WEBVTT - Markets, Real Estate, And Drones 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.439 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.959 at Bloomberg dot com slash podcast. Well, our next guest 0:00:22.000 --> 0:00:25.240 is I'm gonna call the All Big ten team. Undergraduate 0:00:25.239 --> 0:00:29.160 degree from University of Wisconsin and then an MBA from Indiana, 0:00:29.200 --> 0:00:33.840 Greg Han. He's the chief ce IO of Winthrop Capital Management. Greg, 0:00:33.880 --> 0:00:35.960 we kind of got a FED yesterday that kind of 0:00:36.000 --> 0:00:39.400 threw some I guess some uncertainty into this market. Is 0:00:39.400 --> 0:00:42.559 talking about maybe being a little bit more hawkish. What 0:00:42.640 --> 0:00:44.840 did you take away from yesterday's trading and then today's 0:00:44.880 --> 0:00:47.480 seemingly kind of rebound here on a risk on Look, 0:00:47.720 --> 0:00:50.479 what are your thoughts? Good old days? We're going back 0:00:50.520 --> 0:00:52.880 to the good old days because the Fed, the FED 0:00:53.000 --> 0:00:55.320 needs to get in front of inflation. So I think 0:00:55.320 --> 0:00:57.760 the posturing that we're hearing now is one that UM 0:00:58.120 --> 0:01:01.840 represents UM more of the committee, the committee's views, and 0:01:02.280 --> 0:01:06.039 there's a little bit more hawkish um in reminding investors 0:01:06.040 --> 0:01:07.559 that hey, we we don't have to move in twenty 0:01:07.600 --> 0:01:11.000 five basiness point increments UM. But there's been a reticence, 0:01:11.120 --> 0:01:13.960 especially with the labor challenges that we're going through last year, 0:01:14.000 --> 0:01:16.640 to actually message that two investors. We heard a very 0:01:16.640 --> 0:01:19.119 clear message from the Fed yesterday. We're going to take 0:01:19.160 --> 0:01:22.360 the steps necessary that we have to to uh to 0:01:22.360 --> 0:01:25.679 to move retired, to control inflation. In in Paul, They're 0:01:25.680 --> 0:01:28.040 gonna they're going to implode the economy to do it. 0:01:28.080 --> 0:01:30.480 That's basically what the messages that were. If we have 0:01:30.560 --> 0:01:34.000 to push the economy into a recession, we'll do it. 0:01:34.080 --> 0:01:36.679 That was the message we took away. We were just 0:01:36.720 --> 0:01:40.240 talking with our chief rate strategy, our Jersey, who's um, 0:01:40.440 --> 0:01:42.560 I'm pretty sure we will have a recession, he said. 0:01:42.560 --> 0:01:44.560 The question is just what kind of recession are we 0:01:44.600 --> 0:01:48.680 looking at? In three what's your out what's your outlook? Yeah, yeah, 0:01:48.720 --> 0:01:51.280 we've shifted. You know. It's funny because we plan. We 0:01:51.280 --> 0:01:52.840 we lay these big plans out at the beginning of 0:01:52.840 --> 0:01:55.160 the year, here's our investment themes. And sure enough we 0:01:55.240 --> 0:01:57.720 get to March and Wisconsin is not in the sweet 0:01:57.800 --> 0:01:59.480 sixteen and I got it, so I gotta change that. 0:01:59.560 --> 0:02:01.960 We've got to change our outlook on the economy. Uh, 0:02:01.960 --> 0:02:05.040 it's it's it's it's it's a whole brutal. But that's 0:02:05.040 --> 0:02:07.320 what That's what investing is. You just have to shift, 0:02:07.320 --> 0:02:09.679 you do the next right thing. You can't just stick 0:02:09.720 --> 0:02:11.680 to your plan and say, Okay, I gotta I'm gonna 0:02:11.720 --> 0:02:13.359 just die on the hill on this. We've we've got 0:02:13.360 --> 0:02:16.480 to be flexible at move um and we saw that 0:02:16.520 --> 0:02:19.720 with Amicron last year. Um it we are. We We 0:02:19.840 --> 0:02:22.760 thought that we'd see this resurgence and growth, but the 0:02:22.880 --> 0:02:27.240 variant really put muted any economic growth that we were expecting. 