WEBVTT - Growing Buyer Demand and Tight Supply for US Housing 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business, finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:18.640 podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:19.920 --> 0:00:22.479 We're talking to I just tell you, like what I have. 0:00:22.520 --> 0:00:24.360 A great uncle passed away. 0:00:24.640 --> 0:00:26.680 Sorry, he died a couple of weeks ago. 0:00:26.560 --> 0:00:31.880 And he was renting a penthouse apartment with balconies on 0:00:31.960 --> 0:00:35.280 both sides on ninety six in Amsterdam. You know, for 0:00:35.320 --> 0:00:38.080 the past fifty years. I think he was paying like 0:00:38.159 --> 0:00:40.680 eight hundred dollars a month, and my brothers and I 0:00:40.720 --> 0:00:42.800 were always like, should one of us like move in 0:00:42.840 --> 0:00:43.560 with uncle Bud? 0:00:43.840 --> 0:00:46.680 Yes, we adopt us. We failed it. 0:00:47.200 --> 0:00:47.839 We didn't do it. 0:00:47.840 --> 0:00:49.040 We didn't We didn't get it. 0:00:49.159 --> 0:00:50.360 Matt, what's up with that? 0:00:50.920 --> 0:00:52.040 What do you do for a living? 0:00:52.400 --> 0:00:52.880 Did you know? 0:00:53.560 --> 0:00:56.160 Did you ever see? Was it the No Seinfeld episode? 0:00:56.200 --> 0:00:59.880 Remember when someone died in wanted the apartment? A? 0:01:00.080 --> 0:01:01.680 All right, right, we digressed, But we want to talk 0:01:01.720 --> 0:01:04.720 housing because the US is in what's traditionally the busiest 0:01:05.000 --> 0:01:07.920 home buying season. Right now, We've got some home data today. 0:01:08.000 --> 0:01:10.720 US home sales advancing and made of the fastest pace. 0:01:10.560 --> 0:01:11.080 In over years. 0:01:11.120 --> 0:01:13.480 So great roundtable to talk about it. Pat Clark is 0:01:13.520 --> 0:01:16.160 real estate reporter at Bloomberg News here in our interactive 0:01:16.160 --> 0:01:19.280 Broker studio along with Alison Schrager, Senior Fello at the 0:01:19.319 --> 0:01:22.680 Manhattan So Too Bloomberg opinion columnist. She has a column 0:01:22.680 --> 0:01:25.600 out about thirty year mortgages in the US, and we're 0:01:25.600 --> 0:01:26.880 going to get to that in just a moment. But 0:01:26.880 --> 0:01:29.000 Pat's at the stage in terms of the data and 0:01:29.040 --> 0:01:30.800 where we are in the US housing market. 0:01:31.280 --> 0:01:33.880 Yeah, well, we just had a solid increase in home 0:01:33.920 --> 0:01:36.640 prices from March to April. We're still down a little 0:01:36.640 --> 0:01:38.720 bit year over year, which is a you know, that's 0:01:38.760 --> 0:01:40.600 been a pattern we've had for the last few months, 0:01:40.600 --> 0:01:46.560 with small monthly increases, but still down a tad. Probably 0:01:46.600 --> 0:01:51.720 indicates that we are bottoming out and that. 0:01:52.480 --> 0:01:53.200 The worst is over. 0:01:53.280 --> 0:01:55.880 You mean, well, yeah, the worst is over for home prices. 0:01:55.880 --> 0:01:58.560 I mean the housing market. I mean, the housing market 0:01:58.640 --> 0:02:01.200 is it's a market. It's too side. If you own 0:02:01.240 --> 0:02:02.800 a home, the value of your home is not going 0:02:02.840 --> 0:02:05.240 to go down more probably if you are looking to 0:02:05.960 --> 0:02:08.000 buy a home, that's bad news. 0:02:08.280 --> 0:02:11.239 It's amazing to me though, that we're not going to 0:02:11.320 --> 0:02:12.960 go back down from here. I mean, if you look 0:02:12.960 --> 0:02:16.280 at the S and P. K Shiller chart from the 0:02:16.320 --> 0:02:19.640 beginning of the pandemic until now, it's prices have just 0:02:19.840 --> 0:02:23.480 absolutely soared, right because everybody wanted to get out of 0:02:23.480 --> 0:02:26.040 the city and COVID and we needed to distance. But 0:02:26.160 --> 0:02:28.600 now we don't have to anymore. We're like, calm down, 0:02:28.639 --> 0:02:30.440 the ULTI freaking out apply being low. 0:02:30.560 --> 0:02:32.400 Right in terms of the house. 