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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day, we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. Let's talk about the

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Speaker 1: tech space PCs. People are still out there buying PCs,

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Speaker 1: Apparently they bought a lot during the pandemic, and maybe

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Speaker 1: comps are getting a little tougher here. But let's figure out.

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Speaker 1: We got some news out there that PC shipments are

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Speaker 1: down pretty big. Anna rog Rana, senior tech an also

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Speaker 1: Bloomberg Intelligence, joins us, what's going on in the PC

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Speaker 1: market is just us tough comps. I'm seeing minus twenty,

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Speaker 1: minus thirty even Apple minus forty percent on PC deliveries,

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Speaker 1: even though, as Matt Riley points out, Apple doesn't sell PCs,

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Speaker 1: they sell max. But what's going on in that PC space? No? No,

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Speaker 1: I agree, I mean I think it tough. Comps is

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Speaker 1: one thing, but you know, the street already had MAC

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Speaker 1: revenue going down twenty two. But if the unit shipments

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Speaker 1: is down forty percent. I think those numbers need to

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Speaker 1: come down a little bit more, which to me tells

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Speaker 1: me that the consumer spending is actually worse than what

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Speaker 1: we anticipated a quarter ago, and that should bleed into

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Speaker 1: other product categories as well. So I'm expecting a lot

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Speaker 1: more downward revision of consensus estimates over the next couple

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Speaker 1: of weeks. So you expect down or revision of senses estimates,

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Speaker 1: meaning that you also expect the stock to drop, right.

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Speaker 1: That depends on if you are renting it for a

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Speaker 1: quarter or if you're buying it for the long run.

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Speaker 1: So that's usually, you know, truly depends on who the

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Speaker 1: buyer is. But I don't expect the revenue numbers to

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Speaker 1: come down now that that may mean that whoever is

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Speaker 1: taking those numbers down maybe increasing it the year from now,

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Speaker 1: because it's not as if you know the buyer of

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Speaker 1: that particular MacBook Pro like yourself. You know, if you're

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Speaker 1: not buying it now, you're going to buy it six

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Speaker 1: months from now or twelve months from now. Okay, the

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Speaker 1: fact that I bought it twelve months ago because I

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Speaker 1: had some stimmies and and you know, I had to

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Speaker 1: work from home or had to do school from home.

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Speaker 1: Now I can work in the office, I can go

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Speaker 1: back to school. And plus, why would I spend money

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Speaker 1: on that kind of thing now that I don't have

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Speaker 1: the government sending me checks. Well, if you know the

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Speaker 1: people who the government was sending the checks, we're not

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Speaker 1: buying MacBook pros in my view. So if you are

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Speaker 1: a gamer and you're looking for MacBook Pro with the

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Speaker 1: next M two chip, you know you will spend fifteen

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Speaker 1: hundred dollars or two thousand dollars to buy it. But again,

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Speaker 1: that's a that's a luxury product. That's not something that

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Speaker 1: you know everybody can buy. All right, I just want

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Speaker 1: to get the generic Apple call here. What do you

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Speaker 1: think they gets census calls for this stock? Right here?

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Speaker 1: It's up twenty four percent year to date, still about

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Speaker 1: five percent down on a trailing twelve month basis, So

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Speaker 1: stick at trying to dig itself out of that twenty

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Speaker 1: twenty two hole. What's the when you talk to some

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Speaker 1: smart tech investors out there, what are they saying about Apple?

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Speaker 1: You know, I think if you look at both Apple

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Speaker 1: and Microsoft, they have been a safe stock for the

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Speaker 1: past several weeks. As people are trying to figure out

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Speaker 1: where they go from here. The valuation has gone up

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Speaker 1: for both these companies quite a bit in the last

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Speaker 1: two I would say, several weeks. Now the question is,

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Speaker 1: you know, what happens to the rest of the tech portfolio.

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Speaker 1: If we do see some stabilization in other tech stocks,

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Speaker 1: then you would see some kind of I would say,

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Speaker 1: a sector reallocation from you know, these two safety stocks

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Speaker 1: to some of the other ones. Now, having said that,

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Speaker 1: this is the first time I'm seeing a clear indication

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Speaker 1: that Apple numbers needs to come down. You know, that

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Speaker 1: wasn't the case. I would say in the last twelve months,

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Speaker 1: what do you think about chip usage? I mean, the

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Speaker 1: Samsung story and Taiwan Semiconductor as well, has really affected

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Speaker 1: the US market. Today we see a jump at Micron.

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Speaker 1: Does this mean that a lot of chip suppliers are

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Speaker 1: going to have fewer orders or have they bottomed at

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Speaker 1: this point? You see, that's a very tough call to

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Speaker 1: make because a lot depends on you know, autos and

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Speaker 1: other industries. It's not so much always tied with PCs,

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Speaker 1: although consumer spending you know, in PCs is a big

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Speaker 1: portion of chips. But I don't think Apple has ever

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Speaker 1: had an issue with supply chain when it comes to

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Speaker 1: you know, they get it first before anybody else. I'm

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Speaker 1: I'm less concerned on those factors. For my biggest concern

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Speaker 1: at this point for Apple is, um, you know, what's

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Speaker 1: really going to happen on the on some of these

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Speaker 1: products and how bad it's going to get in twenty

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Speaker 1: twenty three before we see a potential bounce back next year?

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Speaker 1: Do they have do they have to introduce a killer

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Speaker 1: new product? Are they going to make some kind of

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Speaker 1: virtual reality aar eyeglasses. Are they going to come out

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Speaker 1: with new air pods that blow us away for this

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Speaker 1: new function that we never knew headphones can have? Or

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Speaker 1: is the car coming soon? I don't know about the car,

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Speaker 1: but Mark German said that you know, they will launch

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Speaker 1: the new mixed reality headset in the summer. You know

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Speaker 1: that is going to truly vibe the whole metaphors discussion.

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Speaker 1: But I don't think mathematically it adds anything at least

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Speaker 1: for the next you know, this financial year. Next year,

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Speaker 1: perhaps it adds a few billion dollars, But you know

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Speaker 1: the big thing for Apple is going to be the

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Speaker 1: iPhone fifteen launch by the end of this year and

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Speaker 1: a revival potentially in the services division. So I think

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Speaker 1: comps are getting easier and easier for Apple for a

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Speaker 1: bounce back next year. But before that, I think we

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Speaker 1: need to have a take a step back on numbers

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Speaker 1: before we can jump back and say revenue growth is

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Speaker 1: going to get back again into that eight to ten

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Speaker 1: percent range. So I'm looking at the PGeo function on

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Speaker 1: the Bloomberg termo for Apple. I see about twenty percent

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Speaker 1: of their sales are in Greater China. Are the Chinese

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Speaker 1: buying watches and phones and all that kind of stuff?

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Speaker 1: What's the market like? I think this, You know, that's

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Speaker 1: probably only going to be the one bright spot for

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Speaker 1: Apple over the next six months, because you know, the

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Speaker 1: China reopening trade and the Chinese consumer really hasn't spent

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Speaker 1: quite a bit over the last twelve months. You know,

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Speaker 1: we could see some relief over there to offset the

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Speaker 1: other things that we are talking about. But you know, again,

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Speaker 1: I think the big jump is going to come from

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Speaker 1: a new hardware design from the iPhone fifteen, which is

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Speaker 1: most likely going to be in the September October timeframe.

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Speaker 1: All right, Now, Tim Cook was over there right in China,

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Speaker 1: and what was she trying to do. It's trying to

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Speaker 1: be nice to them. That's where they you know, it's

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Speaker 1: it is. It is the heart and lungs off Apple

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Speaker 1: supply chain. If something happens to that, Apple's going to

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Speaker 1: be in really tough time. So he's just kind of

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Speaker 1: trying to smooth things out that otherwise it's getting worse. Frankly,

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Speaker 1: Hey guys, you look great today. Hey, anybody wants the

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Speaker 1: new iPhone? Isn't Taiwan yours anyway? Yes, exactly, So I

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Speaker 1: love to see about that. I don't know that's that's

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Speaker 1: still a huge risk there, but I guess trying to

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Speaker 1: smooth it over a little bit. On agron I, senior

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Speaker 1: technology analyst with Bloomberg Intelligence, joining us on the phone

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Speaker 1: talking about Apple, mac shipment's PC shipment's across the industry.

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Speaker 1: You're listening to the Team Cancer Line program Bloomberg Markets

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Speaker 1: weekdays at ten am Eastern on Bloomberg dot com, the

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Speaker 1: I Heard Radio app and the Bloomberg Business app, or

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Speaker 1: listen on demand wherever you get your podcast. Let's get

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Speaker 1: to the next company, which I find really fascinating. I

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Speaker 1: was initially interested because it's called the Howard Hughes Corporation,

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Speaker 1: and who isn't interested in Howard Hughes, right, But it's

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Speaker 1: actually got that name in a roundabout way. Howard Hughes

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Speaker 1: bought the property for one of their master planned communities.

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Speaker 1: And now that's the business that they're in. But it's

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Speaker 1: not all stuff they got from Howard Hughes, mostly general

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Speaker 1: growth properties. David O'Reilly joins as CEO of the company.

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Speaker 1: The ticker is HC. It's publicly traded on the New

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Speaker 1: York Stock Exchange. David, so talk to us first, give

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Speaker 1: us the overhead view of the Howard Hughes Corporation. You

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Speaker 1: have at least three master planned communities, right, These are big.

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Speaker 1: It's not like a few thousands, like one hundred thousand

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Speaker 1: people live in them, and there are thousands of acres.

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Speaker 1: So what's the business. It's the end of the day.

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Speaker 1: We play sim city. We're developing real estate to create

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Speaker 1: the greatest places to live, to have the greatest and

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Speaker 1: positive impact on our residents, tenants and visitors lives. Sell

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Speaker 1: land to home builders, take that capital to amenitize built office,

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Speaker 1: multi families, shopping within our communities, which in turn makes

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Speaker 1: it better places to live where more people want to

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Speaker 1: come live there, our land values go up, and that

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Speaker 1: self fulfilling cycle goes on and on. We essentially play

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Speaker 1: sim city. We decide where the roads go, where the

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Speaker 1: hospitals are, where the homes are, and create what we

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Speaker 1: think are the best communities to live in America. And

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Speaker 1: then they have then they hopefully you know, they have

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Speaker 1: the best plumbing, the best WiFi, pickleball on demand yep.