0:02:27.280 --> 0:02:29.520 We thought it would get pushed into this year, but 0:02:29.560 --> 0:02:34.520 the Russian invasion of Ukraine is going to provide serious 0:02:34.560 --> 0:02:37.000 dislocation for Europe. So we're going to see inflation, We're 0:02:37.000 --> 0:02:38.919 gonna see a slowdown in Europe. It's going to impact 0:02:38.919 --> 0:02:42.240 the United States. The real issue that we're trying to 0:02:42.320 --> 0:02:46.079 navigate now is what we've we've dealt with globalization for 0:02:46.200 --> 0:02:49.839 over three decades. We're seeing we think we're moving back 0:02:49.840 --> 0:02:52.520 to the period where we have trading block block countries, 0:02:52.560 --> 0:02:55.160 where you've got trading arrangements between block countries and the 0:02:55.280 --> 0:02:58.720 w t O is almost neutered if we if major 0:02:58.760 --> 0:03:04.440 countries have establish UM privileged trading relationships, so that that 0:03:04.520 --> 0:03:06.799 may be one of the consequences of the last four 0:03:06.880 --> 0:03:10.600 years of trade issues with China and now with with 0:03:10.639 --> 0:03:14.400 what we're doing with russ all right, So with that backdrop, Greg, 0:03:14.520 --> 0:03:17.639 what's an investor to do when this rising interest rate 0:03:17.800 --> 0:03:21.760 and inflation environment? Where do you go? Hold on? So 0:03:21.919 --> 0:03:23.680 this is this is this is because you have to 0:03:23.720 --> 0:03:26.280 just be patient and hold on. We've had We've got 0:03:26.280 --> 0:03:28.320 to remind it. Look, we've had three great years in 0:03:28.320 --> 0:03:32.080 the sp average returns an SP of over the last 0:03:32.080 --> 0:03:35.320 three years. We're giving some of it back cashes and 0:03:35.680 --> 0:03:38.440 an asset class. So we actually are allocated to cash 0:03:38.520 --> 0:03:41.720 just to just to be transitional. UM. These are near 0:03:41.840 --> 0:03:44.920 term issues. Yes, cash is not keeping up with inflation. 0:03:45.040 --> 0:03:47.440 We get that, we know that, but it's right now, 0:03:47.480 --> 0:03:50.120 it's not meant to it's it's there to preserve capital. 0:03:50.360 --> 0:03:52.000 At the end of the day, this is a stock 0:03:52.040 --> 0:03:54.680 pickers market, so we want to sure that we're in 0:03:54.680 --> 0:03:58.280 good companies that have good revenue drivers. And UM fixed 0:03:58.320 --> 0:04:01.520 income is getting a lot more interesting with two and 0:04:01.640 --> 0:04:05.880 you know twenty on the tenure that that starts to 0:04:05.880 --> 0:04:08.680 make a lot of sense. Now, um, whether they actually 0:04:08.720 --> 0:04:14.560 push whether the FET actually does push it higher. Yeah, 0:04:14.600 --> 0:04:17.679 I mean, what do you think about that? That? Uh? 0:04:17.800 --> 0:04:20.440 Right now we're looking at two thirty seven fifty two 0:04:20.720 --> 0:04:23.480 if you can believe it, just because it continues to soar, 0:04:23.600 --> 0:04:27.839 and that's true really across the curve. How high do 0:04:27.920 --> 0:04:31.800 we get on the tenure? So we I mean we 0:04:31.920 --> 0:04:35.880 we uh, we thought two would be a buffer just 0:04:35.880 --> 0:04:39.560 just to get us to this point. I we don't 0:04:39.600 --> 0:04:42.159 see it going over three percent. The short end is 0:04:42.160 --> 0:04:44.120 going to go higher. But I think that the posturing 0:04:44.400 --> 0:04:47.159 the economy will break. And then if if I don't 0:04:47.160 --> 0:04:50.920 think the Fed's really going to risk that, um there 0:04:50.960 --> 0:04:53.440 to really to We think the mistakes that the FED 0:04:53.520 --> 0:04:55.159 is going to do is they'll stop it doing just 0:04:55.279 --> 0:04:57.600 the next right thing, which was the pattern in the 0:04:57.680 --> 0:05:02.000 nineteen seventies with the Federal Reserve really postponed really Curtailian inflation. 