0:02:32.240 --> 0:02:36.160 The supply, yes, the supply is really low, where inventory 0:02:36.280 --> 0:02:38.760 is something like something just short of half of what 0:02:38.800 --> 0:02:42.440 it was this time in twenty nineteen. But what that 0:02:42.520 --> 0:02:45.560 really speaks to is that, yes, there was this you know, 0:02:45.600 --> 0:02:47.639 there were stimulus. People wanted to go buy a house 0:02:47.639 --> 0:02:49.960 in the country, people wanted to people were forming households 0:02:49.960 --> 0:02:53.000 for the first time. But the prices were also supported 0:02:53.000 --> 0:02:56.720 by these really low interest rates, and those interest rates 0:02:56.720 --> 0:02:57.240 are locked in. 0:02:57.560 --> 0:02:59.080 All right, So let's get to Allison Trigger. 0:02:59.120 --> 0:03:01.880 Come on in Allison on your column today where you 0:03:01.919 --> 0:03:04.040 talk about the thirty year mortgage could save the US 0:03:04.080 --> 0:03:06.440 housing market laid out for us. 0:03:06.080 --> 0:03:08.359 Well, I mean I didn't even realize compared to two 0:03:08.440 --> 0:03:10.720 thousand and eight that Almost everyone who's bought a house 0:03:10.720 --> 0:03:12.680 in the last ten years has had a thirty year 0:03:12.720 --> 0:03:16.440 fixed rate mortgage, which means and I'm one of these people. 0:03:17.400 --> 0:03:19.280 I had locked in a really low interest rate during 0:03:19.320 --> 0:03:21.600 the pandemic, and effectively I'm never moving. 0:03:21.720 --> 0:03:23.799 And that's congratulation exactly. 0:03:23.880 --> 0:03:24.120 Yeah. 0:03:24.120 --> 0:03:26.280 You know, it's funny. I you know, we were talking 0:03:26.280 --> 0:03:29.560 about FED policy and how lowered rates. I was having 0:03:29.600 --> 0:03:31.480 our coffee with a member of the FED board during 0:03:31.480 --> 0:03:32.639 the pandemic, and I was. 0:03:32.600 --> 0:03:34.080 Like, oh, I heard you bought an apartment. 0:03:34.080 --> 0:03:36.200 I'm like, yeah, it's great, paid nothing for it, and 0:03:36.280 --> 0:03:37.480 he goes, you're welcome. 0:03:37.800 --> 0:03:40.880 Oh right. 0:03:41.680 --> 0:03:41.960 Yeah. 0:03:42.040 --> 0:03:44.960 By the way, I just looked at the Cashiller index. 0:03:45.040 --> 0:03:47.680 So from March of twenty nineteen until the peak that 0:03:47.720 --> 0:03:50.760 we hit in the middle of last year, home prices 0:03:50.840 --> 0:03:55.920 rose fifty one percent. That's insane. Froth like, how does 0:03:55.960 --> 0:04:01.120 that not come off when you're the starting point March nine? Okay, Oh, 0:04:01.160 --> 0:04:02.600 I guess that's a little bit too early. I should 0:04:02.640 --> 0:04:04.960 have started March of twenty twenty. The point is, though 0:04:05.360 --> 0:04:09.800 prices have marched higher, and your column, Allison kind of 0:04:09.800 --> 0:04:11.720 explains why we're not going to see a lot of 0:04:11.760 --> 0:04:12.960 movement back to the downside. 0:04:13.080 --> 0:04:14.720 Yeah, because if you remember in two thousand and eight, 0:04:14.720 --> 0:04:17.440 with thirty percent of people had those adjustable rate mortgages, 0:04:17.880 --> 0:04:20.240 so as rates went up, they couldn't afford it, and 0:04:20.320 --> 0:04:22.600 in fact, all of a sudden they found there are underwater. 