WEBVTT - Day Two, Part Two at the Milken Global Conference 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. 0:00:22.239 --> 0:00:24.160 One of the more talked about topics at Milkin this 0:00:24.239 --> 0:00:26.040 year is, yes, we've been talking about the regional banks, 0:00:26.079 --> 0:00:28.800 but we've talked a lot and maybe even more so 0:00:29.080 --> 0:00:31.360 about what's going on in commercial real estate real estate 0:00:31.520 --> 0:00:34.919 in general. Yesterday I had an all star lineup on 0:00:35.200 --> 0:00:37.920 real estate, including this gentleman next to me. Sean Dobson 0:00:38.200 --> 0:00:41.520 is chairman, CEO and chief investment officer at Amherst. They've 0:00:41.560 --> 0:00:43.960 got seventeen point six billion in assets under manager. I 0:00:43.960 --> 0:00:46.120 think that was at the end of last year. They're 0:00:46.159 --> 0:00:49.120 buying their renovating homes, they're investing in single family rentals, 0:00:49.360 --> 0:00:52.280 mortgage backed securities and commercial real estate. So, man, this 0:00:52.400 --> 0:00:54.800 is the person to talk to real estate. 0:00:55.440 --> 0:00:57.800 I've built you up and it's expectations better than that. 0:00:57.840 --> 0:01:00.680 Please go wherever you want to see you again. 0:01:00.800 --> 0:01:01.440 Very good to see you. 0:01:01.640 --> 0:01:03.640 So I know we're going to rehash some of the 0:01:03.680 --> 0:01:05.520 stuff we talked about it on our panel. But you know, 0:01:05.560 --> 0:01:08.560 coming out of the Great Financial Crisis, you took what 0:01:08.720 --> 0:01:11.920 was a difficult environment, but it was really opportunistic for you. 0:01:11.959 --> 0:01:13.840 Correct, it was bull at your company. 0:01:14.200 --> 0:01:16.360 Talk to us about that time and maybe is it 0:01:16.959 --> 0:01:18.640 you know, how you think about some of the crises 0:01:18.680 --> 0:01:19.720 people are talking about now? 0:01:19.760 --> 0:01:20.199 Is it sure? 0:01:20.440 --> 0:01:22.640 That's always the question, is this another two thousand and eight? 0:01:22.760 --> 0:01:24.680 So for us, it was interesting. The roots of our 0:01:24.720 --> 0:01:28.720 firm are actually in analyzing mortgages, which is pretty boring, 0:01:28.760 --> 0:01:30.200 so we can kind of put everyone to sleep talking 0:01:30.200 --> 0:01:30.520 about the. 0:01:31.000 --> 0:01:32.480 Fixtrate mortgage, but with data is important. 0:01:32.480 --> 0:01:34.720 But data is very important, and we tackled this sort 0:01:34.760 --> 0:01:37.360 of over twenty five years where we'd stopped thinking about 0:01:37.360 --> 0:01:39.119 the mortgage market in general and started thinking. 0:01:38.959 --> 0:01:40.760 About each mortgage in each house. 0:01:40.800 --> 0:01:42.360 And so now with you know, with the data and 0:01:42.400 --> 0:01:45.240 analytics and the scale of operation we can we can 0:01:45.600 --> 0:01:47.440 sort of weave to together the story of what's going 0:01:47.480 --> 0:01:49.280 on with the eighty to one hundred million real estate 0:01:49.320 --> 0:01:51.240 parcels in the world and then look at sort of 0:01:51.280 --> 0:01:53.960 the larger, bigger trends. And so with the financial crisis, 0:01:53.960 --> 0:01:57.360 for us, it was all about understanding the level of 0:01:57.440 --> 0:01:59.120 credit risk that was built up in the market that 0:01:59.200 --> 0:02:02.840 was really heavily dippening on home prices continuing to outperform, 0:02:03.080 --> 0:02:06.160 and so we positioned our clients into sort of really 0:02:06.200 --> 0:02:10.440 asymmetric return trades that benefited from housing underperforming. Now, this 0:02:10.520 --> 0:02:13.760 is