0:05:02.440 --> 0:05:04.600 It was only going far enough that it had to 0:05:04.600 --> 0:05:08.320 to get control for that moment and it just kept 0:05:08.320 --> 0:05:10.320 building up in the system. We think the same thing 0:05:10.360 --> 0:05:12.640 is going to happen this time. Is the fed's not 0:05:12.680 --> 0:05:16.720 going to do enough because we will it will be 0:05:16.720 --> 0:05:19.440 politically unpopular. And who buys the tenure here? When you 0:05:19.480 --> 0:05:24.719 get more for buying threes, fives and sevens. You know 0:05:26.120 --> 0:05:28.440 who says I want to seven and at ten when 0:05:28.480 --> 0:05:32.080 you can get two four at seven. Doesn't make any sense? Well, 0:05:32.760 --> 0:05:34.960 the sad, the sad answer to that is that a 0:05:35.000 --> 0:05:37.800 lot of four oh one case and index funds are 0:05:37.920 --> 0:05:41.560 are our peg to the to the aggregate index, which 0:05:41.839 --> 0:05:43.960 is required to buy the tenure. So I knew before 0:05:44.000 --> 0:05:46.520 I asked the question, but I am sorry, no, no, 0:05:46.839 --> 0:05:50.520 I get it. Yeah, it just seems um if you 0:05:50.600 --> 0:05:53.760 break it down to the most elementary terms, it doesn't 0:05:53.800 --> 0:05:56.000 make a lot of sense. But yeah, all right, Greg, 0:05:56.440 --> 0:05:58.719 we appreciate you coming on here, Greg han Cee, I 0:05:58.839 --> 0:06:01.880 O Winthrop cap All Management giving us his thoughts on 0:06:01.920 --> 0:06:04.880 the market. And again, seems like a consensus is kind 0:06:04.960 --> 0:06:10.240 of building here for some type of recessionary environment. That's 0:06:10.279 --> 0:06:12.880 kind of new, I mean in Atlanta, Wilson, certainly since 0:06:13.279 --> 0:06:17.320 Jerome Powell went out with Constant Hunter yesterday and said, 0:06:17.360 --> 0:06:19.320 you know, the buck stops here. By the way, we 0:06:19.320 --> 0:06:22.279 should wish Gregg and Wisconsin best of luck for next year. 0:06:22.640 --> 0:06:26.359 We should yeah, okay, there's a basketball tournament every year. Okay, good, alright, 0:06:26.400 --> 0:06:33.120 the duke invitation when I call it. You know, I 0:06:33.160 --> 0:06:36.720 got my uh my last car that I had to 0:06:36.800 --> 0:06:38.599 sell because I was moving back here and you can't 0:06:39.120 --> 0:06:43.400 um import German cars from into the US. I made 0:06:43.600 --> 0:06:46.320 twenty five percent. I drove it for two years, I 0:06:46.320 --> 0:06:50.200 put thirty thousand miles on it, and I made profit. 0:06:50.560 --> 0:06:52.680 Nice when I sold it. He's good for you. It's 0:06:52.680 --> 0:06:55.080 the only time I've ever made money on a vehicle. 0:06:55.440 --> 0:06:57.400 Car trader. All right, let's see you can put some 0:06:57.400 --> 0:06:59.160 money in the stock market today. You do pretty well. 0:06:59.160 --> 0:07:02.640 The SMPS up one percent and as DAGs up. Robert Teeter, 0:07:02.880 --> 0:07:05.320 head of Investment Policy and Strategy Group of Silver Cress 0:07:05.320 --> 0:07:08.200 Asset Management, joins us. Robert, I'm not sure if I 0:07:08.200 --> 0:07:11.120 should go into the used car business or stick with 0:07:11.160 --> 0:07:14.280 my stock portfolio. What do you tell on your clients, Well, 0:07:14.320 --> 0:07:16.960 both have been pretty compelling over the over the past 0:07:17.080 --> 0:07:19.840 year or so. That's that on the on the grain 0:07:19.880 --> 0:07:22.680 spreader and the US autos are pretty interesting. But I 0:07:22.720 --> 0:07:25.000 do think some of the youth thouto sales are slowing 0:07:25.040 --> 0:07:27.440 down a little bit, so I'd say stick with stocks. 0:07:27.440 --> 0:07:29.720 This has been a pretty challenging environment. But we do 0:07:29.800 --> 0:07:32.680 think there's a strong undercurrent of earnings growth that's likely 0:07:32.720 --> 0:07:34.560 to lead the way towards gains over the next year 0:07:34.640 --> 0:07:38.120 or two. But is that I mean, with double digit 0:07:38.200 --> 0:07:43.200 inflation surely on the way um and a FED that 0:07:43.400 --> 0:07:48.200 is now ready to hike fifty basis points at multiple meetings, 0:07:48.840 --> 0:07:52.440 are you not concerned that this economic growth is going 0:07:52.480 --> 0:07:56.160 to slow to a halt. Well, I think that's that's 0:07:56.160 --> 0:07:58.559 been part of the challenge that markets have been working 0:07:58.560 --> 0:08:00.880 through here with this choppiness of late, which has been 0:08:00.920 --> 0:08:04.120 that there is a deceleration in growth. But I'm not 0:08:04.200 --> 0:08:06.320 in the camp of of recession. I do think there's 0:08:06.360 --> 0:08:09.800 strong underlying growth to come, partly driven by COVID recovery 0:08:09.800 --> 0:08:12.680 and jobs recovery, and so I do think that will continue. 