0:04:23.040 --> 0:04:26.360 And what's interesting is that pretty much every other rich 0:04:26.400 --> 0:04:30.000 OECD country is seeing big drops in housing prices, but 0:04:30.040 --> 0:04:33.960 they also mostly have adjustable rate mortgages too. So the 0:04:34.040 --> 0:04:36.760 fact that people like us are locked into these very 0:04:36.800 --> 0:04:38.839 low rates means we're going to be very reluctant to 0:04:38.839 --> 0:04:40.279 move because, I mean, where can you go? 0:04:40.480 --> 0:04:42.719 Can I just wait, hat did you? Did you lock 0:04:42.720 --> 0:04:44.920 in a low rate path? No? 0:04:45.360 --> 0:04:46.440 Pat didn't get it. 0:04:48.600 --> 0:04:50.240 Can I just say that one stat in your story? 0:04:50.279 --> 0:04:52.279 By twenty twenty one, only two point two percent of 0:04:52.320 --> 0:04:55.960 mortgage applications were for adjustable rate mortgages. Well, in twenty 0:04:56.000 --> 0:04:58.120 twenty two, eighty five percent of mortgages were fixed thirty 0:04:58.200 --> 0:04:59.040 year Like that number. 0:04:59.080 --> 0:05:01.960 That's such a flat It's amazing. 0:05:01.600 --> 0:05:04.120 It is, and it's hard to imagine anyone even if 0:05:04.279 --> 0:05:06.120 home prices do fall a bit and they find their 0:05:06.200 --> 0:05:07.080 underwater with their mortgage. 0:05:07.120 --> 0:05:08.039 Is why people would leave. 0:05:08.080 --> 0:05:10.119 I mean your monthly outlay is going to just only 0:05:10.120 --> 0:05:11.839 go up if you go anywhere, even. 0:05:11.680 --> 0:05:14.960 If you downsize demographics though, I mean people are getting older. 0:05:15.000 --> 0:05:17.200 I have nieces and you know who are getting married, 0:05:17.240 --> 0:05:20.159 and they're buying homes and they're starting families and nephews 0:05:20.160 --> 0:05:22.839 and so on and so forth. I mean, eventually demographics, 0:05:22.920 --> 0:05:24.360 people will be moving or what. 0:05:25.120 --> 0:05:27.119 Well, people are going to want to form households. People 0:05:27.279 --> 0:05:30.920 are going to need homes. Whether that means, you know, 0:05:31.000 --> 0:05:33.159 can they buy them. It seems like right now in 0:05:33.240 --> 0:05:34.680 order to buy them, they're going to have to pay 0:05:34.720 --> 0:05:37.080 up to get them. They can go rent them too. 0:05:37.360 --> 0:05:40.440 I mean there's a you know, the other side of 0:05:40.480 --> 0:05:44.400 demographics is at some point people will die die, or 0:05:44.400 --> 0:05:46.280 at least they age out of a place where they 0:05:46.320 --> 0:05:47.800 want to live in a house in the suburbs and 0:05:47.839 --> 0:05:51.360 need to be in a community where they're getting more assistance. 0:05:51.480 --> 0:05:54.920 But that happens very slowly in overtime. You know, we 0:05:54.960 --> 0:05:57.839 imagine like that that we imagine the boomers all dying 0:05:57.880 --> 0:05:59.560 off all at once, but it's not how it really. 0:05:59.520 --> 0:06:02.360 Well look at in slock from Apollo, he sent around 0:06:02.400 --> 0:06:03.599 a chart. I don't know if you guys are on 0:06:03.600 --> 0:06:06.320 his list a couple of weeks ago showing the average 0:06:06.480 --> 0:06:11.240 new mortgage monthly mortgage payment, and it goes back twenty years. 0:06:11.240 --> 0:06:13.280 So over the past twenty years we've been bouncing around 0:06:13.320 --> 0:06:16.880 between one thousand and fifteen hundred, and now it's three thousand. 0:06:17.600 --> 0:06:21.440 So the current average new mortgage payment average across the 0:06:21.480 --> 0:06:25.719 country including the middle is three thousand dollars. That's insane. 0:06:25.839 --> 0:06:28.480 I remember when we bought our house years ago, decades ago, 0:06:28.600 --> 0:06:30.919 and it was like the mortgage was the same as 0:06:31.120 --> 0:06:33.840 our rent, Like it was just such an easy transition. 0:06:34.240 --> 0:06:38.160 Having said this, Alison, I think about broader economic implications. 0:06:38.160 --> 0:06:40.760 If people have great thirty year mortgages like yourself and 0:06:40.800 --> 0:06:43.240 he ain't moven, what does that mean in terms of 0:06:43.480 --> 0:06:44.440 economic activity? 