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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the radio plus mobile LAP and on your radio.

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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters.

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Speaker 1: I'm Charlie Pelotondal. The SMP NEZDAK halls surging at or

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Speaker 1: near the best level of the day, and we're brought

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Speaker 1: to you by National Realty Providers of one hundred percent

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Speaker 1: satisfaction guaranteed New York City Realty the investments see them

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Speaker 1: at n r i A dot net. Now let's head

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Speaker 1: right over to the first word breaking news desk for

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Speaker 1: today's afternoon call. Here she is Sasha the Money. Good afternoon, Charlie.

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Speaker 1: As you mentioned, the main US averages are holding strong

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Speaker 1: in the green heading into the weekend. Small cap six

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Speaker 1: hundred up at one point five percent, US tenure yield

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Speaker 1: up at five point three percent. Eight out of ten

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Speaker 1: SMP sectors are higher, led by financials. Utilities led to

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Speaker 1: the downside down one point three percent. Dow transfer It's

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Speaker 1: rise a hundred and forty three points, nasdag Bio takes

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Speaker 1: a little changed, and the VIX is down by eight

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Speaker 1: point nine percent. Dow Leaders to the upside include Mark JP, JP,

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Speaker 1: Morgan Chase, and Goldman Sachs. Losers include Verizon Communications, Procter

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Speaker 1: and Gamble, and Coca Cola Bristol Myers. Squib plunged as

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Speaker 1: much as eighteen percent today, most since two thousand and

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Speaker 1: two after non small cell lung cancer trial of up

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Speaker 1: Divo didn't meet endpoint. EO G resources up as much

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Speaker 1: as seven point eight percent after the company said it

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Speaker 1: plans to boost drilling without spending more. Live from the

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Speaker 1: First Word Breaking news desk. I'm Sasha Damuni Charlie. Alrighty,

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Speaker 1: thank you very much, Sasha Damony into year Live breaking

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Speaker 1: news over your Bloomberg Tip Squawk s q U a

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Speaker 1: w K on your terminal. I'm Charlie Pellett. That's a

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Speaker 1: Bloomberg business flash. You're listening to Taking stock with Kathleen

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Speaker 1: and Pim Fox on Bloomberg Radio. The shares of Marcus

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Speaker 1: and Millichat they are hire today by more than five

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Speaker 1: percent after reporting quarterly results that exceeded analysts estimates. Here

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Speaker 1: to tell us more. As the President and the chief

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Speaker 1: executive of Marcus and Millichap, Hassan Naji Hassan, thank you

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Speaker 1: very much for being with us. Sam thanks for having

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Speaker 1: me on the program. All right, let's begin by taking

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Speaker 1: a look at the thirty three billion dollar real estate

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Speaker 1: financing company that is Marcus and Millichap. Tell us a

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Speaker 1: little bit about the business in the last quarter. We'll

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Speaker 1: get to the next quarter in a second, because I

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Speaker 1: know you've got some cautionary thoughts about that. Sure, Just

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Speaker 1: to give some context from the commercial real estate investment marketplace,

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Speaker 1: UH really is dominated by private investors of all commercial

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Speaker 1: property sales in the United States, and the last year

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Speaker 1: have have been in the one to ten million dollar

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Speaker 1: really the microcap segment that are dominated by high network individuals,

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Speaker 1: small partnerships, and then local investors. Our company specializes in

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Speaker 1: brokering these assets and where the largest firm in the

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Speaker 1: United States with about eight offices and specialists who focus

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Speaker 1: only on this specialized niche UH. And we have some

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Speaker 1: larger clients, institutional clients that do the larger transaction and

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Speaker 1: they make up the other sevent of the business. So

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Speaker 1: for US investor sentiment and the longer term tendencies for

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Speaker 1: private investors to have personal drivers like death, the worst

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Speaker 1: partnership breakups, and other financial aspects of their lives becomes

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Speaker 1: a more important ingredient than than just the economic trends

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Speaker 1: or quarterly swings. Uh So, the what where the market

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Speaker 1: has been over the past few years has been in

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Speaker 1: a very rapid recovery post the financial crisis. Of course,

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Speaker 1: commercial reality yields, which are in the five seven percent range,

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Speaker 1: are still attracting a lot of capital to the sector.