0:08:12.760 --> 0:08:14.280 And while you will get a bit of the the 0:08:14.400 --> 0:08:17.520 energy cost tax on consumers that might slow the top 0:08:17.560 --> 0:08:20.120 line rate of growth a little bit, there is still 0:08:20.200 --> 0:08:23.600 strong earnings growth and companies have been navigating this economy 0:08:23.720 --> 0:08:25.520 very well to deliver on those earnings in the in 0:08:25.560 --> 0:08:27.840 the face of a lot of challenges in the past years. 0:08:27.880 --> 0:08:31.160 My concern is just this, Robert, that we have a 0:08:31.200 --> 0:08:34.520 federal reserve um. Now, I don't want to use the 0:08:34.640 --> 0:08:37.280 term hell bent, but I can't think of a less 0:08:37.280 --> 0:08:40.760 aggressive than would go for that one. Hell bent on 0:08:41.520 --> 0:08:44.640 slowing demand at the same time, we're about to see 0:08:44.920 --> 0:08:50.280 a bounce back in production and then inventories. Right, Yeah, 0:08:50.280 --> 0:08:52.360 I do think that's right. I think that some of 0:08:52.360 --> 0:08:55.480 the comments by pal I think have been incorporated or 0:08:55.600 --> 0:08:58.640 or evaluated in a in a fairly optimistic way, and 0:08:58.640 --> 0:09:00.480 that's what we're seeing in terms of the the green 0:09:00.520 --> 0:09:03.600 on the screen today because he has become and communicated 0:09:03.640 --> 0:09:06.959 and appropriately serious message against inflation. And so I think 0:09:07.000 --> 0:09:09.480 that that burst of activity that we had from from 0:09:09.559 --> 0:09:12.319 post COVID has led to a lot of the inflation. 0:09:12.559 --> 0:09:14.960 I think he's committed to fighting that now. But I 0:09:15.000 --> 0:09:17.120 do think that part of the outcome of him being 0:09:17.160 --> 0:09:20.319 a bit stronger is that you won't see inflation expectations 0:09:20.360 --> 0:09:22.960 in the outer years continue to rise, and that I 0:09:22.960 --> 0:09:26.559 think will be positive for investors and for valuations. So, Robert, 0:09:26.600 --> 0:09:30.319 you mentioned profitability earnings a couple of times. How concerned 0:09:30.400 --> 0:09:36.400 argue about inflation pressuring profit margins in corporate America. Yeah, 0:09:36.480 --> 0:09:38.920 I do think that's the that's the really important question, 0:09:38.920 --> 0:09:41.320 and I think in some areas it will pressure a bit. Um. 0:09:41.360 --> 0:09:43.760 We've been of the mind that this market has been 0:09:43.760 --> 0:09:46.319 one where you need to be very highly selective. Uh. 0:09:46.360 --> 0:09:48.880 It lends itself very well, we think to stock selection 0:09:48.920 --> 0:09:52.320 because different companies are are having different degrees of success 0:09:52.320 --> 0:09:55.480 in managing through those supply chain problems and labor cost issues. 0:09:55.800 --> 0:09:57.880 By and large, when we've looked at the Russell one thousand, 0:09:57.920 --> 0:10:01.719 overall margins have been very strong, improving somewhat, but it's 0:10:01.760 --> 0:10:04.320 not a uniform picture beneath the surface, and so we 0:10:04.360 --> 0:10:07.320 do think it's important to focus your opportunities on where 0:10:07.320 --> 0:10:11.199 companies are managing to the problems and delivering on earnings. Yeah. 0:10:11.240 --> 0:10:13.920 And like we've been seeing today, if they deal with 0:10:13.960 --> 0:10:17.679 the supply chain issues, well they are rewarded. Um. Who 0:10:17.760 --> 0:10:21.680 do you think is best positioned? Yeah, Well, we think 0:10:21.720 --> 0:10:25.320 that the technology sector, which is seen consistently strong earnings 0:10:25.320 --> 0:10:27.200 and actually seen estimates go up a bit at the 0:10:27.200 --> 0:10:29.720 beginning of this year. UM, is one area. I do 0:10:29.760 --> 0:10:32.199 think there are some segments in consumer, even though consumer 0:10:32.200 --> 0:10:34.760 earning estimates have come down a bit, there's still pretty 0:10:34.800 --> 0:10:37.320 strong consumer demand in some areas, and then I think 0:10:37.360 --> 0:10:39.320 a few of the cyclical areas might still have a 0:10:39.320 --> 0:10:41.720 few innings left of growth. So we think it's important 0:10:41.720 --> 0:10:44.360 to be diversified here and again really focus on which 0:10:44.360 --> 0:10:46.520 companies are getting the job done at the micro level. 