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Speaker 1: And they also had a good golf course then in Houston.

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Speaker 1: So all right, when I see a new company, I

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Speaker 1: got right to the board of directors. I see your

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Speaker 1: chairman of the boarders, Bill Ackman. Why is he the chairman?

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Speaker 1: Then I go to the HDS screen gives you the

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Speaker 1: shareholders and thirty two percent of your company. What's going

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Speaker 1: on there? Wise? Persian there? Why are they big? Wise? Bill?

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Speaker 1: On your board? Well? Bill took over General Growth when

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Speaker 1: it filed for bankruptcy. And when he went through the

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Speaker 1: assets of General Growth, he saw these communities, these great places,

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Speaker 1: these unique development opportunities that didn't belong in a public malread.

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Speaker 1: So the Howard used corporation is Bill's idea. He came

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Speaker 1: up with it. He spun us out into our own

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Speaker 1: entity about twelve years ago, and he's been an incredible

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Speaker 1: supporter and incredible chairman ever since day one. So what

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Speaker 1: do the numbers look like? I mean, how are you

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Speaker 1: doing on the top and bottom line and give us

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Speaker 1: your five year view. Things have been incredible. The pandemic

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Speaker 1: has been an incredible tail winds to our business. We've

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Speaker 1: sold more land to home builders, which is one of

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Speaker 1: the three main areas of revenue for us, over the

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Speaker 1: past two years than we have ever before. And we

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Speaker 1: see that momentum, despite a rest bite in the fourth

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Speaker 1: quarter of last year, coming right back very quickly this year,

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Speaker 1: despite higher mortgage rates. That's kind of where I wanted

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Speaker 1: to go. We've seen that spike in mortgage rates. It's

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Speaker 1: scared a lot of people out of the market. Not me,

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Speaker 1: but it scared some people out of the market. What

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Speaker 1: are you seeing kind of in this spike in real

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Speaker 1: estate more mortgage rates. I don't think it's the spike

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Speaker 1: of rates that changes home builder demands. I think it's

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Speaker 1: the change the volatility of rates forces homebuyers to pause.

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Speaker 1: Once it settles in, they're right back to the market.

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Speaker 1: We're looking out between a three and five million unit

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Speaker 1: shortfall of housing units needed to meet the household formation

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Speaker 1: of the past ten years. It doesn't exist today. People

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Speaker 1: need places to look. I'll tell you what exist is

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Speaker 1: all the McMansions everywhere. What doesn't exist is starter homes

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Speaker 1: because those guys can't make the same margin on it.

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Speaker 1: How do we fix that problem? Do you think? Oh? Look,

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Speaker 1: I think that it's tough for me to say that

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Speaker 1: there's a magic wand to solve that. Across the country.

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Speaker 1: Within our Masterplant communities, which are twenty thirty thousand acres plus,

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Speaker 1: we're prescriptive in terms of what homes are being sold

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Speaker 1: for what price wear prescriptive in terms of the setbacks.

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Speaker 1: That sizes the pricing so that we can meet affordability

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Speaker 1: across every price point within our community. Look over the

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Speaker 1: past year, we've seen home prices shoot up, and that

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Speaker 1: part of that material prices getting higher. Part of that's

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Speaker 1: labor higher, part of that's my land has been more expensive,

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Speaker 1: and part of that has been home builder margins. Home

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Speaker 1: building margins have been in that eighteen to twenty percent

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Speaker 1: since I can remember, and last year they peaked at

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Speaker 1: twenty nine percent. So there's room. We're seeing material prices

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Speaker 1: come down. We're seeing home builders except lower margins. We're

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Speaker 1: seeing homes land sellers like ourselves, except slightly lower prices. Now,

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Speaker 1: where do you buy land, like when you decide I

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Speaker 1: want to build another woodlands, where do you find How

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Speaker 1: do you identify our market that is worthy of your

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Speaker 1: investment of land? So for us, we belt We bought

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Speaker 1: our last master plane community at the end of last year.

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Speaker 1: It's called Terra Vallis outside of Phoenix, thirty seven thousand

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Speaker 1: acres today, population zero. The characteristics that make that great

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Speaker 1: it's fully entitled fore hundred thousand homes in fifty five

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Speaker 1: million square feet of commercial space. It is immediately adjacent

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Speaker 1: to Phoenix, just north of the I ten that connects

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Speaker 1: to Los Angeles. So great transportation, great access, lower tax,

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Speaker 1: business friendly community, warm or less expensive to live. Affordability

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Speaker 1: helps drive our decision. Make is that only going to

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Speaker 1: be you know, the older people like Paul and Tucker

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Speaker 1: or kind of young buck like Megan and on that

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Speaker 1: I would tell you that we're going to see this community.

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Speaker 1: I think it's going to be more starter homes. I

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Speaker 1: think it's going to be more younger families coming into

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Speaker 1: the market. I think this is going to be not

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Speaker 1: your age restricted community. Will have age restricted communities within

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Speaker 1: the overall thirty seven thousand acres, but the predominance is

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Speaker 1: starting here is going to be your young families moving

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Speaker 1: into the area finding that quality of life that they

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Speaker 1: can't get in La Sanford. So you're so you're now

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Speaker 1: a kind of a ground zero type of situation in

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Speaker 1: that community in Phoenix for that property. What's a lifespan

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Speaker 1: before you get to a Woodlands where it is built

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Speaker 1: out and it looks like it's been there forever. Well,

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Speaker 1: the Woodlands is celebrating its fiftieth anterimursary next year, and

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Speaker 1: we're out of residential land. All twenty twenty eight thousand

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Speaker 1: acres or of the residential side are gone. We're down

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Speaker 1: to seven hundred acres of commercial space, which is another

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Speaker 1: twenty or thirty years of commercial development. So the life

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Speaker 1: cycle of Tera Vallis and Phoenix could be forty or

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Speaker 1: fifty years. Wow, I think it'll be quicker this. And

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Speaker 1: you have developers, did that you know you want to

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Speaker 1: work with to build the homes, to build the commercial space?

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Speaker 1: Is that do you pick those? We are the commercial developer,

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Speaker 1: you're the career master planning. We're just signing where those

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Speaker 1: roads are gonna go. We're gonna build those office buildings,

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Speaker 1: so you build them as well. Okay, we're gonna own

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Speaker 1: them forever. We'll sell the land to home builders, okay,

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Speaker 1: and they'll build a single family homes and got in

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Speaker 1: the residence. So you can't help us up with a

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Speaker 1: good contractor. I mean I was going to ask you.

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Speaker 1: I was gonna see if you had a couple of records.

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Speaker 1: Everybody wants to know because that kind of labor is

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Speaker 1: tough to come by. But I guess you outsourced the

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Speaker 1: home building process, so you're not as worried about, you know,

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Speaker 1: finding people to put it up. Our labor is horizontal development.

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Speaker 1: It is putting in the water, sewer, roads, curbs parks,

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Speaker 1: and that labor is still very difficult to find. I

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Speaker 1: think our competitive advantage is that when we're spending a

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Speaker 1: billion and a half dollars a year, and we know

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Speaker 1: we're going to spend it for the next forty years,

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Speaker 1: we can keep someone's attention real time, rather than have

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Speaker 1: them worry about moving to the next project in six months.

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Speaker 1: So what are some of the big variables for your business?

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Speaker 1: I mean, if your business can perform presumably you know

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Speaker 1: you're saying, even at these levels of interest rates, what

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Speaker 1: are some of the big variables that kind of you

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Speaker 1: have to manage as a CEO. I think some of

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Speaker 1: the biggest thing is there's two areas. One in the

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Speaker 1: residential land development. We're trying to develop lots just to

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Speaker 1: keep up with underlying home sales, right and underlying home

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Speaker 1: sales are very difficult to predict, but we're watching them

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Speaker 1: every day to see which size lots selling, which size

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Speaker 1: homes are selling, and making sure we have those lots

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Speaker 1: available for our home builders to get back into their inventory.

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Speaker 1: And the other side of the equation is really just

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Speaker 1: trying to get a pulse of our residence. We're most

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Speaker 1: successful when we're building the amenities that our residents want,

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Speaker 1: whether that's the Kirby Ice House in the Woodlands or

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Speaker 1: whether that's another multi family apartment building. Because we're full

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Speaker 1: and rents are raised rising too quickly, we need to

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Speaker 1: be we make sure we have a finger on the

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Speaker 1: pulse of what our residents want and meet that demand.

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Speaker 1: I'm telling you it's pickaball. It's pickaball. Yeah, I don't

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Speaker 1: know it has been. It's been amazing how we've seen

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Speaker 1: parking garages and tennis courts being repurposed for pickaball and

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Speaker 1: it gets used. So I see a big drop in

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Speaker 1: revenue in twenty twenty. Was that just all pandemic driven?

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Speaker 1: You guys kind of had to shut down development? It is,

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Speaker 1: But we also another part of our business is selling

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Speaker 1: condominiums in Hawaii, where we have sixty acres on the

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Speaker 1: beach in an area known as Ward Village between Waikiki

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Speaker 1: and alamo Ona Mall. If we don't have a condo

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Speaker 1: tower closed in a particular year, the revenue will drop off.

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Speaker 1: You know, We're not running our business for next quarters earnings,

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Speaker 1: running our business to drive value creation for the next one, three, five,

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Speaker 1: ten years. Fascinating stuff. I knew. I knew the Woodlands.

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Speaker 1: I've been there a couple of times. I didn't know

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Speaker 1: as you guys, so very very cool Slumberland. Is it

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Speaker 1: called Summerlin outside Vegas? Yes, I played their tid. Hughes

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Speaker 1: has been gone for about fifty years as well. I

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Speaker 1: think he died in nineteen seventy three. Yeah, you fly

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Speaker 1: into Lax you see the Hughes aerospace, which is very cool.