not two thousand and eight today, not at all, 0:02:14.120 --> 0:02:16.840 not at all. You've got a very different infrastructure. But 0:02:16.880 --> 0:02:18.280 one of the things that came out of two thousand 0:02:18.280 --> 0:02:20.560 and eight was very difficult for the average American family 0:02:20.600 --> 0:02:22.880 to get a mortgage. So we were sitting around the 0:02:22.880 --> 0:02:24.960 table in two thousand and nine kind of exhausted from 0:02:25.520 --> 0:02:28.440 anticipating it and then you know the mess that it occurred, 0:02:28.680 --> 0:02:30.120 and we thought about what is the next And this 0:02:30.160 --> 0:02:31.679 is what Amherst does. We don't do sort of run 0:02:31.680 --> 0:02:33.440 in and buy something and hope it appreciates. For like, 0:02:33.440 --> 0:02:35.000 what's the next thing that we can do to provide 0:02:35.000 --> 0:02:36.840 a lot of service to a lot of people for 0:02:36.919 --> 0:02:39.200 a trade that's very durable. And we thought about what's 0:02:39.200 --> 0:02:41.840 going to happen to all these homes. Families still need 0:02:41.840 --> 0:02:43.120 to live in the home. They need the type of 0:02:43.120 --> 0:02:47.200 amenities that a home presents the local, the school district, 0:02:47.200 --> 0:02:48.720 and that type of thing the things that multi family 0:02:48.720 --> 0:02:50.600 maybe doesn't do a great job providing. They need this 0:02:50.639 --> 0:02:52.280 type of real estate. But if they can't get a mortgage, 0:02:52.400 --> 0:02:54.160 are how are they going to live in this in 0:02:54.200 --> 0:02:57.720 this real estate? So around post financial crisis is okay, 0:02:57.800 --> 0:03:00.000 let's figure it out. And so we built a national 0:03:00.160 --> 0:03:02.880 platform that does all of the basics that leverage off 0:03:02.880 --> 0:03:04.720 of all of our technology. We already were pricing the 0:03:04.720 --> 0:03:07.440 home and thinking about the home as a as an investment, 0:03:07.560 --> 0:03:09.320 and so we said, okay, how do we activate this 0:03:09.400 --> 0:03:12.200 investment when really it's a lot of grander decisions of 0:03:12.240 --> 0:03:15.680 an acquisition and underwrite repair. So we built a national 0:03:15.840 --> 0:03:18.600 general contracting I never thought that Amherstond end up owning 0:03:18.600 --> 0:03:20.880 trucks with people running around fixing the air conditions. 0:03:20.880 --> 0:03:23.440 Well that's what's interesting, right, I mean, because it's rental. 0:03:23.760 --> 0:03:24.320 It's rental. 0:03:24.480 --> 0:03:26.400 Right, Yeah, So in the US about two thirds of 0:03:26.400 --> 0:03:28.280 people own their home, which is pretty good for a 0:03:28.320 --> 0:03:31.760 global comparison of home ownership versus rentorship. But that means 0:03:31.760 --> 0:03:33.560 about a third of American families are living in a 0:03:33.639 --> 0:03:36.640 home that they're leasing. And I spent the first sort 0:03:36.680 --> 0:03:39.680 of two thirds of my career helping and participating in 0:03:39.720 --> 0:03:40.720 the mortgage market and. 0:03:40.680 --> 0:03:41.440 Helping people own. 0:03:41.640 --> 0:03:43.200 And I spent about the last third of my career, 0:03:43.240 --> 0:03:45.120 the most recent third, hopefully not the last third, but 0:03:45.200 --> 0:03:47.400 the most recent third of my career, focus on that 0:03:47.400 --> 0:03:49.800 rental segment that you know, there's so such a big market. 0:03:49.840 --> 0:03:50.720 You're talking about. 0:03:50.520 --> 0:03:54.320 Fifteen million families live in a separately detached home that 0:03:54.320 --> 0:03:58.760 they're leasing from an owner operator. And of those, there's 0:03:58.800 --> 0:04:00.800 only like half a dozen of us that are big 0:04:00.800 --> 0:04:04.000 owner operators. The rest of them are owned by individual investments. 