0:10:46.559 --> 0:10:48.440 And I think that's really the theme here. Macro has 0:10:48.440 --> 0:10:50.439 been dominating, and we think it's going to shift back 0:10:50.440 --> 0:10:54.640 to micro micro. UM. When I think growth, I guess 0:10:54.640 --> 0:10:57.400 I've just been conditioned over the last ten or twenty 0:10:57.480 --> 0:11:01.640 years to think tech but cantect reform in a rising 0:11:01.640 --> 0:11:04.480 interest rate environment? I think it can. I think the 0:11:04.520 --> 0:11:07.280 classic wisdom, like you say, is rates higher is not 0:11:07.320 --> 0:11:10.360 necessarily good for multiples, and I think that's true. Um. However, 0:11:10.400 --> 0:11:12.400 we have to consider the starting point as well, so 0:11:12.559 --> 0:11:15.240 rates are still pretty low. Pre COVID we were around 0:11:15.280 --> 0:11:17.960 two percent. Two thousand eighteen, we were around three percent. 0:11:18.480 --> 0:11:20.120 We're in the mid twos now. We think that could 0:11:20.160 --> 0:11:22.480 drift a little bit higher. UM. I think multiples can 0:11:22.520 --> 0:11:24.840 handle that as long as we have this runway for 0:11:24.920 --> 0:11:27.280 growth in front of us. In terms of outlook for earnings, 0:11:27.280 --> 0:11:30.000 and again, earnings estimates have been going up in some 0:11:30.000 --> 0:11:31.920 some sectors and so we think that will help support 0:11:31.960 --> 0:11:36.880 multiple So also alright, so um, in terms of fixed income, 0:11:37.080 --> 0:11:39.920 what do you say just stay away? Well, we stay 0:11:39.960 --> 0:11:42.320 stay conservative. So not a lot of duration, so not 0:11:42.400 --> 0:11:44.760 a lot of interest rate risk. Be very careful on 0:11:44.760 --> 0:11:47.520 the credit selection side. It's not an environment to be 0:11:47.600 --> 0:11:49.760 scraping for a few extra basis points here and there. 0:11:49.920 --> 0:11:52.120 Use fixed income for what it's meant to be safe 0:11:52.160 --> 0:11:53.959 and secure a part of your portfolio that if you 0:11:54.000 --> 0:11:56.480 hold it to maturity, it delivers at par and helps 0:11:56.480 --> 0:11:59.400 protect you against some of the chop inequities. All Right, Robert, 0:11:59.400 --> 0:12:01.439 thank you so much for joining us. I really appreciate 0:12:01.480 --> 0:12:05.080 your perspective there, Robert Teeter, he's head of Investment Policy 0:12:05.080 --> 0:12:11.839 and Strategy Group at Silver Crest Asset Management. Kind of 0:12:12.160 --> 0:12:14.840 up and down Lexington Avenue here in midtown, a lot 0:12:14.880 --> 0:12:18.360 of empty stores, big stores, big box stores, smaller stores, 0:12:18.400 --> 0:12:20.560 and really gets you thinking about not just in New 0:12:20.640 --> 0:12:23.360 York City, but just kind of across the United States, 0:12:23.400 --> 0:12:27.280 how this commercial and industrial real estate markets gonna play 0:12:27.280 --> 0:12:29.440 out here. Fortunately, have an expert here you can walk 0:12:29.520 --> 0:12:32.280 us through with John Macy's, the CEO of I r 0:12:32.400 --> 0:12:35.040 G Industrial. John love to get your just your thirty 0:12:35.080 --> 0:12:38.840 thousand foot overview of how the last two years have 0:12:39.360 --> 0:12:44.800 impacted the commercial industrial real estate space here in the US. Sure, 0:12:45.120 --> 0:12:48.040 the last two years on the industrial space has been 0:12:48.080 --> 0:12:53.440 pretty spectacular. Rates have risen virtually every market in the country. 