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Speaker 1: David O'Reilly, CEO of Howard Hughes Corporation, trades on the

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Speaker 1: NYC h HC talking about some planned communities, some commercial

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Speaker 1: real estate. You're listening to. The tape cans are our

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Speaker 1: live program Bloomberg Markets weekdays at ten am Eastern on

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Speaker 1: Bloomberg Radio, the tune in app, Bloomberg dot Com, and

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Speaker 1: the Bloomberg Business App. You can also listen live on

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Speaker 1: Amazon Alexa from our flagship New York station, Just say

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Speaker 1: Alexa play Bloomberg eleven thirty twenty twenty two. There was

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Speaker 1: nowhere to hide really in the fixed income space. But

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Speaker 1: I look at my i nd go function on the

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Speaker 1: Bloomberg terminal for the Bloomberg Index browser, and I see

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Speaker 1: the Bloomberg US Aggregate fixed Income Index is up three

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Speaker 1: point five percent this year. So a much much better

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Speaker 1: start to twenty twenty three. Let's see if there's more

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Speaker 1: life in the fixed income space. Jason Greenblath joins us.

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Speaker 1: He's a senior portfolio manager in American Century Investments, proud

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Speaker 1: alumnus from Penn State University, joining us here in our

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Speaker 1: Bloomberg Interactive Broker studio. So what do you do in

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Speaker 1: this year? Jason, I mean twenty twenty two, let's just

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Speaker 1: flush it. That's how bad it was for the fixed

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Speaker 1: income folks. How'd you guys start this year and what

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Speaker 1: do you think right now? Yeah, thanks for having me on.

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Speaker 1: I appreciate it. Our highest conviction this year is duration,

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Speaker 1: belong duration coming in. We've certainly seen some evidence last month.

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Speaker 1: We saw evidence back in September that higher rates are

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Speaker 1: starting to break things down in the economy. Last month

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Speaker 1: was the banks back in September, with UK pension plans

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Speaker 1: having problems and so being long duration in our mind

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Speaker 1: is the economy's slowing is our highest conviction position. And

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Speaker 1: at the moment, yeah, we saw, well, there's a Bloomberg

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Speaker 1: story out overnight about one and a half trillion dollar

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Speaker 1: wall of maturity coming due in just commercial real estate

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Speaker 1: by twenty twenty five. So it started to kind of

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Speaker 1: freak me out. I was worried, as had nightmares as

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Speaker 1: I read this last night, because these higher rates could

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Speaker 1: really break something. Right, We've already seen as you said,

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Speaker 1: the banking crisis. Are are we giving up on the

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Speaker 1: idea of a soft landing? Can the Fed not achieve that?

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Speaker 1: In our minds, it's a low probability. The probability recession

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Speaker 1: harder landing certainly has has grown the beginning of March

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Speaker 1: with the banking crisis certainly illustrated that, Matt, you mentioned

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Speaker 1: series and what's going on with maturity walls. I think

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Speaker 1: if you look inside the data, there are certain loans

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Speaker 1: even here in Manhattan that are being marked at fifty

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Speaker 1: cents on the dollar. You can certainly see that cap

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Speaker 1: rates have gone up substantially. Office vacancies, you know, are

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Speaker 1: certainly playing into that, and I think you know higher

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Speaker 1: rates are also causing issues with refinancings A push that

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Speaker 1: blue button. Are you concerned about financial institutions banks and

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Speaker 1: their real estate portfolios, because I'm not sure. Some folks

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Speaker 1: are saying it had the big money center banks don't

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Speaker 1: have to worry about it so much. It's more the

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Speaker 1: regional banks. How do you think about that? Yeah, I

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Speaker 1: think the regional banks certainly for sure have the higher exposure. Right.

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Speaker 1: It's something like forty percent of their U of small

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Speaker 1: business loans are coming out of these regional banks. So

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Speaker 1: we need that part of the plumbing to certainly be

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Speaker 1: be flowing and working. And you know, you guys at

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Speaker 1: Bloomberg had a great story over the weekend on financial

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Speaker 1: conditions and loans coming down the last two weeks of March,

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Speaker 1: there's clearer evidence. I think we'll see a little bit

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Speaker 1: more over the next one to two weeks with bank earnings,

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Speaker 1: but we also need one to two more quarters to

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Speaker 1: see if this becomes a trend or not. We talk

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Speaker 1: about first of all, we're not great it running the

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Speaker 1: audio today. No, it was a weekend. True, it was

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Speaker 1: a long weekend too. It's a Monday. We talk about

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Speaker 1: the world insurrate probability screen a lot. I'm sure you're

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Speaker 1: familiar with it on the Bloomberg terminal. It shows what

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Speaker 1: the market is pricing in terms of the Fed moves right,

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Speaker 1: and currently we're pricing in four rate cuts through January

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Speaker 1: thirty first, twenty twenty four. Does that make sense to you?

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Speaker 1: Do you buy it? Our thought is the Fed's going

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Speaker 1: to raise one more time next month and early meg

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Speaker 1: and then pause. If something else breaks, then maybe they

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Speaker 1: will cut, but we think they're going to hold that

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Speaker 1: just to ensure that inflation is really under control. So

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Speaker 1: those four rate cuts probably don't happen in twenty five

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Speaker 1: bases point increments in our minds, they happen in hundred

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Speaker 1: or two hundred bases point increments when something really breaks. Well,

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Speaker 1: that's terrifying though it is it is, And so I

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Speaker 1: think the other element we talked about being long duration.

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Speaker 1: The other element is being credit risk. Credit spreads, in

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Speaker 1: our mind do not reflect a recession, a hard landing.

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Speaker 1: You know, in the mid to high four hundreds and

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Speaker 1: high yield credit spreads, it's kind of normal and average

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Speaker 1: over the last ten years. What's not normal is eight

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Speaker 1: and a half percent because treasury rate rates are higher.

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Speaker 1: So in our mind, credit spreads are not reflecting that

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Speaker 1: hard landing. And we like being short here and waiting

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Speaker 1: for a better entry point. I know earlier in your

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Speaker 1: career you looked at the high yield space. That's distressed space.

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Speaker 1: Do I take some risk here and go into the

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Speaker 1: high old market? If so, where can I go in

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Speaker 1: high yield? We like shorter duration, high qualities. So Doublebees

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Speaker 1: that's a place that we think offers some value, some safety.

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Speaker 1: There's still some names out there that we think will

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Speaker 1: migrate up to investment grade, so there is total return potential.

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Speaker 1: You know, we had the Citrics deal that that came

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Speaker 1: price what's happened to that? So that the second lean

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Speaker 1: the priced at seventy nine cents, and we had some

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Speaker 1: banks unload off their balancy a leveraged buyout from last year. Now,

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Speaker 1: is that something that you guys traffick in that kind

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Speaker 1: of stuff? That really looks like the banks are just

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Speaker 1: kind of, you know, chucking in on the market wherever

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Speaker 1: it landed. You know, I think at a price, certain

429
00:22:15,320 --> 00:22:18,879
Speaker 1: investments look interesting coming at at an oide of twenty

430
00:22:18,880 --> 00:22:21,840
Speaker 1: one points. Pricing at seventy nine cents in the dollar.

431
00:22:22,560 --> 00:22:24,919
Speaker 1: The market certainly warmed up to it. It's it's up

432
00:22:24,960 --> 00:22:27,399
Speaker 1: about four points since it priced last week. All right.

433
00:22:27,640 --> 00:22:30,359
Speaker 1: By the way, I thought, I saw another interesting story

434
00:22:30,400 --> 00:22:33,359
Speaker 1: on the Bloomberg terminal over the weekend, and I wonder

435
00:22:34,240 --> 00:22:36,639
Speaker 1: if I could put it to a genuine fixed income investor.

436
00:22:36,720 --> 00:22:41,280
Speaker 1: Great to have you. Here. We see volatility just off

437
00:22:41,280 --> 00:22:45,760
Speaker 1: the charts right in rates in the Western world. That

438
00:22:46,600 --> 00:22:51,040
Speaker 1: moves are mind boggling, sixty seventy basis point moves in

439
00:22:51,040 --> 00:22:54,200
Speaker 1: a day on the two year, And the Bloomberg story

440
00:22:54,480 --> 00:22:58,600
Speaker 1: is that that's driving some fixed income investors to China

441
00:22:58,720 --> 00:23:03,320
Speaker 1: where they have almost volatility. Do you find that believable.

442
00:23:05,400 --> 00:23:08,000
Speaker 1: I mean, look, going from a DM market to an

443
00:23:08,000 --> 00:23:11,720
Speaker 1: EM market and in a more esoteric, you know, less

444
00:23:11,800 --> 00:23:14,720
Speaker 1: regulated environment, to me, does not make a whole lot

445
00:23:14,720 --> 00:23:18,080
Speaker 1: of sense. You know, we like transparency and being able

446
00:23:18,119 --> 00:23:21,920
Speaker 1: to dig through financial statements and have a more substantial

447
00:23:21,960 --> 00:23:26,040
Speaker 1: regulatory body. I think the volatility here in the US

448
00:23:26,200 --> 00:23:29,480
Speaker 1: needs to settle down. Once that settles down, we certainly

449
00:23:29,480 --> 00:23:32,720
Speaker 1: will have more interest and inflos into the asset class,

450
00:23:32,720 --> 00:23:36,639
Speaker 1: but we need volatility to come down. So what are

451
00:23:36,640 --> 00:23:38,840
Speaker 1: some of the sectors that you guys are doing work

452
00:23:38,840 --> 00:23:40,440
Speaker 1: in these days? And maybe conversely, what are some of

453
00:23:40,440 --> 00:23:44,120
Speaker 1: the sectors you just staying away from? Yeah, I think

454
00:23:44,920 --> 00:23:48,760
Speaker 1: to answer the latter first, I think CMBs and leverage

455
00:23:48,800 --> 00:23:52,119
Speaker 1: loans are parts of the market that we're most concerned about,

456
00:23:52,200 --> 00:23:56,040
Speaker 1: probably like a lot of our competitors. The rising rates,

457
00:23:56,080 --> 00:23:59,399
Speaker 1: the maturity walls that we mentioned before, those are certainly

458
00:23:59,440 --> 00:24:02,280
Speaker 1: areas of of concern. What do we like We like

459
00:24:02,920 --> 00:24:07,120
Speaker 1: We like short spread durations, so short maturities um particularly

460
00:24:07,200 --> 00:24:11,199
Speaker 1: in parts of more esoteric areas in the securitized market,

461
00:24:11,560 --> 00:24:14,760
Speaker 1: in my space and corporate credit. You know, I think

462
00:24:14,800 --> 00:24:17,640
Speaker 1: there's haves and have nots in the banking sector. So

463
00:24:17,680 --> 00:24:21,119
Speaker 1: that's high quality investment grade. UM. I think that there

464
00:24:21,119 --> 00:24:24,399
Speaker 1: are disclocations there. The proverbial may be thrown out. With

465
00:24:24,440 --> 00:24:28,760
Speaker 1: the bathwater certainly created some opportunities last month. We're expecting

466
00:24:28,840 --> 00:24:33,040
Speaker 1: more in the nearer term of these disclocations. I'm just

467
00:24:33,080 --> 00:24:37,960
Speaker 1: looking through historically the matchups between Penn State and the

468
00:24:38,040 --> 00:24:41,399
Speaker 1: Ohio State University. Last year it was a loss for

469
00:24:41,440 --> 00:24:44,359
Speaker 1: your lions. The year before that, it was a loss.

