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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters.
Speaker 1: I'm Charlie Pelotondal. The SMP NEZDAK halls surging at or
Speaker 1: near the best level of the day, and we're brought
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Speaker 1: at n r i A dot net. Now let's head
Speaker 1: right over to the first word breaking news desk for
Speaker 1: today's afternoon call. Here she is Sasha the Money. Good afternoon, Charlie.
Speaker 1: As you mentioned, the main US averages are holding strong
Speaker 1: in the green heading into the weekend. Small cap six
Speaker 1: hundred up at one point five percent, US tenure yield
Speaker 1: up at five point three percent. Eight out of ten
Speaker 1: SMP sectors are higher, led by financials. Utilities led to
Speaker 1: the downside down one point three percent. Dow transfer It's
Speaker 1: rise a hundred and forty three points, nasdag Bio takes
Speaker 1: a little changed, and the VIX is down by eight
Speaker 1: point nine percent. Dow Leaders to the upside include Mark JP, JP,
Speaker 1: Morgan Chase, and Goldman Sachs. Losers include Verizon Communications, Procter
Speaker 1: and Gamble, and Coca Cola Bristol Myers. Squib plunged as
Speaker 1: much as eighteen percent today, most since two thousand and
Speaker 1: two after non small cell lung cancer trial of up
Speaker 1: Divo didn't meet endpoint. EO G resources up as much
Speaker 1: as seven point eight percent after the company said it
Speaker 1: plans to boost drilling without spending more. Live from the
Speaker 1: First Word Breaking news desk. I'm Sasha Damuni Charlie. Alrighty,
Speaker 1: thank you very much, Sasha Damony into year Live breaking
Speaker 1: news over your Bloomberg Tip Squawk s q U a
Speaker 1: w K on your terminal. I'm Charlie Pellett. That's a
Speaker 1: Bloomberg business flash. You're listening to Taking stock with Kathleen
Speaker 1: and Pim Fox on Bloomberg Radio. The shares of Marcus
Speaker 1: and Millichat they are hire today by more than five
Speaker 1: percent after reporting quarterly results that exceeded analysts estimates. Here
Speaker 1: to tell us more. As the President and the chief
Speaker 1: executive of Marcus and Millichap, Hassan Naji Hassan, thank you
Speaker 1: very much for being with us. Sam thanks for having
Speaker 1: me on the program. All right, let's begin by taking
Speaker 1: a look at the thirty three billion dollar real estate
Speaker 1: financing company that is Marcus and Millichap. Tell us a
Speaker 1: little bit about the business in the last quarter. We'll
Speaker 1: get to the next quarter in a second, because I
Speaker 1: know you've got some cautionary thoughts about that. Sure, Just
Speaker 1: to give some context from the commercial real estate investment marketplace,
Speaker 1: UH really is dominated by private investors of all commercial
Speaker 1: property sales in the United States, and the last year
Speaker 1: have have been in the one to ten million dollar
Speaker 1: really the microcap segment that are dominated by high network individuals,
Speaker 1: small partnerships, and then local investors. Our company specializes in
Speaker 1: brokering these assets and where the largest firm in the
Speaker 1: United States with about eight offices and specialists who focus
Speaker 1: only on this specialized niche UH. And we have some
Speaker 1: larger clients, institutional clients that do the larger transaction and
Speaker 1: they make up the other sevent of the business. So
Speaker 1: for US investor sentiment and the longer term tendencies for
Speaker 1: private investors to have personal drivers like death, the worst
Speaker 1: partnership breakups, and other financial aspects of their lives becomes
Speaker 1: a more important ingredient than than just the economic trends
Speaker 1: or quarterly swings. Uh So, the what where the market
Speaker 1: has been over the past few years has been in
Speaker 1: a very rapid recovery post the financial crisis. Of course,
Speaker 1: commercial reality yields, which are in the five seven percent range,
Speaker 1: are still attracting a lot of capital to the sector.