0:06:44.480 --> 0:06:46.000 Because when we buy a house, we tend to buy 0:06:46.000 --> 0:06:46.599 a lot of stuff. 0:06:46.640 --> 0:06:49.800 There's just amount of an economic activity component as a 0:06:49.839 --> 0:06:50.800 result of that movement. 0:06:51.160 --> 0:06:53.120 So you mean, like people buy other things to go 0:06:53.160 --> 0:06:56.479 to house or are gonna want us maybe as well, 0:06:56.560 --> 0:06:59.039 do renovations stuff like that, home. 0:06:58.920 --> 0:07:03.080 Depot, real estate agents, commissions, I mean everything you can 0:07:03.120 --> 0:07:06.240 think of associated with buying a house or forming a household. Right, 0:07:06.680 --> 0:07:11.480 that kind of activity is maybe gonna lessen substantially, right, 0:07:11.560 --> 0:07:13.600 if we don't see a lot more transactions. 0:07:13.680 --> 0:07:15.720 Yeah, and now why I don't think anyway the thirty 0:07:15.800 --> 0:07:18.000 year mortgage might save us from a housing collapse. I 0:07:18.000 --> 0:07:20.880 don't think it's all necessarily good because anyway, it might 0:07:21.200 --> 0:07:23.920 save us some short term pain. It's also good to move. 0:07:24.200 --> 0:07:26.000 Like if you're thinking, I want to move to another 0:07:26.040 --> 0:07:28.480 city for a better job, but the housing costs are 0:07:28.520 --> 0:07:30.080 just too high because you have to sell your cheap 0:07:30.120 --> 0:07:32.080 house and go to something with a more expensive mortgage, 0:07:32.080 --> 0:07:34.480 maybe you won't and that might make the economy less dynamic. 0:07:34.760 --> 0:07:37.160 And as you say, younger people forming households might be 0:07:37.200 --> 0:07:40.080 priced out. That's not good either. So I think we're 0:07:40.080 --> 0:07:43.360 giving up some short term pain, but you know, might 0:07:43.480 --> 0:07:45.560 end up with a sort of just less dynamic economy 0:07:45.560 --> 0:07:46.080 in the process. 0:07:46.120 --> 0:07:49.600 So your takeaway was the thirty year mortgage has kind 0:07:49.600 --> 0:07:52.080 of saved us from falling off a cliff. 0:07:51.840 --> 0:07:54.840 Edge right now versus other countries, right versus. 0:07:54.520 --> 0:07:57.800 What you see in the UK. But in the long term, 0:07:58.240 --> 0:08:02.480 we're going to lack that dynamism that has made America 0:08:02.520 --> 0:08:02.920 so great. 0:08:03.000 --> 0:08:04.720 It will be less dynamic than we otherwise could be. 0:08:04.760 --> 0:08:06.920 We're always more dynamic than the UK, but I mean 0:08:07.480 --> 0:08:09.040 it's all relative, correctly. 0:08:08.800 --> 0:08:09.680 That's always dynamic. 0:08:09.840 --> 0:08:11.560 Up Papa coming in in terms of when you look 0:08:11.560 --> 0:08:15.440 at the residential real estate market, are home builders getting 0:08:15.440 --> 0:08:17.680 ready to amp up by land and build or what. 0:08:17.760 --> 0:08:19.679 It's a good time to be a home builder because 0:08:19.920 --> 0:08:24.160 you're not competing with existing home inventory, right, So I 0:08:24.200 --> 0:08:28.920 think certainly builders are feeling optimistic and see a great opportunity. 0:08:30.160 --> 0:08:34.680 What level they actually produce homes into, I guess is 0:08:34.760 --> 0:08:37.719 a question. And you know, they got burned. 0:08:37.440 --> 0:08:39.760 Fifteen years ago, were so cautious. 0:08:39.400 --> 0:08:40.959 Along with the rest of us, and they've kind of 0:08:41.840 --> 0:08:45.400 real you know, their business model operates in a way 0:08:45.400 --> 0:08:48.840 where they're taking less risk but also are less nimble 0:08:48.880 --> 0:08:50.880 in terms of capitalizing an opportunity. 