're no good. Is there 135 00:07:58,000 --> 00:08:01,680 Speaker 1: a new Class A the than in the other cycles? 136 00:08:02,560 --> 00:08:05,880 Speaker 1: In and as far as fancy properties, there is a 137 00:08:05,960 --> 00:08:09,600 Speaker 1: new Have we redefined what a fancy property is? There's 138 00:08:09,600 --> 00:08:11,760 Speaker 1: it all the same? No? No, I don't think we've 139 00:08:11,800 --> 00:08:13,960 Speaker 1: redefined it all that much. I mean we've we've had 140 00:08:14,000 --> 00:08:17,720 Speaker 1: quite a bit of gentrification so that office buildings which 141 00:08:17,760 --> 00:08:21,200 Speaker 1: are downtown in major cities have now become either apartments 142 00:08:21,280 --> 00:08:24,360 Speaker 1: or condos, and those are actually pretty fancy, and in 143 00:08:24,400 --> 00:08:26,040 Speaker 1: the old days they would have been Class B or 144 00:08:26,120 --> 00:08:29,120 Speaker 1: class the office buildings. Um. But if you look at 145 00:08:29,120 --> 00:08:32,080 Speaker 1: a Class A office now, it's still a Class A office, 146 00:08:32,360 --> 00:08:35,120 Speaker 1: although there is quite quite a move to people that 147 00:08:35,240 --> 00:08:38,640 Speaker 1: want expose beams and the kind of things that will 148 00:08:38,760 --> 00:08:43,680 Speaker 1: will attract the millennials. Do we have a shortage in 149 00:08:44,320 --> 00:08:48,280 Speaker 1: of office space anywhere now? I don't see that. Um. 150 00:08:48,360 --> 00:08:50,800 Speaker 1: And in fact, if you looked at the pricing data 151 00:08:50,880 --> 00:08:54,760 Speaker 1: that just came out, uh, CBD offices are actually down 152 00:08:54,880 --> 00:08:59,280 Speaker 1: some five percent. Uh, there's still plenty of room in 153 00:08:59,280 --> 00:09:02,559 Speaker 1: in the suburb than most parts now. There are exceptions 154 00:09:02,559 --> 00:09:05,559 Speaker 1: of that. So for example, if you're in Silicon Valley, Uh, 155 00:09:05,600 --> 00:09:09,880 Speaker 1: if you're in Portland's um, um anything that you know, Denver, 156 00:09:10,320 --> 00:09:14,280 Speaker 1: there areas where high technologies is just continuing to drive 157 00:09:14,360 --> 00:09:19,319 Speaker 1: the the you know, the ship. So. Um, we haven't 158 00:09:19,320 --> 00:09:23,520 Speaker 1: built much retail as you know. Um, We've we've certainly 159 00:09:23,520 --> 00:09:27,880 Speaker 1: built some industrial, but not nearly as much retailers you 160 00:09:27,960 --> 00:09:30,400 Speaker 1: might have thought. And I think that's actually starting to 161 00:09:30,440 --> 00:09:33,040 Speaker 1: come back. Interesting one minute, what's the big money doing. 162 00:09:33,080 --> 00:09:35,320 Speaker 1: What are soving wealth funds doing? They're cashing and they've 163 00:09:35,360 --> 00:09:39,080 Speaker 1: got a change oil dynamic. Are they still plowing money 164 00:09:39,120 --> 00:09:41,679 Speaker 1: in the United States of commercial real estate. Yeah, they are. 165 00:09:42,040 --> 00:09:43,800 Speaker 1: They aren't because if you look at most of the 166 00:09:43,880 --> 00:09:48,320 Speaker 1: big funds with you know, the multi UH funds, they've 167 00:09:48,320 --> 00:09:51,360 Speaker 1: actually got a waiting list to get in. So the 168 00:09:51,400 --> 00:09:53,520 Speaker 1: sovereign funds and all those who are foreigners are still 169 00:09:53,520 --> 00:09:56,600 Speaker 1: thinking this is a really good place to invest. Uh, 170 00:09:57,080 --> 00:10:00,440 Speaker 1: you know, despite our thoughts that maybe we aren't taking 171 00:10:00,480 --> 00:10:03,559 Speaker 1: a breather, John, thank you so much. Never no time, 172 00:10:03,600 --> 00:10:06,839 Speaker 