470
00:24:44,400 --> 00:24:46,840
Speaker 1: Before that, it was a loss. The year before that,

471
00:24:46,920 --> 00:24:49,399
Speaker 1: it was a loss. The year before that, you lost.

472
00:24:50,160 --> 00:24:53,600
Speaker 1: The year before that, we won. So when do you

473
00:24:53,640 --> 00:24:56,800
Speaker 1: think Penn State can come back and beat the Buckeyes.

474
00:24:57,440 --> 00:25:00,840
Speaker 1: So so, Matt, You're you're talking like a true cynic

475
00:25:00,920 --> 00:25:04,480
Speaker 1: in the fixed income world, loss after loss after loss.

476
00:25:04,560 --> 00:25:07,280
Speaker 1: I will tell you I visited Columbus, Ohio for the

477
00:25:07,320 --> 00:25:10,680
Speaker 1: first time in my life my career a month ago.

478
00:25:11,600 --> 00:25:14,160
Speaker 1: Nice city, but glad to be back on the East coast,

479
00:25:14,720 --> 00:25:18,240
Speaker 1: all right. Jason Greenblatt, Senior portfolio manager, American Century Investments,

480
00:25:18,480 --> 00:25:22,280
Speaker 1: with a zinger at the end, This is Bloomberg. You're

481
00:25:22,320 --> 00:25:26,440
Speaker 1: listening to the Team Cancer Line program Bloomberg Markets weekdays

482
00:25:26,440 --> 00:25:29,040
Speaker 1: at ten am, eas daring on Bloomberg dot Com, the

483
00:25:29,119 --> 00:25:31,840
Speaker 1: I Heart Radio app, and the Bloomberg Business app. We're

484
00:25:31,880 --> 00:25:35,960
Speaker 1: listening on demand wherever you get your podcast. I want

485
00:25:35,960 --> 00:25:38,480
Speaker 1: to get right to our next guest listening fascinating discussion

486
00:25:38,520 --> 00:25:42,840
Speaker 1: Alexander Isakoff. He is the Russia and CEE economist at

487
00:25:42,840 --> 00:25:48,520
Speaker 1: Bloomberg Economics based in the Middle East. Alexander, you are

488
00:25:48,560 --> 00:25:52,639
Speaker 1: out with a fascinating Bloomberg Economics column today story today

489
00:25:52,960 --> 00:25:56,760
Speaker 1: talking about President Putin's to prioritize his twenty twenty four

490
00:25:56,880 --> 00:26:00,920
Speaker 1: reelection over the war. How can me do that? Isn't

491
00:26:00,960 --> 00:26:04,520
Speaker 1: the war front and center for everything and super popular

492
00:26:04,720 --> 00:26:07,119
Speaker 1: at home? Yeah, so that seems like it would be

493
00:26:07,160 --> 00:26:11,040
Speaker 1: the center of his election re election platform exact. So

494
00:26:11,119 --> 00:26:17,320
Speaker 1: what are we seeing, Alexander H. We're seeing that Russian

495
00:26:17,359 --> 00:26:20,720
Speaker 1: government and Pussing were able to stabilize the economy in

496
00:26:20,760 --> 00:26:23,840
Speaker 1: the past months. So you're looking at an economy with

497
00:26:23,880 --> 00:26:28,399
Speaker 1: inflation rate of like three percent and unemployment which is

498
00:26:28,520 --> 00:26:32,280
Speaker 1: just a bit north of three percent. Our call is

499
00:26:32,320 --> 00:26:38,200
Speaker 1: that because the labor market is so tight, essentially a

500
00:26:38,280 --> 00:26:44,280
Speaker 1: Pussin face the dilemma whether to try and mobilize more people,

501
00:26:45,240 --> 00:26:49,800
Speaker 1: uh and take a cost of cost of this in

502
00:26:49,920 --> 00:26:54,680
Speaker 1: terms of public support mobilization, I'm never too popular with people,

503
00:26:55,520 --> 00:27:00,399
Speaker 1: or just try to model through until his elections XTA

504
00:27:00,440 --> 00:27:05,760
Speaker 1: in March and just postpone mobilization. So I think our

505
00:27:05,840 --> 00:27:09,640
Speaker 1: call is that you will prefer the letter. So when

506
00:27:09,640 --> 00:27:15,480
Speaker 1: you say mobilize, you mean draft people essentially force probably

507
00:27:15,800 --> 00:27:19,359
Speaker 1: you know, young able bodied men to go to the

508
00:27:19,359 --> 00:27:22,399
Speaker 1: front lines where they risk their lives. That's something that

509
00:27:22,760 --> 00:27:25,159
Speaker 1: Russia hasn't done yet. What are they doing, What are

510
00:27:25,160 --> 00:27:31,000
Speaker 1: they doing to you know, fill their ranks? Yeah, exactly.

511
00:27:31,840 --> 00:27:37,840
Speaker 1: So they've drafted around three hundred thousand people lost October.

512
00:27:38,680 --> 00:27:42,880
Speaker 1: But this means that in six months most of those

513
00:27:42,920 --> 00:27:46,480
Speaker 1: people will be back at home and Russia would need

514
00:27:46,520 --> 00:27:51,280
Speaker 1: to replenish its troops and it will not be easier.

515
00:27:51,480 --> 00:27:55,680
Speaker 1: So Russia needs to find a way which will be

516
00:27:57,280 --> 00:28:00,959
Speaker 1: less coversive but also very effective and finding another three

517
00:28:01,080 --> 00:28:05,399
Speaker 1: hundred thousand people which will be very very hard. So, Alexander,

518
00:28:05,840 --> 00:28:09,760
Speaker 1: to what extent, if any, are the Western sanctions having

519
00:28:09,760 --> 00:28:12,919
Speaker 1: a negative impact on the Russian economy just given some

520
00:28:12,960 --> 00:28:15,960
Speaker 1: of the data you just recited, doesn't seem to be

521
00:28:16,240 --> 00:28:23,920
Speaker 1: hurting that badly. Yeah, I mean, the thing is that

522
00:28:24,240 --> 00:28:27,160
Speaker 1: most of the numbers we are used to look at

523
00:28:27,840 --> 00:28:32,320
Speaker 1: don't capture the pain, the economic pain that Russia undergoes.

524
00:28:32,800 --> 00:28:35,679
Speaker 1: For example, if you look at imports, which were like

525
00:28:35,920 --> 00:28:41,000
Speaker 1: down twenty percent, they reflect the quality of consumption and

526
00:28:41,080 --> 00:28:45,880
Speaker 1: quality of investment in Russia. These both are declined pretty

527
00:28:45,920 --> 00:28:49,600
Speaker 1: substantially last year. But from the GDP perspective, any decline

528
00:28:49,600 --> 00:28:54,640
Speaker 1: in imports is actually neutral. Imports don't affect the GDP directly,

529
00:28:55,440 --> 00:28:59,400
Speaker 1: so it doesn't show the GDP numbers. But Alexander, from

530
00:28:59,400 --> 00:29:05,400
Speaker 1: an economic perspective perspective, given you your Russian background, do

531
00:29:05,760 --> 00:29:08,000
Speaker 1: the Russian people is a Russian government prepared or the

532
00:29:08,040 --> 00:29:10,720
Speaker 1: Russian people prepared to be what they are today, which

533
00:29:10,760 --> 00:29:15,000
Speaker 1: effectively sealed off most of the world from an economic perspective,

534
00:29:15,000 --> 00:29:18,720
Speaker 1: trading perspective, all the type of stuff. Are they prepared

535
00:29:18,760 --> 00:29:23,080
Speaker 1: to do this for the long term? I think dances

536
00:29:23,640 --> 00:29:28,680
Speaker 1: yes and no. If current continuitions, especially in the commodity markets, prevail,

537
00:29:29,240 --> 00:29:34,000
Speaker 1: if oil prices remain north of eighty percent, then I

538
00:29:34,040 --> 00:29:39,680
Speaker 1: think Russia can tellierate these functions a long time. But

539
00:29:40,320 --> 00:29:43,880
Speaker 1: on the other hand, because Russian international reserves have been frozen,

540
00:29:44,200 --> 00:29:47,200
Speaker 1: the country is very, very sensitive to any drop in

541
00:29:47,240 --> 00:29:51,040
Speaker 1: the oil prices. So if COMMITI prices remain high, the

542
00:29:51,080 --> 00:29:54,160
Speaker 1: country can't delierate that. But it's very fragile to any

543
00:29:54,640 --> 00:29:59,320
Speaker 1: downside shock for oil price and it must be very

544
00:29:59,360 --> 00:30:03,280
Speaker 1: fragile and lation situation because it's been relatively low. But

545
00:30:03,560 --> 00:30:08,520
Speaker 1: with this tight labor market, especially if they need to

546
00:30:08,600 --> 00:30:12,080
Speaker 1: draft more troops, that means wages are going to have

547
00:30:12,160 --> 00:30:17,400
Speaker 1: to rise, are they not? Yeah? All correct? And in fact,

548
00:30:17,880 --> 00:30:20,720
Speaker 1: we are looking at the data on the prestability of

549
00:30:20,760 --> 00:30:25,080
Speaker 1: private enterprises and the lost mobilization actually was pretty detrimental

550
00:30:25,160 --> 00:30:28,920
Speaker 1: to that. We see that the private sector margins are

551
00:30:28,920 --> 00:30:33,080
Speaker 1: shrinking and I think, yeah, the labor costs will definitely

552
00:30:34,120 --> 00:30:38,480
Speaker 1: reduce growth in the coming year. So, Alexander, just from

553
00:30:38,520 --> 00:30:41,200
Speaker 1: you know, the consumer data, it seems like the war

554
00:30:41,880 --> 00:30:45,800
Speaker 1: is having little to no impact on the consumers at

555
00:30:45,800 --> 00:30:51,600
Speaker 1: home as at the case and B does it feel

556
00:30:51,600 --> 00:30:57,760
Speaker 1: like that can go on going forward? I think so.