0:08:50.920 --> 0:08:53.560 Home Builder stocks are up almost fifty percent this year. Yeah, 0:08:53.600 --> 0:08:57.080 they're doing very well on a tear. Okay, thank you. 0:08:58.679 --> 0:09:00.920 We didn't talk about the Manhattan Law. Sixty three percent 0:09:01.000 --> 0:09:02.120 is ken? How do we not do that? 0:09:02.160 --> 0:09:02.319 True? 0:09:02.400 --> 0:09:05.000 Jennifer Epstein has a great story on the Bloomberg Terminal 0:09:05.160 --> 0:09:10.200 about fifty eight hundred square foot loft that may sell 0:09:10.280 --> 0:09:12.800 for four million, which is pretty low for such a 0:09:12.840 --> 0:09:15.640 gigantic pad. Because there's a renter in there that's going 0:09:15.720 --> 0:09:18.320 to stay forever and only pays twenty three hundred dollars 0:09:18.400 --> 0:09:19.000 a month in rent. 0:09:19.200 --> 0:09:21.000 That's how it works in New York City. All Right, 0:09:21.000 --> 0:09:22.720 Pat and Allison, thank you so much. 0:09:22.960 --> 0:09:26.559 You're listening to the Bloomberg Business Week podcast. Catch us 0:09:26.559 --> 0:09:29.920 live weekday afternoons from three to six Eastern Listen on 0:09:30.000 --> 0:09:34.040 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, 0:09:34.320 --> 0:09:46.840 or watch us live on YouTube. 0:09:47.679 --> 0:09:50.280 All Right, as we try to figure out when we 0:09:50.320 --> 0:09:53.360 should go apply to be a Citadel intern, in the meantime, 0:09:53.400 --> 0:09:55.840 we continue to kind of passe through economic data points 0:09:55.840 --> 0:09:58.960 headlines on a lot of things. We talked about residential 0:09:58.960 --> 0:10:01.640 housing earlier with our team, and we know the current 0:10:01.640 --> 0:10:04.160 issue of Bloomberg Business Week is all about the office 0:10:04.160 --> 0:10:05.520 real estate market and noting that. 0:10:05.480 --> 0:10:08.960 It's getting scary. But then we had essel Green yesterday. 0:10:08.559 --> 0:10:11.559 Selling a stake in a park a Park Avenue tower. 0:10:11.640 --> 0:10:14.640 A value of about two billion put on that skyscraper 0:10:14.640 --> 0:10:17.240 as a result of the deal, and that showed to 0:10:17.320 --> 0:10:20.319 be or was looked at, Matt, is some optimism when 0:10:20.320 --> 0:10:22.360 it comes to the office real estates. Yes, I think 0:10:22.400 --> 0:10:23.679 in certain markets, certain areas. 0:10:23.720 --> 0:10:24.439 I won't use the. 0:10:24.400 --> 0:10:29.520 Tale of two cities cliche, but clearly there's a difference. 0:10:29.640 --> 0:10:31.880 Right if you have a great office building on Park 0:10:31.920 --> 0:10:35.199 Avenue in a place where everybody wants to be, or 0:10:35.240 --> 0:10:38.760 if you've got one of the buildings on the Third 0:10:38.800 --> 0:10:42.560 Avenue canyon down here that nobody wants to work in 0:10:42.960 --> 0:10:45.600 or will ever be able to live in. There's a 0:10:45.720 --> 0:10:48.199 very big difference in the value of those aspets. 0:10:48.200 --> 0:10:49.160 It's not apples to apples. 0:10:49.160 --> 0:10:50.920 Well, we have a great guest to comment on the 0:10:50.920 --> 0:10:53.680 commercial real estate world with us is Michael Chauveau. He 0:10:53.760 --> 0:10:56.160 is founder, chairman and CEO of the international real estate 0:10:56.200 --> 0:10:59.600 development and investment company that bears his name. Is company 0:10:59.600 --> 0:11:02.360 owns the Transamerica Pyramid in San Francisco, brought that back 0:11:02.400 --> 0:11:05.679 in twenty twenty other properties around the world, and we 0:11:05.679 --> 0:11:08.000 welcome him in our Bloomberg Interactive Brokers studio. 0:11:08.040 --> 0:11:10.160 Hello, Hello, Hello, good morning, afternoon. 0:11:11.040 --> 0:11:11.880 It's morning somewhere? 0:11:11.960 --> 0:11:12.720 Is it morning? 0:11:13.000 --> 0:11:13.240 Yeah? 0:11:13.360 --> 0:11:14.720 Bloom this morning? 0:11:14.960 --> 0:11:18.480 When when Carol and I get our Citadel internships, have 0:11:18.559 --> 0:11:20.760 you got a place for us to hang out in Miami? 