1: John Levy, UH with us as we look at commercial 173 00:10:07,200 --> 00:10:10,440 Speaker 1: real estate, John be Levin Company, and they just Mike, 174 00:10:10,440 --> 00:10:14,000 Speaker 1: it's always interesting. The buildings are all around us in 175 00:10:14,000 --> 00:10:17,960 Speaker 1: New York. Maybe that's our problem. John, You don't look 176 00:10:18,720 --> 00:10:21,480 Speaker 1: biggest right here behind us. That he was a monster 177 00:10:21,880 --> 00:10:25,680 Speaker 1: and nobody's in it yet. That's what John Miller was 178 00:10:25,679 --> 00:10:28,040 Speaker 1: talking about. John Miller and John Levy. That's very good. 179 00:10:28,040 --> 00:10:30,959 Speaker 1: A lot of real estate today and surveillance A yeah, 180 00:10:31,040 --> 00:10:33,800 Speaker 1: one O eight thirty six. That is a one point 181 00:10:33,920 --> 00:10:38,920 Speaker 1: four three points strengthening of a Japanese un versus a dollar. 182 00:10:39,040 --> 00:10:42,880 Speaker 1: Amazing how the trade weighted yen looks a little bit 183 00:10:42,920 --> 00:10:47,920 Speaker 1: different from dollar yen this morning futures a negative ten. 184 00:10:51,840 --> 00:10:53,960 Speaker 1: All right, let's check in now with Michael Barr at 185 00:10:54,000 --> 00:10:56,440 Speaker 1: the Latest World in National headline, Mike, Tom, thank you 186 00:10:56,520 --> 00:10:59,320 Speaker 1: very much. Belgian prosecutors are asking for the public's help 187 00:10:59,360 --> 00:11:02,600 Speaker 1: and trying to the so called man in hats suspect 188 00:11:03,040 --> 00:11:07,280 Speaker 1: at the Brussels airports suicide bombings. Belgian federal prosecutor Eric 189 00:11:07,360 --> 00:11:11,600 Speaker 1: Vanderspeite says authorities are asking for anyone who might have 190 00:11:11,760 --> 00:11:14,680 Speaker 1: filmed or photographed the man during the March twenty second 191 00:11:14,720 --> 00:11:17,839 Speaker 1: attacks to help. The photo shows the suspect leaving the 192 00:11:17,880 --> 00:11:21,080 Speaker 1: airport on foot, walking into a nearby town and then 193 00:11:21,200 --> 00:11:24,600 Speaker 1: into Brussels. President Obama will make his case today on 194 00:11:24,720 --> 00:11:28,040 Speaker 1: why Senate Republicans should move forward on the domination of 195 00:11:28,160 --> 00:11:31,280 Speaker 1: Judge Merrick Garland for the u. S. Supreme Court. The 196 00:11:31,320 --> 00:11:34,480 Speaker 1: President will speak at the University of Chicago Law School today. 197 00:11:34,960 --> 00:11:37,280 Speaker 1: Round one of the Master's golf Tournament begins today, and 198 00:11:37,280 --> 00:11:40,520 Speaker 1: you can hear it here live this afternoon on Bloomberg Radio. 199 00:11:40,720 --> 00:11:43,320 Speaker 1: Global News twenty four hours a day, powered by our 200 00:11:43,480 --> 00:11:46,280 Speaker 1: twenty four hundred journalists and more than a hundred fifty 201 00:11:46,280 --> 00:11:49,480 Speaker 1: news bureaus from around the world. Michael Bar, Mike Tom, Michael, 202 00:11:49,520 --> 00:11:53,760 Speaker 1: thanks so much. Futures Down Features three nineteen minutes away 203 00:11:53,800 --> 00:11:57,720 Speaker 1: from a market opening. Again these story today German yeelds 204 00:11:57,800 --> 00:12:06,760 Speaker 1: lower in the yen strong. This is Bloomberg's surveillance Market drivers. 205 00:12:06,800 --> 00:12:08,400 Speaker 1: Brought to you by n y c B asked about 206 00:12:08,400 --> 00:12:11,200 Speaker 1: there by community interests. Checking with free NYCB online and 207 00:12:11,240 --> 00:12:14,719 Speaker 1: mobile banking. Earn more. Get more, visit NYCB family dot 208 00:12:14,800 --> 00:12:20,199 Speaker 1: com