0:04:04.080 --> 0:04:06.280 Does that continue in terms of the amount of people 0:04:06.320 --> 0:04:07.720 that are in rental? And you know, some of the 0:04:07.760 --> 0:04:09.320 things that came up on the panel show, and I 0:04:09.320 --> 0:04:12.320 thought was really interesting. We talked about demographics. Right, older folks, 0:04:12.400 --> 0:04:13.880 they're not leaving their homes. They don't want to have 0:04:13.920 --> 0:04:16.240 that three percent mortgage or four percent or whatever, you know, 0:04:16.320 --> 0:04:18.800 let low mortgage. But there are some things going on. 0:04:19.600 --> 0:04:22.640 So does that stay? Does that continue where people don't 0:04:22.680 --> 0:04:23.240 buy a home? 0:04:23.560 --> 0:04:24.159 I think it does. 0:04:24.200 --> 0:04:26.000 I think it's here to stay. I think that there's 0:04:26.000 --> 0:04:29.159 a little lot consumer preference at stake here. Owning a 0:04:29.160 --> 0:04:31.360 home means sort of committing to stay in one location 0:04:31.440 --> 0:04:33.120 for a longer period of time. We see less that 0:04:33.240 --> 0:04:35.240 about a quarter of our residents move out every year. 0:04:35.320 --> 0:04:35.560 Wow. 0:04:35.600 --> 0:04:37.719 So some of this is it's not time to buy. 0:04:38.160 --> 0:04:40.960 Some of this it's very difficult to buy, and we 0:04:41.040 --> 0:04:43.279 have to provide them the type of services that they're 0:04:43.400 --> 0:04:45.320 accustomed to. Coming out of multi family, we have a 0:04:45.360 --> 0:04:47.680 lot more professional management, so I think there will be 0:04:47.720 --> 0:04:49.920 a lot more growth in the rental segment. One of 0:04:49.960 --> 0:04:51.200 the things that to point out, you just point out 0:04:51.200 --> 0:04:53.920 something super important that most people didn't haven't really fully 0:04:53.960 --> 0:04:56.800 adjusted for yet. I don't think so. My dad is 0:04:56.800 --> 0:04:59.719 eighty five years old. He's fantastic. He's still the smartest 0:04:59.720 --> 0:05:01.840 guy in the room. When my father was born in 0:05:01.920 --> 0:05:05.120 nineteen thirty seven, the life expectancy for a male in 0:05:05.160 --> 0:05:07.120 the US and the UK was sixty three years. 0:05:07.320 --> 0:05:11.200 So he's outperformed, which we love. But today Dad go Dad. 0:05:11.560 --> 0:05:14.200 So today a male born in the US or UK 0:05:14.279 --> 0:05:15.880 has a life expectancy of eighty three years. 0:05:16.360 --> 0:05:17.760 So that twenty year. 0:05:17.680 --> 0:05:21.760 Expansion life expectancy is a third and that changes everything. 0:05:21.800 --> 0:05:23.520 And one of the things that changed was how real 0:05:23.640 --> 0:05:25.080 estate gets recycled. 0:05:24.640 --> 0:05:25.400 Back into the market. 0:05:25.680 --> 0:05:27.599 So the US, you have a decade of underinvesting in 0:05:27.600 --> 0:05:30.400 real estate, and then we have the use case extending extending, 0:05:30.640 --> 0:05:32.320 and then on the front side we have more people 0:05:32.800 --> 0:05:35.320 choosing to rent or requiring to rent. What happened to 0:05:35.320 --> 0:05:36.960 the GFC, So you can just kind of see there's 0:05:37.000 --> 0:05:38.880 a lot of tailwinds behind the asset class. 0:05:39.040 --> 0:05:41.000 This is what I find fascinating about housing, Like the 0:05:41.080 --> 0:05:42.040 supply demand. 0:05:42.040 --> 0:05:44.960 It's so basic, but it really it's. 0:05:44.520 --> 0:05:46.400 Not that complicated that you have to have the demand 0:05:46.600 --> 0:05:48.080 the supply where people want to demand. 