Speaker 1: And uh this time around on like other cycles, commercial
Speaker 1: realty is not being over built. Uh The the discipline
Speaker 1: we've seen in the marketplace, both imposed by lenders and
Speaker 1: by developers compared to other cycles, has really kept the
Speaker 1: market very, very healthy. Now, having said that, the market
Speaker 1: is in a transition from this rapid growth that I
Speaker 1: just talked about over the last five years in sales
Speaker 1: velocity and dramatic improvement in vacancies, dramatic improvement in rent
Speaker 1: into a more of a slow growth environment just because
Speaker 1: number one, the pricing has gone up quite a bit.
Speaker 1: Number two, there has been a lot of psychological effects
Speaker 1: in this year so far, in the first half of
Speaker 1: the year that have created some caution among investors. So
Speaker 1: shales so far this year in the marketplace have been
Speaker 1: relatively flat compared to the rapid growth that I talked
Speaker 1: about it over the past few years, and for us,
Speaker 1: our firm is really focused on market share increases and
Speaker 1: market coverage and growing by headcount and productivity. And that's
Speaker 1: why we were able to exceed the market's performance by
Speaker 1: showing a nine percent revenue game over the first half
Speaker 1: off and about a four percent earnings game. And that's
Speaker 1: that's sort of the perspective one where we are and
Speaker 1: where the market is. Well, we're just looking at your
Speaker 1: to date highlights for the company's sales volume right now
Speaker 1: up about sixtent transaction closings higher by six correct, Yeah,
Speaker 1: So I was just gonna say revenue by transaction size
Speaker 1: as well. You've got a nice sweet spot sweet spot
Speaker 1: of the of the market exactly. We're so well aligned
Speaker 1: with that of sales that was in the one to
Speaker 1: ten million dollar range. Uh, and we're the dominant brand
Speaker 1: with a lot of room to grow in that segment.
Speaker 1: And that's what's really encouraging for us in terms of
Speaker 1: our long term plans. Looking in the short term, there
Speaker 1: is a lot of caution in the marketplace. Lenders are
Speaker 1: being very careful and therefore transactions are taking longer to market,
Speaker 1: longer to close, and even though that affects the short
Speaker 1: term sales velocity and slows everything down over the long term.
Speaker 1: We think that's constructive because is it's eliminating or let's say,
Speaker 1: at least reducing the risk of overbuilding, and it's reducing
Speaker 1: the risk of over leveraging, which are really the two
Speaker 1: ingredients that typically disrupt good expansion cycle for commercial real estate. Well,
Speaker 1: I note that for example, occupancies have been rising as
Speaker 1: well as construction trends. They remain favorable for multi family, retail,
Speaker 1: office as well as industrial exactly, tell us a little
Speaker 1: bit about commercial real estate yields. Are they still compelling? Well, Pam,
Speaker 1: that's the that's the bottom line is that in this
Speaker 1: low interest rate, low yield environment, when you look around
Speaker 1: alternative investments and where where investors can look for some
Speaker 1: reliable yield commercial real estate depending on the quality and
Speaker 1: depending on the market. Of course, it's a broad statement,
Speaker 1: but the averages show of five to seven percent yield
Speaker 1: going in yield on the asset class. Now, if you're
Speaker 1: appetite for risk is higher, and you can invest in
Speaker 1: let's say, a hotel property or a shopping center that
Speaker 1: can be turned around with we tenanting and some work
Speaker 1: that you can do to add value to it. Those
Speaker 1: yields can be much higher than this general range if
Speaker 1: your appetite for risk is not so strong and you'd
Speaker 1: rather have more of a of a lower risk income yield. Uh.
Speaker 1: There's plenty of appts, particularly apartments, and a market where
Speaker 1: the yields are in the three to four present range,
Speaker 1: but there's hardly any product being built, so there's a
Speaker 1: very little or supply risk. We gotta we gotta leave
Speaker 1: it there. I'm sorry, has some Naji. He's the president,
Speaker 1: the chief executive of Marcus and Millichap. The shares are
Speaker 1: higher by more than five percent. This is Bloomberg coming
Speaker 1: up on taking stock. We're going to take stock of
Speaker 1: the campaign for president, more on Hillary Clinton and Donald
Speaker 1: Trump as he unveils his economic team. That's next