557
00:30:57,880 --> 00:31:01,320
Speaker 1: If you look at historically at the impacts of wars

558
00:31:01,400 --> 00:31:04,280
Speaker 1: on the labor markets, what they typically do is they

559
00:31:04,880 --> 00:31:09,640
Speaker 1: reduced the premiere for high skill labor, but actually increased

560
00:31:09,640 --> 00:31:14,400
Speaker 1: the wages for those who don't. We're not earning as much,

561
00:31:14,840 --> 00:31:19,760
Speaker 1: so Essentially, they are reducing the inequality and labor incomes.

562
00:31:20,520 --> 00:31:23,000
Speaker 1: This is what actually is happening in Russia. So you

563
00:31:23,080 --> 00:31:29,080
Speaker 1: don't see much wage growth in the high pay success

564
00:31:29,080 --> 00:31:33,479
Speaker 1: secious information technology or banking of finance, but actually you

565
00:31:33,520 --> 00:31:37,240
Speaker 1: see a lot of growth in the manual labor, manufacturing

566
00:31:37,280 --> 00:31:40,959
Speaker 1: and services, etcetera, etcetera. So what you see is that

567
00:31:41,040 --> 00:31:46,920
Speaker 1: consumption is being supported by growth in in those UH

568
00:31:47,480 --> 00:31:52,400
Speaker 1: kind of sectors where wages were low previously. All right, Alexander,

569
00:31:52,400 --> 00:31:55,680
Speaker 1: thank you very much, Really appreciate your reporting here. Alexander Isakov.

570
00:31:56,040 --> 00:32:00,880
Speaker 1: He is the Russian UH and CEE economist Blomberg Economics.

571
00:32:00,920 --> 00:32:03,600
Speaker 1: He's based in Dubai. We appreciate getting some of his

572
00:32:03,680 --> 00:32:07,040
Speaker 1: time there. You're listening to the tape cancer live program

573
00:32:07,080 --> 00:32:11,040
Speaker 1: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,

574
00:32:11,160 --> 00:32:13,880
Speaker 1: the tune in app, Bloomberg dot Com, and the Bloomberg

575
00:32:13,960 --> 00:32:17,040
Speaker 1: Business App. You can also listen live on Amazon Alexa

576
00:32:17,120 --> 00:32:20,400
Speaker 1: from our flagship New York station, Just say Alexa play

577
00:32:20,520 --> 00:32:25,640
Speaker 1: Bloomberg eleven thirty. Let's talk about Carvana. Yes, well, we

578
00:32:25,720 --> 00:32:29,200
Speaker 1: have my favorite headline writer in all of Bloomberg in

579
00:32:29,640 --> 00:32:33,720
Speaker 1: the studio, right now, Joel Levington writes these headlines that

580
00:32:33,760 --> 00:32:37,520
Speaker 1: get me to click no matter what. Even now I

581
00:32:37,600 --> 00:32:39,320
Speaker 1: see them and I'm like, I know this is one

582
00:32:39,360 --> 00:32:42,480
Speaker 1: of Joel's headlines. It's gonna be a bi credit report,

583
00:32:42,560 --> 00:32:46,840
Speaker 1: but I'm still clicking because it's like Ferrari eats Maserati's lunch,

584
00:32:47,480 --> 00:32:50,800
Speaker 1: you know. But so, Joel, thanks for coming to the studio.

585
00:32:51,600 --> 00:32:54,120
Speaker 1: You have a great story out about you know, barbarians

586
00:32:54,120 --> 00:32:56,200
Speaker 1: at the gate, except for they're not at the gate,

587
00:32:56,240 --> 00:33:00,920
Speaker 1: they're at the Carvanna. What do they have like vending

588
00:33:01,360 --> 00:33:05,800
Speaker 1: vending machines? Um? This story has been amazing on the

589
00:33:05,840 --> 00:33:09,880
Speaker 1: stock side, right because just climbed so high during the

590
00:33:09,880 --> 00:33:15,240
Speaker 1: pandemic and then came absolutely crashing down, paying stilly prices

591
00:33:15,320 --> 00:33:18,040
Speaker 1: for used vehicles and then apparently not selling them for

592
00:33:18,480 --> 00:33:23,120
Speaker 1: um similar amounts. What's the story on the debt side? Yeah,

593
00:33:23,200 --> 00:33:25,960
Speaker 1: well it's been equally crazy. You know, it's just a

594
00:33:26,000 --> 00:33:28,920
Speaker 1: few years ago that they were issuing bonds with you know,

595
00:33:28,920 --> 00:33:30,880
Speaker 1: like a five handle on it or a little over

596
00:33:30,960 --> 00:33:33,960
Speaker 1: five percent. Now those bonds are more like forty five percent.

597
00:33:34,360 --> 00:33:38,080
Speaker 1: So it's it's been a dramatic turn, and unfortunately for

598
00:33:38,080 --> 00:33:40,680
Speaker 1: for stakeholders. It hasn't been good a good run. So

599
00:33:40,680 --> 00:33:45,440
Speaker 1: where I mean there's they've not, they've not. They're just

600
00:33:45,480 --> 00:33:48,560
Speaker 1: proposing a debt exchange, right, right, So this is Carvana.

601
00:33:48,800 --> 00:33:52,720
Speaker 1: They sell these cars market they don't or they don't

602
00:33:52,720 --> 00:33:54,920
Speaker 1: market kind of dried up. Now they've got problems with

603
00:33:54,960 --> 00:33:58,000
Speaker 1: their equity, but they really got problems with their debt.

604
00:33:58,040 --> 00:34:00,600
Speaker 1: They did too much debt going into this rough patch.

605
00:34:00,680 --> 00:34:02,360
Speaker 1: You're totally right, Paul, And this is one of those

606
00:34:02,400 --> 00:34:04,920
Speaker 1: cases where it's the balance sheet that's driving the equity

607
00:34:04,960 --> 00:34:08,520
Speaker 1: story as opposed to the opposite. In this case, they've

608
00:34:08,560 --> 00:34:10,719
Speaker 1: levered up. They have eight billion dollars worth of debt.

609
00:34:10,960 --> 00:34:14,359
Speaker 1: They're not supposed to generate positive ebada until twenty twenty five,

610
00:34:14,840 --> 00:34:17,320
Speaker 1: So you know, like, how do you make that lending

611
00:34:17,400 --> 00:34:20,279
Speaker 1: on no cash flow? I mean, you were lending on

612
00:34:20,360 --> 00:34:23,520
Speaker 1: just the big equity cushion underneath, like a lot of

613
00:34:23,520 --> 00:34:25,800
Speaker 1: tech companies will do. You know, yeah, exactly over the

614
00:34:25,880 --> 00:34:28,280
Speaker 1: last couple of years, you could pick out any startup

615
00:34:28,280 --> 00:34:31,279
Speaker 1: tech company or in my area, Tesla where it was

616
00:34:31,280 --> 00:34:34,120
Speaker 1: issuing bonds also where the five percent handle on it,

617
00:34:34,360 --> 00:34:36,640
Speaker 1: and people love the equity story, and they'll tell you like, hey,

618
00:34:36,680 --> 00:34:39,640
Speaker 1: there's billions of billions of dollars a cushion as opposed

619
00:34:39,680 --> 00:34:42,600
Speaker 1: to you know, like, what are the fundamentals and where

620
00:34:42,640 --> 00:34:45,160
Speaker 1: can this company go? In the case of Carvana, it's

621
00:34:45,160 --> 00:34:47,920
Speaker 1: in an industry where you have very thin margins and

622
00:34:48,000 --> 00:34:51,279
Speaker 1: high capital intensity, and it really can't handle a lot

623
00:34:51,280 --> 00:34:53,520
Speaker 1: of volatility. So when you put a lot of debt

624
00:34:53,560 --> 00:34:55,719
Speaker 1: on that, you're kind of setting the stage for problems.

625
00:34:55,760 --> 00:34:58,320
Speaker 1: And unfortunately they've run into it. All right, the stock

626
00:34:58,520 --> 00:35:02,440
Speaker 1: on all thirteen twenty twenty one, three hundred and sixty

627
00:35:02,480 --> 00:35:06,600
Speaker 1: dollars stocks training below nine? Isn't that guy? And so

628
00:35:06,840 --> 00:35:09,359
Speaker 1: I can see. I can see buying debt when you've

629
00:35:09,360 --> 00:35:11,360
Speaker 1: got all this equity underneath me, even though I wouldn't

630
00:35:11,360 --> 00:35:13,359
Speaker 1: do because I only lend on cash flows. That's how

631
00:35:13,360 --> 00:35:15,200
Speaker 1: I was. I was taught at the Chase Front and

632
00:35:15,200 --> 00:35:19,920
Speaker 1: Bank Credit training class nineteen ninety one. Um, that's how

633
00:35:19,960 --> 00:35:22,840
Speaker 1: you do it. But now what happens to these debthholders?