0:05:48.080 --> 0:05:50.839 This is another issue. Yeah, another big issue is the age. 0:05:50.640 --> 0:05:52.719 Of our housing stock. The average home United States built 0:05:52.720 --> 0:05:55.480 in nineteen seventy seven. It's got less than eight foot 0:05:55.520 --> 0:05:57.919 ceilings and it's got one bathroom for every three bedroom. 0:05:57.960 --> 0:05:59.479 I grew up in a house in the nineteen fifties, 0:05:59.480 --> 0:05:59.840 don't even know. 0:06:00.360 --> 0:06:02.400 Well, that's not the product that people want today. And 0:06:02.440 --> 0:06:05.159 so we have this unbelievable business that takes that home 0:06:05.200 --> 0:06:07.600 and modernizes it and basically recycles it. 0:06:07.680 --> 0:06:11.719 Well, I guess what I'm also curious about is what 0:06:12.000 --> 0:06:16.680 happened to the oversupply of housing coming off the Great 0:06:16.720 --> 0:06:19.360 Financial Crisis where people were talking about blowing up houses, 0:06:19.720 --> 0:06:22.480 you know, increasing immigration, so that immigrants could buy home, 0:06:22.560 --> 0:06:24.200 Like what happened to that oversupply? 0:06:24.360 --> 0:06:24.800 We bought it? 0:06:24.920 --> 0:06:27.279 We did because it wasn't the supply demanding balance that 0:06:27.320 --> 0:06:29.640 they thought about them was geez, we lost a lot 0:06:29.640 --> 0:06:32.880 of our consumers that were going to buy. But we 0:06:33.080 --> 0:06:35.160 realized is that you didn't lose the fact that people 0:06:35.200 --> 0:06:39.480 want to live there. But someone has to institutionalize the equity. 0:06:39.120 --> 0:06:39.960 Supply to that home. 0:06:40.000 --> 0:06:43.200 So how do you get scaled equity into these micro assets? 0:06:43.200 --> 0:06:44.520 And so that's the challenge that we took on. That's 0:06:44.600 --> 0:06:45.279 kind of thing we like to do. 0:06:45.360 --> 0:06:46.720 So what do you do with home? Like, so talk 0:06:46.720 --> 0:06:48.680 about the building side of it. So, all right, if 0:06:48.680 --> 0:06:51.040 we need more supply. I think one of the things 0:06:51.080 --> 0:06:52.480 that also came up on the panels that there's not 0:06:52.560 --> 0:06:54.640 workers there that you need to necessarily build these. 0:06:54.839 --> 0:06:57.760 Yeah, there are so many multiple variables that make housing 0:06:57.800 --> 0:07:01.320 so expensive to manufacture. About two thirds or maybe sixty 0:07:01.360 --> 0:07:04.279 percent of a home that's built on site cost is labor. 0:07:05.080 --> 0:07:06.680 We like to we point out to people that there 0:07:06.680 --> 0:07:08.279 are more barrels of oil in a home than there 0:07:08.320 --> 0:07:11.760 are sticks and timber. So what do you mean just 0:07:11.840 --> 0:07:14.440 transportation cost of all the materials and the people, and 0:07:14.480 --> 0:07:16.640 so you have to form up this construction site every 0:07:16.680 --> 0:07:18.040 day and then take it down. 0:07:17.960 --> 0:07:19.360 When you're building homes on site. 0:07:19.480 --> 0:07:21.880 So we've really gone deep in trying to understand what 0:07:21.920 --> 0:07:23.720 can we do to bring down the cost of housing. 0:07:24.000 --> 0:07:25.560 One of the things we're doing or innovating is a 0:07:25.600 --> 0:07:28.600 new type of factory where we it's the same home 0:07:28.640 --> 0:07:31.160 you would build on site, but it's built modually. Yeah, 0:07:31.160 --> 0:07:34.120 and then we so our labor pool is quite different. 