0:11:21.120 --> 0:11:23.640 By the way, the Citadel Play in Miami is something 0:11:23.640 --> 0:11:26.680 that everybody's been talking about because you know, the move 0:11:26.920 --> 0:11:30.679 of citviel to Miami from Chicago has been a big 0:11:30.800 --> 0:11:35.480 generator of kind of other companies moving there. This whole 0:11:35.480 --> 0:11:37.720 interest thing is a phenomenal marketing tool. Right now you've 0:11:37.760 --> 0:11:42.920 got every top, every top, yeah, coming to Citadel. But 0:11:44.240 --> 0:11:47.000 you know, when when you're looking at the market and 0:11:47.040 --> 0:11:49.320 you were talking about theesyl Green deal, Essel Green deals 0:11:49.400 --> 0:11:51.640 is interesting if you if you go through the details, 0:11:51.840 --> 0:11:54.160 a lot of it was actually a transfer of debt, right, 0:11:54.200 --> 0:11:56.840 so the Japanese firm actually took over a bunch of 0:11:56.840 --> 0:11:58.280 the debt. But the fact. 0:11:58.120 --> 0:12:00.200 That it was great for sl Green. 0:12:00.800 --> 0:12:02.560 It was amazing for us. Greening to the fact that 0:12:02.600 --> 0:12:04.240 the building is worth more than the dead was a 0:12:04.280 --> 0:12:07.040 miracle on that specific acid. But as you said, it's 0:12:07.080 --> 0:12:09.600 not even a tail of two cities, it's it's it's 0:12:09.960 --> 0:12:15.800 a building specific today and the separation between good and 0:12:15.840 --> 0:12:18.600 not good, or good and really bad is huge. There's 0:12:18.640 --> 0:12:22.720 no more in between. It's either your winner, which means 0:12:22.760 --> 0:12:26.520 you're a trophy building you're generating rents of two hundred 0:12:26.520 --> 0:12:29.680 bucks a foot plus in that market's on fire, or 0:12:29.679 --> 0:12:32.360 you're dead. There's no in between. Because, as you said, 0:12:32.360 --> 0:12:34.640 nobody wants to go to Third Avenue because those buildings 0:12:34.679 --> 0:12:38.920 have expired. The idea that real estate lasts forever is 0:12:39.440 --> 0:12:42.440 something that people are now realizing is probably not true. 0:12:42.480 --> 0:12:44.240 By the way, what do you do with those buildings 0:12:44.280 --> 0:12:48.600 on Third Avenue, Because we've heard from people that look 0:12:48.640 --> 0:12:51.440 into it. Not only does nobody want to work in 0:12:51.480 --> 0:12:56.440 them as office buildings, but they cannot be repurposed as residential. 0:12:55.800 --> 0:12:58.480 I'm gonna ask it, when you open your fridge and 0:12:58.520 --> 0:13:00.240 you see the milk expired, what do you do with 0:13:00.240 --> 0:13:02.360 the mill? Throw it away exactly? And that's what's going 0:13:02.400 --> 0:13:04.199 to happen with these buildings. So when we're looking at 0:13:04.240 --> 0:13:06.680 these buildings, we don't buy on Third Avenue because I 0:13:06.720 --> 0:13:09.120 don't really it's it's not our neighborhood. We only focus 0:13:09.200 --> 0:13:12.240 on super prime real estate. But at some point, the 0:13:12.360 --> 0:13:14.440 value of those buildings is going to trade at land 0:13:14.559 --> 0:13:17.120 value and there will be an opportunity to demolish them 0:13:17.160 --> 0:13:19.960 and build a new office, a new building. It's not 0:13:20.000 --> 0:13:22.480 that nobody wants to live there, but you can't convert. 0:13:22.720 --> 0:13:25.640 You can't take bad stock and make make You know, 0:13:25.679 --> 0:13:27.440 you're not going to take the sour milk and make 0:13:27.440 --> 0:13:28.599 a cake out of it, It's still going to be 0:13:28.600 --> 0:13:30.840 a sour cake. And that's really the problem with a 0:13:30.840 --> 0:13:34.760 lot of these conversations about converting office to do RESI. 0:13:35.040 --> 0:13:38.040 It works in really specific cases with buildings that have 0:13:38.120 --> 0:13:39.760 the right column with and things of that native. 