634
00:35:22,920 --> 00:35:25,120
Speaker 1: What are they trying to do here? From credit to

635
00:35:25,160 --> 00:35:28,359
Speaker 1: star that's the way it goes bossweek Okay, yes, well

636
00:35:29,120 --> 00:35:33,239
Speaker 1: well really what what what Carvana is doing is trying

637
00:35:33,280 --> 00:35:36,200
Speaker 1: to set the stage four there's going to be an exchange,

638
00:35:36,280 --> 00:35:38,799
Speaker 1: or they're trying to make an exchange happen. Now this

639
00:35:38,880 --> 00:35:40,840
Speaker 1: is if they do this, it's really the first of

640
00:35:41,080 --> 00:35:43,120
Speaker 1: many steps that they would have to do to change

641
00:35:43,160 --> 00:35:46,480
Speaker 1: their balance sheet because really here you're trying to exchange

642
00:35:46,880 --> 00:35:49,240
Speaker 1: about a billion three of debt for a new billion

643
00:35:49,239 --> 00:35:53,560
Speaker 1: dollars offering, and essentially you're saving about three hundred million

644
00:35:53,640 --> 00:35:56,720
Speaker 1: worth of debt and fifteen to twenty million of interest

645
00:35:56,760 --> 00:35:59,840
Speaker 1: expense for a company that has as much debt and

646
00:36:00,160 --> 00:36:02,480
Speaker 1: so little cash flow as they do. This is just

647
00:36:02,520 --> 00:36:04,839
Speaker 1: a beginning. It's really just a start to you know,

648
00:36:04,880 --> 00:36:07,680
Speaker 1: like get the barbarians, to get the Apollos and the

649
00:36:07,719 --> 00:36:10,680
Speaker 1: Arias out there to come up with a deal where

650
00:36:10,760 --> 00:36:13,440
Speaker 1: they can restructure the balance sheet, but do it in

651
00:36:13,440 --> 00:36:16,360
Speaker 1: a way where the Garcia family can we make in control.

652
00:36:16,400 --> 00:36:19,560
Speaker 1: And that's really why family to remain in control. They

653
00:36:19,560 --> 00:36:22,719
Speaker 1: want to remain in control. Well, as a neutral independent party,

654
00:36:22,760 --> 00:36:24,560
Speaker 1: I would say you would not want them in control

655
00:36:24,600 --> 00:36:27,200
Speaker 1: because they have made so many bad choices along the way,

656
00:36:27,280 --> 00:36:31,040
Speaker 1: including debt financing a two billion dollars acquisition of Edessa

657
00:36:31,200 --> 00:36:34,440
Speaker 1: at a time where where the industry was starting to

658
00:36:34,480 --> 00:36:37,960
Speaker 1: go down. They've missed earnings expectations for like nine of

659
00:36:38,000 --> 00:36:40,719
Speaker 1: the past ten quarters. Really, what you need to do

660
00:36:40,960 --> 00:36:45,040
Speaker 1: is strip out costs, reslate the balance sheet to have

661
00:36:45,080 --> 00:36:47,680
Speaker 1: a clean balance sheet. We've estimated that it should be

662
00:36:47,680 --> 00:36:49,560
Speaker 1: about ninety four percent of the debt needs to get

663
00:36:49,560 --> 00:36:52,799
Speaker 1: wiped out. Oh so really this is hit. I mean

664
00:36:52,880 --> 00:36:58,560
Speaker 1: your point is that debt holders may be happier in bankruptcy. Yeah, yeah, exactly, Matt,

665
00:36:58,600 --> 00:37:00,719
Speaker 1: because if you came out with a clean company and

666
00:37:00,840 --> 00:37:03,520
Speaker 1: a story of hey, let's get back to basics, let's

667
00:37:03,520 --> 00:37:07,400
Speaker 1: reduce our thirteen percent difference in SG and A, and

668
00:37:07,520 --> 00:37:10,960
Speaker 1: here's a path to growth, that stock price can certainly

669
00:37:11,000 --> 00:37:14,080
Speaker 1: turn around. And our expectation is that if it was

670
00:37:14,600 --> 00:37:17,839
Speaker 1: a clean balanty like bond holders might get seventy five

671
00:37:17,880 --> 00:37:20,640
Speaker 1: cents back on the dollar relatives to where bonds are,

672
00:37:20,640 --> 00:37:22,520
Speaker 1: which is kind of more in the forty to fifty zone.

673
00:37:22,920 --> 00:37:25,799
Speaker 1: So let me ask. I look through your bank up

674
00:37:25,880 --> 00:37:27,719
Speaker 1: stories that you work on, and you cover the car

675
00:37:27,800 --> 00:37:33,239
Speaker 1: industry very closely. Obviously, one that catches my eye is

676
00:37:33,960 --> 00:37:40,040
Speaker 1: a concern I think that we have across markets, which

677
00:37:40,120 --> 00:37:46,760
Speaker 1: is about refinancing. I think the point that you're making

678
00:37:46,800 --> 00:37:51,280
Speaker 1: here is Ford needs to refinance a ton of debt.

679
00:37:51,400 --> 00:37:55,160
Speaker 1: Right as rates rise, Ford credit may face five hundred

680
00:37:55,160 --> 00:37:57,680
Speaker 1: and seventy million dollars headwin and refinancing debt is the headline.

681
00:37:57,719 --> 00:37:59,400
Speaker 1: As rates rise, this is going to be a problem

682
00:37:59,400 --> 00:38:00,799
Speaker 1: for a lot of the ending arms are the big

683
00:38:00,800 --> 00:38:03,239
Speaker 1: carmakers I think so, you know, and it becomes a

684
00:38:03,320 --> 00:38:06,640
Speaker 1: game mat of where do you reduce the pain? Right

685
00:38:07,200 --> 00:38:09,279
Speaker 1: when you have a captive finance company like a Forward

686
00:38:09,400 --> 00:38:11,479
Speaker 1: or a GM, you can do that in the form

687
00:38:11,520 --> 00:38:14,600
Speaker 1: of incentives on the you know, MSRP on on the

688
00:38:14,640 --> 00:38:16,839
Speaker 1: price that you're paying for a car, so you could

689
00:38:16,840 --> 00:38:19,920
Speaker 1: reduce that as a way to making things more affordable.

690
00:38:20,239 --> 00:38:22,680
Speaker 1: But really that's the issue is affordability. It's forty eight

691
00:38:22,719 --> 00:38:25,520
Speaker 1: thousand dollars for your average car, and when the average

692
00:38:25,560 --> 00:38:28,200
Speaker 1: American makes seventy thousand dollars a year, you can't afford

693
00:38:28,200 --> 00:38:30,560
Speaker 1: a car. So how do you make that work and

694
00:38:30,640 --> 00:38:33,719
Speaker 1: keep the volume in your plant going? And it's either

695
00:38:33,760 --> 00:38:37,080
Speaker 1: going to be through the finance company, in the finance

696
00:38:37,120 --> 00:38:39,400
Speaker 1: company eating the interest rates on it, or it's going

697
00:38:39,400 --> 00:38:41,960
Speaker 1: to be through pricing on the cars. I hope it's

698
00:38:41,960 --> 00:38:45,000
Speaker 1: through the finance company eating interest rates. Why just because

699
00:38:45,320 --> 00:38:46,480
Speaker 1: I don't want to pay it. I don't want to

700
00:38:46,520 --> 00:38:49,000
Speaker 1: pay that much. Our prices ever kind of come down

701
00:38:49,239 --> 00:38:51,600
Speaker 1: in the card and Street or they resetting these new

702
00:38:51,680 --> 00:38:54,520
Speaker 1: highs because I mean, they've incredible inflation. I'm not sure

703
00:38:54,560 --> 00:38:56,640
Speaker 1: with the numbers, but over the last three or four years,

704
00:38:56,719 --> 00:39:00,600
Speaker 1: ridiculous increases in price. The monthly nut is just impossible

705
00:39:00,640 --> 00:39:03,200
Speaker 1: to cover for the average shoe, right, It's ridiculous. And

706
00:39:03,239 --> 00:39:05,879
Speaker 1: I think that's you know, it's it's a great question, Paul,

707
00:39:05,920 --> 00:39:07,920
Speaker 1: and I think it if you even if you asked internally,

708
00:39:07,960 --> 00:39:09,879
Speaker 1: I think our equity analysts might have a different view

709
00:39:09,880 --> 00:39:12,960
Speaker 1: than I do. I personally believe that pricing has to

710
00:39:13,000 --> 00:39:15,440
Speaker 1: come down. I think you're seeing that with Tesla, right

711
00:39:16,520 --> 00:39:18,000
Speaker 1: if you look at any of their models are down

712
00:39:18,280 --> 00:39:22,080
Speaker 1: twenty to twenty this year, and a Model three now

713
00:39:22,160 --> 00:39:24,560
Speaker 1: is about thirty six thousand dollars or thirty seven thousand dollars.

714
00:39:24,560 --> 00:39:26,240
Speaker 1: So if you're saying, hey, do I want the Model

715
00:39:26,280 --> 00:39:30,560
Speaker 1: three or the Honda CRV, like, that's a battle, and

716
00:39:30,719 --> 00:39:32,920
Speaker 1: that's where Tesla is going to be picking up share.

717
00:39:32,960 --> 00:39:34,840
Speaker 1: And I think others are going to eventually have to

718
00:39:34,880 --> 00:39:40,960
Speaker 1: follow because economically, you know, they're they're they're very high

719
00:39:41,000 --> 00:39:44,120
Speaker 1: in terms of cost. I mean the four has followed

720
00:39:44,160 --> 00:39:47,440
Speaker 1: with them with the Mustang Maki in terms of price cuts,

721
00:39:47,480 --> 00:39:50,640
Speaker 1: but not yet with the F one fifty Lightning that

722
00:39:50,760 --> 00:39:54,040
Speaker 1: you drove. What was the sticker price four large ninety

723
00:39:54,080 --> 00:39:56,319
Speaker 1: four grand for a pickup truck, right, I mean, and

724
00:39:56,360 --> 00:39:58,520
Speaker 1: that's what I mean, so honestly, I mean, I'm not

725
00:39:58,560 --> 00:40:03,200
Speaker 1: even joking. I mean, the American pickup truck buyers already

726
00:40:03,520 --> 00:40:07,439
Speaker 1: used to laying out forty fifty sixty grand. I'm sure

727
00:40:07,520 --> 00:40:10,080
Speaker 1: that was you just can you do ninety I don't

728
00:40:10,080 --> 00:40:12,800
Speaker 1: know four thousand. I don't know what demand destruction is

729
00:40:12,840 --> 00:40:14,840
Speaker 1: going to look like there. And that's in addition to

730
00:40:14,840 --> 00:40:16,759
Speaker 1: all the software that they're trying to sell behind it,

731
00:40:16,920 --> 00:40:19,480
Speaker 1: so you know, like there's a recurring revenue stream that

732
00:40:19,480 --> 00:40:22,640
Speaker 1: they're trying to attach to the electric car. So you know,

733
00:40:22,680 --> 00:40:25,000
Speaker 1: like something has to give, and I would think this

734
00:40:25,080 --> 00:40:27,120
Speaker 1: is a case where the companies are gonna wind up

735
00:40:27,160 --> 00:40:29,640
Speaker 1: having to give. And they're starting to see it, right,

736
00:40:29,680 --> 00:40:34,640
Speaker 1: you see, GM, Ford, Mercedes, they're all announcing headcut plans

737
00:40:34,680 --> 00:40:36,960
Speaker 1: over the next years because they recognize, like you have

738
00:40:37,000 --> 00:40:39,040
Speaker 1: to change your cost structure to be in a world

739
00:40:39,360 --> 00:40:42,560
Speaker 1: that can't afford these crazy, you know, high prices. Does

740
00:40:42,600 --> 00:40:46,680
Speaker 1: Lucid survive? Does Rivian survive? Do these ev startups make it?