0:12:53.679 --> 0:12:57.240 Some of the major markets are up thirty even thirty 0:12:58.480 --> 0:13:01.800 most even through the smaller more minor markets, and industrial 0:13:01.840 --> 0:13:07.559 are up about So although we're seeing inflation affecting us, 0:13:07.640 --> 0:13:11.800 it's primarily in being able to rehab buildings that we 0:13:11.920 --> 0:13:16.040 bought or new construction where it's more expensive to build 0:13:16.360 --> 0:13:20.720 as well, it's taking longer. Particularly one issue we face 0:13:20.800 --> 0:13:23.080 is we get tenants that are ready to move into 0:13:23.120 --> 0:13:26.480 our buildings, but we can't deliver the building because some 0:13:26.559 --> 0:13:30.199 of our delays due to supply constraints are six months 0:13:30.200 --> 0:13:34.120 even nine months and everyone standing on the sidelines waiting 0:13:34.120 --> 0:13:36.440 for the materials to come in so we can fix 0:13:36.480 --> 0:13:41.480 them up. Otherwise, rental rates are up significantly, and there 0:13:41.559 --> 0:13:46.280 there still is a large difference between office space and 0:13:46.360 --> 0:13:49.600 industrial space. I mean, we could talk about office space 0:13:49.760 --> 0:13:54.559 for you know, extensively, but we're primarily in the industrial sector. 0:13:54.960 --> 0:13:58.640 So how do you differentiate those two. Yeah, office space 0:13:58.679 --> 0:14:02.520 are primarily for people who are service providers or other 0:14:02.600 --> 0:14:05.520 office people who actually go to an office and have 0:14:05.679 --> 0:14:08.959 office space primarily in either in the major cities or 0:14:09.040 --> 0:14:18.240 suburban office where industrial space is big, large spaces. Trucking, manufacturing, distribution, 0:14:18.600 --> 0:14:22.680 e commerce rates are usually a lot cheaper for industrial 0:14:22.760 --> 0:14:27.080 space than they are for office. There's fewer jobs, um, 0:14:27.160 --> 0:14:30.880 and it's more for storage or for manufacturing. Big difference 0:14:30.920 --> 0:14:33.960 between the two. John, is there industrial I mean, is 0:14:33.960 --> 0:14:38.120 there a geographical impact on your business? Are you seeing 0:14:38.120 --> 0:14:40.600 greater growth and everybody seems like everybody's going down to 0:14:40.680 --> 0:14:42.440 Texas and Florida? Is that what you're seeing demand for 0:14:42.440 --> 0:14:45.800 industrial space? Or is industrial space pretty much across the board? 0:14:47.000 --> 0:14:50.600 I'm going to say industrial spaces across the board. However, 0:14:50.640 --> 0:14:54.560 there are certain markets that are significantly stronger than others. 0:14:54.640 --> 0:14:58.200 And I'd have to say the greater Seattle area, San Francisco, 0:14:58.280 --> 0:15:02.160 Bay area, Lost Angeles, and the Inland Empire and then 0:15:02.160 --> 0:15:05.680 probably central Jersey right outside of New York or the 0:15:06.200 --> 0:15:08.800 Rights industrial And I see all those trucks there are 0:15:08.880 --> 0:15:11.320 millions of them, prime trucks, and these warehouses right along 0:15:11.320 --> 0:15:16.320 the must have a huge amount of pull there. Yeah, 0:15:16.360 --> 0:15:20.360 so it's interesting, John, I mean is this Does you 0:15:20.400 --> 0:15:22.280 know Amazon come to you and say I need a 0:15:22.280 --> 0:15:26.320 warehouse in Central Jersey? Is that how it works? Amazon 0:15:26.400 --> 0:15:28.640 does wanted to the things. They either buy the land 0:15:28.640 --> 0:15:31.320 and build their own or they go find a great 0:15:31.360 --> 0:15:33.840 location and they work a deal with a developer to 0:15:33.920 --> 0:15:37.680 build their their brand new, state of the art warehouse. 0:15:37.960 --> 0:15:40.880 And we've done both. We've sold some land to them 0:15:40.920 --> 0:15:45.960 that they've built on, and we've also um uh at 0:15:46.040 --> 0:15:48.120 least some of our land that we built for them. 0:15:48.160 --> 0:15:51.320 But most of what they want is the best, brand new, 0:15:51.800 --> 0:15:54.760 best location, the best, and they're willing to pay for it. 0:15:55.080 --> 0:15:58.200 But there's a lot of other people out there besides Amazon. 