0:13:40.520 --> 0:13:42.040 For example, you've been to the Net in London. 0:13:42.120 --> 0:13:42.840 Yeah, gorgeous. 0:13:42.840 --> 0:13:44.760 It was a bank and now it's a really cool 0:13:44.800 --> 0:13:46.359 hotel with like nine restaurants. 0:13:46.520 --> 0:13:48.560 But once we take down the sour cakes, are we 0:13:48.559 --> 0:13:51.280 going to build new cakes? In other words, new offices 0:13:51.360 --> 0:13:52.840 or a we're going to do something else with that lane. 0:13:52.840 --> 0:13:55.680 Well, we're in certain cases whereas there's demand, we're going 0:13:55.760 --> 0:13:57.800 to build new office. I mean, I'm a big believer 0:13:57.960 --> 0:14:02.280 that the idea that everybody's worked from home is nonsense. 0:14:03.200 --> 0:14:05.520 You know, pre COVID, we all remember everybody wanted to 0:14:05.559 --> 0:14:09.640 be Google, Apple, Facebook, We all wanted big offices, hold hands, 0:14:09.960 --> 0:14:12.120 you know, and in collaboration years ago. I'm just going 0:14:12.120 --> 0:14:14.360 to I want to say that every time I come 0:14:14.400 --> 0:14:16.760 to this office, this was built in two thousand and five. 0:14:16.800 --> 0:14:19.160 What a visionary mic was to do this, to bring 0:14:19.200 --> 0:14:22.720 people together, forces you to come together in London as well, 0:14:22.920 --> 0:14:25.160 before you go to your office. This is it's brilliant 0:14:25.200 --> 0:14:26.320 and he's a true visionary. 0:14:26.360 --> 0:14:28.560 It's a fantastic place to work. And our new office 0:14:28.600 --> 0:14:31.280 in London, by the way, I Norman Foster designed that 0:14:31.360 --> 0:14:31.920 as well, So. 0:14:31.920 --> 0:14:34.080 We're so I just toured that actually with Norman. Norman's 0:14:34.080 --> 0:14:36.320 designing four buildings for us. He's also doing the Trans 0:14:36.320 --> 0:14:38.840 America Pyramid in San Francisco, and you know a couple 0:14:38.880 --> 0:14:41.440 of the new office buildings in Miami. The building is amazing. 0:14:42.080 --> 0:14:44.720 But just to go back here to your question, we're 0:14:44.760 --> 0:14:47.360 going to build office, We're gonna build residential. We're going 0:14:47.440 --> 0:14:49.680 to build the right thing at the time, but the 0:14:49.800 --> 0:14:52.120 value of the land will start making sense. 0:14:52.640 --> 0:14:55.640 Go to San Francisco. You bought that Trans America Pyramid 0:14:55.680 --> 0:14:57.240 back in twenty twenty. I think it was six hundred 0:14:57.240 --> 0:14:59.760 and fifty million dollars and you're putting a ton of. 0:14:59.680 --> 0:15:02.240 Money and to renovate it. Any regrets about that property 0:15:02.280 --> 0:15:04.440 and help me understand San Francisco. 0:15:04.000 --> 0:15:06.440 By five times again if I could. It's it's the 0:15:06.600 --> 0:15:09.920 first thing, as I said, focuses only on elevating super 0:15:09.920 --> 0:15:12.360 prime real estate. It doesn't get more prime than the 0:15:12.360 --> 0:15:13.240 Trans America period. 0:15:13.320 --> 0:15:14.480 So what's going on San Francisco. 0:15:14.520 --> 0:15:16.480 We have a cover story on Business Week at San 0:15:16.480 --> 0:15:18.040 Francisco's go through really tough. 