741
00:40:47,200 --> 00:40:50,719
Speaker 1: I think they survive because you find over and over again,

742
00:40:50,719 --> 00:40:52,840
Speaker 1: and maybe McLaren is a great example of it. You

743
00:40:52,880 --> 00:40:56,680
Speaker 1: find these companies that find people that are willing to

744
00:40:56,680 --> 00:40:58,759
Speaker 1: take a bet on a brand name, Investors in the

745
00:40:58,760 --> 00:41:01,719
Speaker 1: Middle East, and in the case of Lucid, it might

746
00:41:01,760 --> 00:41:03,440
Speaker 1: be an investor in the Middle East because they already

747
00:41:03,480 --> 00:41:05,759
Speaker 1: old and sixty percent of the company in the case

748
00:41:05,800 --> 00:41:07,839
Speaker 1: of Review, and they have enough flexibility that they can

749
00:41:07,960 --> 00:41:10,400
Speaker 1: last at least a year or two before before you

750
00:41:10,440 --> 00:41:12,960
Speaker 1: have to worry about that good stuff as always Joe Levington,

751
00:41:13,080 --> 00:41:16,880
Speaker 1: he is a director credit research Bloomberg Intelligence. He covers

752
00:41:16,880 --> 00:41:18,840
Speaker 1: and his real day job he covers some autos and

753
00:41:18,880 --> 00:41:21,759
Speaker 1: some industrial credits and things like that. The management is

754
00:41:21,800 --> 00:41:24,319
Speaker 1: just a ruse. He actually does a real job and

755
00:41:24,320 --> 00:41:27,720
Speaker 1: he's a real analyst. But appreciate having come into studio.

756
00:41:27,920 --> 00:41:31,040
Speaker 1: You're listening to the Take Cancer our live program Bloomberg

757
00:41:31,120 --> 00:41:34,600
Speaker 1: Markets weekdays at ten am Eastern on Bloomberg Radio, the

758
00:41:34,719 --> 00:41:37,959
Speaker 1: tune in app, Bloomberg dot Com and the Bloomberg Business App.

759
00:41:38,000 --> 00:41:40,839
Speaker 1: You can also listen live on Amazon Alexa from our

760
00:41:40,840 --> 00:41:46,040
Speaker 1: flagship New York station, Jo Say Alexa, play Bloomberg eleven thirty.

761
00:41:46,440 --> 00:41:49,439
Speaker 1: Let's talk real estate. Now, let's talk commercial real estate.

762
00:41:49,480 --> 00:41:51,480
Speaker 1: And we can do that with our next guest, Christine

763
00:41:51,560 --> 00:41:56,200
Speaker 1: Mastandrea Coo of white Stone Reet. That's a publicly traded

764
00:41:56,280 --> 00:41:58,560
Speaker 1: reet WSR as a ticker you can load into the

765
00:41:58,560 --> 00:42:02,320
Speaker 1: Bloomberg terminal about four D thirty million dollars marketap. Christine,

766
00:42:02,520 --> 00:42:04,640
Speaker 1: thanks so much for joining us live in the Bloomberg

767
00:42:04,640 --> 00:42:07,319
Speaker 1: Interactive Broker Studio. So post pandemic, you get a gold

768
00:42:07,360 --> 00:42:10,239
Speaker 1: star for showing up live, not phoning it in. Talk

769
00:42:10,280 --> 00:42:12,000
Speaker 1: to us about Whitestone. What type of real estate do

770
00:42:12,040 --> 00:42:15,000
Speaker 1: you guys specialize in? Oh, I specialize in smaller center

771
00:42:15,080 --> 00:42:18,520
Speaker 1: is basically focusing on community and convenience for our retail

772
00:42:18,880 --> 00:42:22,520
Speaker 1: So you so okay? So not a technical term, kind

773
00:42:22,520 --> 00:42:25,319
Speaker 1: of like a strip mall type thing similar and all right,

774
00:42:25,360 --> 00:42:29,640
Speaker 1: So Amazon is a thing out there. I've actually become

775
00:42:29,760 --> 00:42:32,840
Speaker 1: very very depth on Amazon since the pandemic in the lockdown,

776
00:42:33,120 --> 00:42:34,919
Speaker 1: but I can't and I've heard this is not good

777
00:42:34,960 --> 00:42:37,400
Speaker 1: for bricks and more to retail or retail. How do

778
00:42:37,480 --> 00:42:39,880
Speaker 1: you guys approach that and deal with that? So we

779
00:42:40,160 --> 00:42:43,120
Speaker 1: saw that coming a long time back, especially with a

780
00:42:43,280 --> 00:42:46,160
Speaker 1: change of people in the workforce and time crunch consumers.

781
00:42:47,160 --> 00:42:49,560
Speaker 1: Amazon just solved a problem for people. So we focus

782
00:42:49,640 --> 00:42:52,920
Speaker 1: primarily on services. Okay, so I go to see one

783
00:42:52,960 --> 00:42:54,960
Speaker 1: of your properties and it's not gonna be necessarily selling

784
00:42:55,320 --> 00:42:58,520
Speaker 1: goods that competing against Amazon. It's a services, whether it's

785
00:42:58,560 --> 00:43:04,040
Speaker 1: a nail salon or something along those. So primarily around food, grocery,

786
00:43:04,719 --> 00:43:08,920
Speaker 1: services such as health, wellness, medical. In addition to that,

787
00:43:09,040 --> 00:43:12,880
Speaker 1: there would be you know, your financial services, ups, logistics

788
00:43:12,960 --> 00:43:15,200
Speaker 1: and so what kind of markets attract you guys? And

789
00:43:15,280 --> 00:43:17,320
Speaker 1: I think I know the answer, but go ahead. So

790
00:43:17,440 --> 00:43:20,640
Speaker 1: we focused on the southern markets primarily. Yeah, what's going

791
00:43:20,719 --> 00:43:23,120
Speaker 1: on is the rest of this country. Everybody's abandoning us.

792
00:43:23,920 --> 00:43:26,040
Speaker 1: Go ahead, So well, they came from Chicago, it is

793
00:43:26,120 --> 00:43:30,080
Speaker 1: happening there, and so focused on fast growing markets. So

794
00:43:30,200 --> 00:43:33,759
Speaker 1: we started in Dallas, Houston, San Antonio, then moved into

795
00:43:33,760 --> 00:43:36,279
Speaker 1: Austin and also in the Phoenix market, Scottsdale all the

796
00:43:36,320 --> 00:43:39,279
Speaker 1: way down to Mesic over channel all winners certainly post

797
00:43:39,320 --> 00:43:41,719
Speaker 1: pandemic winners, right those are you just listed to the

798
00:43:41,920 --> 00:43:44,000
Speaker 1: names of the cities. So when you go into a market,

799
00:43:44,040 --> 00:43:45,879
Speaker 1: what do you I mean, do you look for population growth?

800
00:43:45,880 --> 00:43:48,759
Speaker 1: Does that kind of a good job growth, job job growth,

801
00:43:48,880 --> 00:43:53,080
Speaker 1: job growth? Yeah, okayly mobile, really looking for good strong

802
00:43:53,160 --> 00:43:57,160
Speaker 1: secondary school systems as well. Okay, So I'm guessing you

803
00:43:57,239 --> 00:44:00,880
Speaker 1: guys are like most folks in real estate interest rates sensitive.

804
00:44:00,920 --> 00:44:03,960
Speaker 1: Talk to us about the market today versus you know,

805
00:44:04,080 --> 00:44:06,799
Speaker 1: a year or two ago. Yeah, that's great deal of change,

806
00:44:06,800 --> 00:44:09,400
Speaker 1: as you can imagine. But this provides the opportunity of

807
00:44:09,440 --> 00:44:12,520
Speaker 1: people know how to operate real estate versus just financial engineering.

808
00:44:12,760 --> 00:44:14,520
Speaker 1: So who were like, who were some of the people

809
00:44:14,560 --> 00:44:17,279
Speaker 1: maybe you were competing against, you know, when rates were

810
00:44:17,360 --> 00:44:21,440
Speaker 1: low versus kind of today, Like what happened to Who

811
00:44:21,480 --> 00:44:23,279
Speaker 1: were those people and what happened to them? Well, in

812
00:44:23,360 --> 00:44:26,759
Speaker 1: most cases passive investors that just bought the properties. In

813
00:44:26,880 --> 00:44:30,280
Speaker 1: our case, we have smaller centers, so it'd be local owners.

814
00:44:30,719 --> 00:44:33,960
Speaker 1: But passive owners versus active owners like we are. So

815
00:44:34,080 --> 00:44:35,799
Speaker 1: they're getting squeezed out of the market. It gives us

816
00:44:35,800 --> 00:44:38,840
Speaker 1: an opportunity. So we read a lot about or at

817
00:44:38,880 --> 00:44:40,040
Speaker 1: least year in New York. You know, some of the

818
00:44:40,200 --> 00:44:44,080
Speaker 1: big private equity funds getting into real estate. What's been

819
00:44:44,120 --> 00:44:46,640
Speaker 1: your experience do you run into them at all? If so,

820
00:44:47,200 --> 00:44:49,680
Speaker 1: are they how do you compete? They don't compete in

821
00:44:49,760 --> 00:44:52,239
Speaker 1: our space. That's why we stayed in smaller centers. So okay,

822
00:44:52,400 --> 00:44:53,800
Speaker 1: might be a little bit more of a hands on

823
00:44:53,920 --> 00:44:56,600
Speaker 1: operation than a larger center, but it's benefit is right.

824
00:44:56,719 --> 00:45:01,640
Speaker 1: So when you go look for new property, what do

825
00:45:01,640 --> 00:45:03,560
Speaker 1: you guys look for? What does your team look for? Oh?