0:15:58.720 --> 0:16:01.880 There's a lot of on shoring. We're manufacturing is coming back, 0:16:02.280 --> 0:16:05.680 so a lot of our properties, particularly in the Midwest 0:16:05.720 --> 0:16:10.840 in Ohio, Indiana, Illinois and Michigan area. I mean, a 0:16:10.840 --> 0:16:14.240 lot of manufacturing going on that's been really really stable 0:16:14.280 --> 0:16:16.920 for us. So I and I wonder if you see, 0:16:18.000 --> 0:16:21.320 you know, in commercial in office space. Um I was 0:16:21.360 --> 0:16:23.240 reading this morning on the Bloomberg that it used to 0:16:23.240 --> 0:16:27.400 be Manhattan had eleven percent of all of the national 0:16:27.480 --> 0:16:30.120 office square footage, which is just massive. If you think 0:16:30.160 --> 0:16:32.440 about it. But that's not going to be the same 0:16:32.480 --> 0:16:35.400 going forward as the concern. You know, as people um 0:16:35.440 --> 0:16:39.600 gravitate more well away from the urban centers for for 0:16:39.720 --> 0:16:43.360 office work into the suburbs. Do you see that kind 0:16:43.360 --> 0:16:48.200 of shift with industrial space as well. No, not really. 0:16:48.240 --> 0:16:50.640 I mean what we are seeing though, is that there's 0:16:50.680 --> 0:16:54.400 a greater demand for the better locations. Before people were 0:16:54.400 --> 0:16:57.680 willing to drive an extra half hour hour outside of 0:16:57.680 --> 0:17:01.760 the major urban area. Uh. Consider during the truck expenses 0:17:01.800 --> 0:17:04.520 of driving the trucks and gas was not a big deal. 0:17:04.840 --> 0:17:07.280 Now it is a bigger deal. Therefore, they're willing to 0:17:07.320 --> 0:17:10.119 pay more money and higher rents in order to be 0:17:10.240 --> 0:17:14.360 closer to the urban inner areas. It's through what's commonly 0:17:14.359 --> 0:17:17.439 referred to his last mile. So, John, interest rates are 0:17:17.440 --> 0:17:20.200 going up, maybe pretty dramatically. How does that impact your business? 0:17:21.160 --> 0:17:24.280 It certainly does. Interest rates going up. I mean, our 0:17:24.440 --> 0:17:28.320 cost to capital is a critical element of what we do. Um, 0:17:28.359 --> 0:17:30.480 we know interest rates are going up. Matter of fact, 0:17:30.520 --> 0:17:33.560 the yield curve is flattened a bit, which is never 0:17:33.640 --> 0:17:36.359 great for the economy. But generally, if you have a 0:17:36.400 --> 0:17:40.960 good quality building, two percent three percent interest rates are 0:17:41.040 --> 0:17:44.000 traditionally very very low rates, we should be able to 0:17:44.040 --> 0:17:47.679 make it through even as as rates increase. But what 0:17:47.800 --> 0:17:52.720 also happens is as interest rates increase, cap rates often increase, 0:17:52.880 --> 0:17:56.000 and when a capitalization rate increases, the value of the 0:17:56.080 --> 0:18:00.800 property declines. So it's it's cyclical. Have been through about 0:18:00.840 --> 0:18:04.520 four or five major cycles. Hopefully we're not having another 0:18:04.560 --> 0:18:07.919 one right now. Interest rates is definitely a factor in 0:18:07.920 --> 0:18:11.439 our business. Now on the other side is inflation goes up, 0:18:12.040 --> 0:18:15.479 um cost the goods goes up, rents go up, so 0:18:15.520 --> 0:18:17.680 you just have to hope that the two balance out 0:18:17.720 --> 0:18:20.359 each other. Right, Hey, John, thanks so much for joining us. 0:18:20.359 --> 0:18:23.320 Really appreciate it. John May, CEO of I r G Industrial. 0:18:28.040 --> 0:18:32.240 I want to get to our next guest, Valerie Iakovenko Uh, 0:18:32.280 --> 0:18:36.719 founder and CEO of Drone you A based in Ukraine. Valerie, 0:18:36.760 --> 0:18:39.359 thank you so much for taking the time UH to 0:18:39.480 --> 0:18:41.960 call in and share some time with us talk to 0:18:42.080 --> 0:18:45.200 us about your company Drone you A, what is it 0:18:45.640 --> 0:18:48.800 and how has your company been impacted by the last 0:18:48.840 --> 0:18:52.639 month with the invasion of Ukraine by Russia. Let's are 0:18:52.680 --> 0:18:55.879 to be with you today. Um and actually is a 0:18:55.960 --> 0:19:00.080 drowning company. Is the technological company, the robotics company that 0:19:00.320 --> 0:19:03.960 was supposed to work only in industrial spheres, using drones 0:19:04.000 --> 0:19:08.800 and robots to help our manufacturing possibilities, to be smarter, 0:19:09.000 --> 0:19:13.080 more efficient, to grow more food on Ukrainian fields, to 0:19:13.840 --> 0:19:18.840 get better yields, to provide more safer work experience for 0:19:18.920 --> 0:19:26.000 any industrial employee. But when the work started, almost everything changed. 