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Speaker 1: And uh this time around on like other cycles, commercial

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Speaker 1: realty is not being over built. Uh The the discipline

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Speaker 1: we've seen in the marketplace, both imposed by lenders and

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Speaker 1: by developers compared to other cycles, has really kept the

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Speaker 1: market very, very healthy. Now, having said that, the market

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Speaker 1: is in a transition from this rapid growth that I

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Speaker 1: just talked about over the last five years in sales

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Speaker 1: velocity and dramatic improvement in vacancies, dramatic improvement in rent

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Speaker 1: into a more of a slow growth environment just because

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Speaker 1: number one, the pricing has gone up quite a bit.

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Speaker 1: Number two, there has been a lot of psychological effects

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Speaker 1: in this year so far, in the first half of

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Speaker 1: the year that have created some caution among investors. So

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Speaker 1: shales so far this year in the marketplace have been

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Speaker 1: relatively flat compared to the rapid growth that I talked

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Speaker 1: about it over the past few years, and for us,

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Speaker 1: our firm is really focused on market share increases and

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Speaker 1: market coverage and growing by headcount and productivity. And that's

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Speaker 1: why we were able to exceed the market's performance by

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Speaker 1: showing a nine percent revenue game over the first half

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Speaker 1: off and about a four percent earnings game. And that's

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Speaker 1: that's sort of the perspective one where we are and

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Speaker 1: where the market is. Well, we're just looking at your

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Speaker 1: to date highlights for the company's sales volume right now

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Speaker 1: up about sixtent transaction closings higher by six correct, Yeah,

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Speaker 1: So I was just gonna say revenue by transaction size

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Speaker 1: as well. You've got a nice sweet spot sweet spot

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Speaker 1: of the of the market exactly. We're so well aligned

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Speaker 1: with that of sales that was in the one to

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Speaker 1: ten million dollar range. Uh, and we're the dominant brand

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Speaker 1: with a lot of room to grow in that segment.

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Speaker 1: And that's what's really encouraging for us in terms of

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Speaker 1: our long term plans. Looking in the short term, there

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Speaker 1: is a lot of caution in the marketplace. Lenders are

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Speaker 1: being very careful and therefore transactions are taking longer to market,

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Speaker 1: longer to close, and even though that affects the short

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Speaker 1: term sales velocity and slows everything down over the long term.

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Speaker 1: We think that's constructive because is it's eliminating or let's say,

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Speaker 1: at least reducing the risk of overbuilding, and it's reducing

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Speaker 1: the risk of over leveraging, which are really the two

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Speaker 1: ingredients that typically disrupt good expansion cycle for commercial real estate. Well,

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Speaker 1: I note that for example, occupancies have been rising as

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Speaker 1: well as construction trends. They remain favorable for multi family, retail,

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Speaker 1: office as well as industrial exactly, tell us a little

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Speaker 1: bit about commercial real estate yields. Are they still compelling? Well, Pam,

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Speaker 1: that's the that's the bottom line is that in this

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Speaker 1: low interest rate, low yield environment, when you look around

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Speaker 1: alternative investments and where where investors can look for some

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Speaker 1: reliable yield commercial real estate depending on the quality and

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Speaker 1: depending on the market. Of course, it's a broad statement,

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Speaker 1: but the averages show of five to seven percent yield

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Speaker 1: going in yield on the asset class. Now, if you're

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Speaker 1: appetite for risk is higher, and you can invest in

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Speaker 1: let's say, a hotel property or a shopping center that

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Speaker 1: can be turned around with we tenanting and some work

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Speaker 1: that you can do to add value to it. Those

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Speaker 1: yields can be much higher than this general range if

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Speaker 1: your appetite for risk is not so strong and you'd

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Speaker 1: rather have more of a of a lower risk income yield. Uh.

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Speaker 1: There's plenty of appts, particularly apartments, and a market where

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Speaker 1: the yields are in the three to four present range,

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Speaker 1: but there's hardly any product being built, so there's a

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Speaker 1: very little or supply risk. We gotta we gotta leave

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Speaker 1: it there. I'm sorry, has some Naji. He's the president,

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Speaker 1: the chief executive of Marcus and Millichap. The shares are

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Speaker 1: higher by more than five percent. This is Bloomberg coming

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Speaker 1: up on taking stock. We're going to take stock of

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Speaker 1: the campaign for president, more on Hillary Clinton and Donald

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Speaker 1: Trump as he unveils his economic team. That's next