0:15:18.080 --> 0:15:20.080 So if you read the press, you know, and you 0:15:20.120 --> 0:15:22.680 think San Francisco is dead and it's about the sink 0:15:22.720 --> 0:15:26.760 and the cable cars are going down the ocean. You 0:15:26.800 --> 0:15:31.080 guys reported recently about the Trans America Pyramid. We've signed 0:15:31.160 --> 0:15:33.800 multiple leases between two hundred dollars to two hundred and 0:15:33.800 --> 0:15:37.080 fifty dollars a foot in the pyramid. Now, that makes 0:15:37.080 --> 0:15:40.720 the Trans America Pyramid the third most expensive building in 0:15:40.760 --> 0:15:43.360 the country, more expensive than the building that essel Green 0:15:43.480 --> 0:15:45.640 just sold as far as rents, right, it's at the 0:15:45.640 --> 0:15:48.200 top of the market is rents. And this is in 0:15:48.280 --> 0:15:50.560 San Francisco, which a market that in general has a 0:15:50.560 --> 0:15:55.400 lot of negativity. It shows you that even in difficult markets, 0:15:54.560 --> 0:15:58.800 there's a flight to quality. And we're getting the investment banks, 0:15:58.840 --> 0:16:00.640 we're getting you know, the BC is there that are 0:16:00.640 --> 0:16:03.040 willing to pay if you give them the right thing. 0:16:03.080 --> 0:16:05.640 And obviously with Norman Foster and we're investing hundreds of 0:16:05.640 --> 0:16:07.840 minutes of dollars, we're seeing that. But San Francis, guys, 0:16:07.880 --> 0:16:12.800 obviously some existential issues that that will eventually get solved. 0:16:12.920 --> 0:16:15.080 I think that there's a lot of a lot of 0:16:15.080 --> 0:16:17.520 eyes on us with what we're doing at the Pyramid, 0:16:17.680 --> 0:16:20.920 with how we're going to rejuvenate the park. We have 0:16:20.920 --> 0:16:24.320 the Redwood Park there to really ignite that whole neighborhood 0:16:24.400 --> 0:16:26.880 Jackson Square, that's going to happen towards the end of 0:16:26.880 --> 0:16:28.440 the year early next year. So there's a lot of 0:16:28.520 --> 0:16:30.800 hope that that brings life to get. 0:16:30.640 --> 0:16:31.560 Ahead of itself. 0:16:31.640 --> 0:16:34.360 Also, I mean, I feel like we've been talking about that, 0:16:34.400 --> 0:16:37.720 the housing problems and situations, the expensive nature of San 0:16:37.760 --> 0:16:41.000 Francisco city like San Francisco for years. So did it 0:16:41.240 --> 0:16:43.440 just kind of need to write itself or is it 0:16:43.520 --> 0:16:44.240 the pandemic. 0:16:44.440 --> 0:16:46.840 I think I think it's a combination. It's it's the 0:16:46.880 --> 0:16:49.680 star align the stars aligned in the wrong location, and 0:16:49.760 --> 0:16:53.840 that's says because the pandemic took a hit. The largest 0:16:54.280 --> 0:16:56.760 groups that suffered from the pandemic, or in the sense 0:16:56.800 --> 0:16:59.600 from an office perspective, is the tech tenants because they 0:16:59.640 --> 0:17:01.840 all all of a sudden figured we can work from home. 0:17:02.080 --> 0:17:04.359 But that's all changing, right You're seeing a change of 0:17:04.400 --> 0:17:07.960 that and right now we're seeing even in San Francisco 0:17:08.320 --> 0:17:12.359 we're seeing Monday to Thursday. You know the card swipes 0:17:12.440 --> 0:17:14.719 right now, people are, people are at the office. Friday 0:17:14.760 --> 0:17:19.040 is still is still quite quiet. But all that really 0:17:19.080 --> 0:17:20.600 means is you got to give people a reason to come. 0:17:21.000 --> 0:17:23.240 You've got to endow or ED. Lola, who's dinner. 0:17:23.280 --> 0:17:25.720 San Francisco Bureau is listening, it says, ask him, what's 0:17:25.760 --> 0:17:28.000 going to happen to downtown San Francisco, Westfield and all 0:17:28.000 --> 0:17:29.320 the corporate real estate is empty. 0:17:29.400 --> 0:17:31.320 Everyone wants it rezoned. 0:17:31.240 --> 0:17:35.560 So well, they're working on ED. But again, part of 0:17:35.640 --> 0:17:37.680 part of the issue there is, as I said earlier, 0:17:38.080 --> 0:17:41.720 not every building works as as as a converse conversion 0:17:41.720 --> 0:17:44.200 to residential. San Francisco from all market needs it more 0:17:44.240 --> 0:17:47.520 than anything else because housing prices are out of control. 0:17:47.680 --> 0:17:50.639 You know, unemployment in San Francisco is sub three percent today, 0:17:50.800 --> 0:17:53.880