0:19:26.600 --> 0:19:30.639 Before it was we were like collaborating with officials with 0:19:30.800 --> 0:19:35.159 Minister of Defense, with different police, UH departments, etcetera. It 0:19:35.280 --> 0:19:38.000 was a part of our business. But right now it's 0:19:38.080 --> 0:19:42.440 multiplied several I think, I think hundreds times since all 0:19:42.560 --> 0:19:45.800 our tension. And this is about not only us, this 0:19:45.920 --> 0:19:49.960 is about every Ukrainian person. So everybody may be clear. 0:19:50.000 --> 0:19:56.080 You make drones that were typically mostly recreational or industrial. 0:19:56.720 --> 0:19:59.240 You were working a little bit with m police, but 0:19:59.359 --> 0:20:03.480 none military, Harry, and now you've been drawn in to 0:20:03.560 --> 0:20:07.840 the fight to try and beef up Ukrainian intelligence. This 0:20:07.960 --> 0:20:12.040 is correct, and this is about all all companies and 0:20:12.359 --> 0:20:16.880 all specialists on Ukrainian market. UH. Since we need intelligence, 0:20:16.920 --> 0:20:20.920 see needs, since we need to find enemy troops, everybody 0:20:21.000 --> 0:20:24.399 is joining forces to help with intel, to file with 0:20:24.680 --> 0:20:28.800 to help with surveillance, finding enemy troops, find an enemy tanks, 0:20:28.920 --> 0:20:33.080 finding there were sons of Suborteurs group all around Ukraine. 0:20:33.200 --> 0:20:36.040 This is not about only frontline in Ukraine or some 0:20:36.160 --> 0:20:39.800 special regions. This is about everywhere. Drones are right now 0:20:39.960 --> 0:20:45.040 as working as a tool uh to provide intelligence to 0:20:45.160 --> 0:20:49.160 our Minister of Defense and to defend our country. So 0:20:50.080 --> 0:20:52.919 Valley give us a sense of the drone force in 0:20:53.119 --> 0:20:57.080 Ukraine right now. Does Ukraine have enough drones or does 0:20:57.119 --> 0:21:01.040 it need more? And where would you get them? First 0:21:01.040 --> 0:21:03.480 of all, you have to understand that there are two 0:21:03.600 --> 0:21:06.280 types of drones that are being used right now in Ukraine. 0:21:06.320 --> 0:21:10.440 The first one is small hobby like looking like drones 0:21:10.520 --> 0:21:13.560 that you can purchase actually in almost every r sistore 0:21:13.720 --> 0:21:17.600 and they are useful. You're useful to provide information for 0:21:17.680 --> 0:21:21.760 the military and defensive military operations in Ukraine. But and 0:21:22.119 --> 0:21:24.639 there are a lot of them, like thousands of drones 0:21:24.680 --> 0:21:28.200 are working right now for the Ministry of Defense purposes 0:21:28.480 --> 0:21:31.520 to provide intelligence. And the second part of drones is 0:21:31.800 --> 0:21:36.880 like military drones that was designed to provide strikes from 0:21:37.000 --> 0:21:39.960 the sky not only ice, but also some kind of 0:21:40.000 --> 0:21:45.160 power to make an action against Russian military troops that 0:21:45.200 --> 0:21:49.679 are invading Russia. Ukrainian peaceful cities. So basically the second 0:21:49.720 --> 0:21:54.480 part is mostly well well known by barracts. The Turkish 0:21:54.520 --> 0:21:58.960 drones that are being supplied to Ukraine, and there are 0:21:59.480 --> 0:22:03.520 a lot of them, but there are not enough to 0:22:03.720 --> 0:22:08.520 cover all necessity of Ukrainian defense. We need more drones, 0:22:08.760 --> 0:22:12.760 all kinds of drones and surveillance and hope be like, yes, 0:22:12.840 --> 0:22:16.400 we need them. We are in lack of termal imagery 0:22:16.440 --> 0:22:21.639 cameras and termal imagery drones to help our defenders and 0:22:22.200 --> 0:22:25.639