826
00:45:03,760 --> 00:45:05,879
Speaker 1: In most cases and sticking us so we use place

827
00:45:06,000 --> 00:45:08,360
Speaker 1: or AI and we also use as ray as digital

828
00:45:08,400 --> 00:45:11,759
Speaker 1: platforms to understand the communities. So we really dive into

829
00:45:11,960 --> 00:45:14,640
Speaker 1: our users and who's the end end user and that

830
00:45:14,760 --> 00:45:18,080
Speaker 1: allows us to find to find the most attractive locations.

831
00:45:18,480 --> 00:45:21,840
Speaker 1: So what type of I mean, do you like to

832
00:45:21,880 --> 00:45:24,640
Speaker 1: have one or do your shopping center a retail space

833
00:45:24,680 --> 00:45:27,400
Speaker 1: attend of like a big kind of anchor tenant and

834
00:45:27,440 --> 00:45:29,440
Speaker 1: then you build around it. How do you like that?

835
00:45:29,960 --> 00:45:31,680
Speaker 1: So I don't like taking a lot of risk in

836
00:45:31,760 --> 00:45:35,680
Speaker 1: bake anchors. I mean there's always a difficulty if you

837
00:45:35,800 --> 00:45:38,440
Speaker 1: lose a big anchor to have to re fit somebody

838
00:45:38,520 --> 00:45:41,080
Speaker 1: moving into that space. So we have a tendency to

839
00:45:41,200 --> 00:45:43,600
Speaker 1: stay in the smaller shout space. So we found that

840
00:45:43,760 --> 00:45:46,200
Speaker 1: twenty five hundred square feet to about three thousand square

841
00:45:46,239 --> 00:45:49,520
Speaker 1: feet is about the most interchangeable use with the widest

842
00:45:49,960 --> 00:45:53,280
Speaker 1: amount of users. So who do you tend to compete

843
00:45:53,280 --> 00:45:56,920
Speaker 1: against a lot? Like even now? Is it other rates?

844
00:45:57,239 --> 00:46:00,880
Speaker 1: Is it just local privately owned real estate development companies?

845
00:46:00,920 --> 00:46:04,280
Speaker 1: Who are some of your competitors? So mostly local, privately owned,

846
00:46:04,400 --> 00:46:06,399
Speaker 1: although we're starting to see some other reeds move into

847
00:46:06,400 --> 00:46:09,319
Speaker 1: our space. So if it typically if I go up

848
00:46:09,320 --> 00:46:13,279
Speaker 1: against a private, local person, presumably that person has something

849
00:46:13,360 --> 00:46:16,520
Speaker 1: maybe I don't, such as local knowledge. I mean, how

850
00:46:16,560 --> 00:46:19,279
Speaker 1: do you guys build that? Do you buy like said,

851
00:46:19,280 --> 00:46:21,279
Speaker 1: I want to develop Phoenix? Do you just send your

852
00:46:21,320 --> 00:46:24,480
Speaker 1: team into Phoenix or do you maybe buy a team

853
00:46:24,560 --> 00:46:26,840
Speaker 1: that's already in Phoenix that knows how know? We usually

854
00:46:26,880 --> 00:46:30,359
Speaker 1: build our teams in our markets. So and very much

855
00:46:30,680 --> 00:46:34,960
Speaker 1: focusing on location again, using as much analysis as possible

856
00:46:35,000 --> 00:46:37,880
Speaker 1: that we can that we're provided with our platforms to understand.

857
00:46:38,600 --> 00:46:41,360
Speaker 1: So what was your business like during the pandemic, Like

858
00:46:41,640 --> 00:46:44,560
Speaker 1: how did it just impact you guys? Oh, we did great.

859
00:46:44,719 --> 00:46:48,040
Speaker 1: I think it's counterintuitive to a lot of the national tenants.

860
00:46:48,360 --> 00:46:50,920
Speaker 1: In our case, we had the highest recovery rates and

861
00:46:51,120 --> 00:46:54,239
Speaker 1: also the highest collection rates in the industry. So what

862
00:46:54,640 --> 00:46:56,520
Speaker 1: why is that? I mean, I just I would think

863
00:46:56,760 --> 00:47:00,040
Speaker 1: like just Main Street USA, Talent I live in, and

864
00:47:00,719 --> 00:47:03,759
Speaker 1: a lot of vacancies, a lot of company businesses went

865
00:47:03,800 --> 00:47:05,719
Speaker 1: out of business. So it was almost every third or

866
00:47:05,760 --> 00:47:08,640
Speaker 1: fourth or fifth store was out of business. Now that's

867
00:47:09,239 --> 00:47:13,600
Speaker 1: literally Main Street USA, not at a shopping center. Did

868
00:47:13,680 --> 00:47:16,520
Speaker 1: you experience that and if so, did you get people

869
00:47:16,560 --> 00:47:19,120
Speaker 1: back in there? No? I found, especially in our markets,

870
00:47:19,200 --> 00:47:22,320
Speaker 1: people were pretty active, and in addition to that we

871
00:47:22,480 --> 00:47:26,080
Speaker 1: had we were pretty I'm always amazed at you know,

872
00:47:26,080 --> 00:47:29,160
Speaker 1: American business and especially growing entrepreneurs. They're the ones that

873
00:47:29,280 --> 00:47:32,359
Speaker 1: flex the first. They caught the opportunity with a lot

874
00:47:32,400 --> 00:47:34,800
Speaker 1: of customer switching at that point, especially at the nationals

875
00:47:34,880 --> 00:47:37,480
Speaker 1: when they're closed because they're dictated by you know, their

876
00:47:37,560 --> 00:47:40,239
Speaker 1: home office. Right. The other thing that I found really

877
00:47:40,320 --> 00:47:43,920
Speaker 1: interesting through this whole thing is kind of the resilience

878
00:47:43,960 --> 00:47:46,680
Speaker 1: of our portfolio and also the resilience of the American

879
00:47:46,840 --> 00:47:49,279
Speaker 1: entrepreneur yep as We've talked about that a lot on

880
00:47:49,360 --> 00:47:51,400
Speaker 1: the show. But if you go down to Electionton Avenue

881
00:47:51,480 --> 00:47:54,600
Speaker 1: right there, a lot of empty retail between fifty eighth

882
00:47:54,640 --> 00:47:57,000
Speaker 1: and fifty nine Street. It was once it was before

883
00:47:57,040 --> 00:48:00,399
Speaker 1: the pandemic. It was full Victoria's Secret and some other

884
00:48:00,640 --> 00:48:03,239
Speaker 1: box door or something I can remember. Now there's just

885
00:48:03,560 --> 00:48:06,959
Speaker 1: a chocolate store that survived the pandemic. People bought chocolate

886
00:48:07,000 --> 00:48:09,320
Speaker 1: during a pandemic in the lockdown, and a bank just

887
00:48:09,440 --> 00:48:11,800
Speaker 1: opened up on the corner. But you see town cities

888
00:48:11,800 --> 00:48:13,279
Speaker 1: like this, you're probably like, boy, I'm glad I'm not

889
00:48:13,360 --> 00:48:17,000
Speaker 1: in big cities. Right. Yeah, we've avoided the big central

890
00:48:17,040 --> 00:48:20,480
Speaker 1: business districts. Again, pretty tough. The rental rates, they are

891
00:48:20,560 --> 00:48:24,120
Speaker 1: pretty difficult to size space, the ability to flex to

892
00:48:24,200 --> 00:48:26,879
Speaker 1: the user. Most of those are goods. It's a little

893
00:48:26,920 --> 00:48:29,160
Speaker 1: difficult to put in a service user in those type

894
00:48:29,160 --> 00:48:33,279
Speaker 1: of locations as well. So yeah, interesting, all right, Last question,

895
00:48:33,320 --> 00:48:36,040
Speaker 1: what's what's the growth outlook for you guys over the

896
00:48:36,120 --> 00:48:38,560
Speaker 1: next one to two years. Oh, I think we're well possessioned.

897
00:48:38,600 --> 00:48:40,880
Speaker 1: I mean already in our markets, were over ninety percent

898
00:48:40,920 --> 00:48:44,040
Speaker 1: occupantsy in all of our markets, and I think there's

899
00:48:44,080 --> 00:48:45,880
Speaker 1: not a lot of retail being built because of what

900
00:48:46,000 --> 00:48:48,560
Speaker 1: happened in the past. So things look good to come.

901
00:48:48,719 --> 00:48:50,800
Speaker 1: Oh interesting, good stuff, all right, Christine, thank you. So

902
00:48:50,960 --> 00:48:53,920
Speaker 1: much for joining a Christine at Most Andrea Coo of

903
00:48:54,000 --> 00:48:57,200
Speaker 1: white Stone reet again, that is a publicly traded company.

904
00:48:57,360 --> 00:49:02,280
Speaker 1: WSR is the ticker or the retail space, the commercial

905
00:49:02,360 --> 00:49:05,040
Speaker 1: retail space. Some weakness out there and a lot of

906
00:49:05,120 --> 00:49:07,200
Speaker 1: big markets, and we certainly see it here in New

907
00:49:07,280 --> 00:49:09,279
Speaker 1: York City, certainly in Midtown, but a lot of the

908
00:49:09,360 --> 00:49:12,480
Speaker 1: country doing very well and good for them. So it's

909
00:49:12,520 --> 00:49:14,720
Speaker 1: good to see some good growth out there in retail.

910
00:49:14,719 --> 00:49:17,239
Speaker 1: The consumer remains a very strong consumer has a job

911
00:49:17,320 --> 00:49:20,600
Speaker 1: that's good for all things retail. Thanks for listening to

912
00:49:20,640 --> 00:49:24,160
Speaker 1: the Bloomberg Markets podcasts. You can subscribe and listen to

913
00:49:24,239 --> 00:49:28,359
Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.

914
00:49:28,760 --> 00:49:32,040
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller nineteen

915
00:49:32,160 --> 00:49:34,799
Speaker 1: seventy three and on Fall Sweeney I'm on Twitter at

916
00:49:34,880 --> 00:49:37,680
Speaker 1: pt Sweeney. Before the podcast, you can always catch us

917
00:49:37,760 --> 00:49:39,160
Speaker 1: worldwide at Bloomberg Radio.