0:07:34.360 --> 0:07:35.880 We have tradesmen that are you know, they are really 0:07:35.920 --> 0:07:37.640 able to perfect what they do to build the home, 0:07:38.000 --> 0:07:40.480 and then we can sort of, if you will, export 0:07:40.520 --> 0:07:42.800 the labor cost of a small town into the real 0:07:42.880 --> 0:07:45.080 estate market of a big town. So it really unlocks 0:07:45.080 --> 0:07:47.920 it brings to American manufacturing jobs. It allows us to 0:07:47.960 --> 0:07:50.800 create really good, high paying jobs right towns of that 0:07:50.840 --> 0:07:52.240 maybe don't have as much opportunity. 0:07:52.240 --> 0:07:54.040 How much of that is going on, that's fascinating. 0:07:54.200 --> 0:07:55.320 It's been around for a long time. 0:07:55.640 --> 0:07:57.920 Moduls's aroun a long time, but we think that we've 0:07:58.000 --> 0:08:00.520 uncovered a little bit of our of what's happened to 0:08:00.560 --> 0:08:04.920 the market. But the industry is to build a home 0:08:04.960 --> 0:08:07.520 and sell it, or preferably sell a home and then 0:08:07.560 --> 0:08:10.440 build it right, so they don't have a long demand 0:08:10.440 --> 0:08:13.600 function for their manufacturing base. So imagine if BMW or 0:08:13.640 --> 0:08:15.720 General Motors waited for you to order a car. 0:08:15.640 --> 0:08:17.680 Before they started the factory every day. That's how the 0:08:17.760 --> 0:08:18.800 US housing market works. 0:08:18.840 --> 0:08:21.280 There's no they don't have an elongated demand cycle, and 0:08:21.320 --> 0:08:23.320 there's a lot of price risk in the asset itself 0:08:23.320 --> 0:08:25.760 as we're seeing today. So what we think we can 0:08:25.800 --> 0:08:27.840 do by having an opportunity to either sell the home 0:08:28.120 --> 0:08:31.000 or provide the home as a rental and have capital 0:08:31.040 --> 0:08:34.000 for that asset available for years in advance, we were 0:08:34.000 --> 0:08:37.720 striking capital relationships with global investors that last five, seven, 0:08:37.760 --> 0:08:40.559 ten years. So now we can create a really reliable 0:08:40.600 --> 0:08:43.319 long term capital base for the asset before it's built. 0:08:44.600 --> 0:08:49.600 Rental the business of being in renting homes versus building 0:08:49.640 --> 0:08:51.520 and selling what's more profitable. 0:08:52.320 --> 0:08:53.920 It depends on where you are on the cycle. 0:08:54.240 --> 0:08:56.559 The big thing that we point out to people is 0:08:57.200 --> 0:09:00.080 that you need to have a monetization. 0:08:59.559 --> 0:09:01.200 Strategy that moves with interest rates. 0:09:01.320 --> 0:09:03.160 Yeah, and if you're just building them to sell and 0:09:03.200 --> 0:09:06.160 like you're in, affordability is really a difficult thing. Right now, 0:09:06.440 --> 0:09:09.160 all of a sudden, the home builder gets concerned about 0:09:09.160 --> 0:09:12.720 their takeout and they have to shrink their capacity. So 0:09:12.760 --> 0:09:14.640 I think that the winning strategy is going to be 0:09:15.520 --> 0:09:18.640 get manufacturing right and then let the capital markets provide 0:09:18.679 --> 0:09:22.400 you a longer term, more stable exit price for your product. 0:09:22.440 --> 0:09:22.760 All right. 0:09:22.800 --> 0:09:25.120 So affordability is tough right now right, and lot of 0:09:25.160 --> 0:09:27.640 people can't afford a home. You've got higher mortgage rates, 0:09:27.640 --> 0:09:30.640 which dampens buying. So give me an idea of what 0:09:30.679 --> 0:09:34.360 you're anticipating, like the dynamics that are sometimes conflicting, the 0:09:34.400 --> 0:09:36.840 strange that are out there, What does it mean for 0:09:36.880 --> 0:09:40.640 the residential housing market in the next six to twelve months. Yeah, 0:09:40.760 --> 0:09:43.240 terms of demand and pricing and sure, and I know 0:09:43.280 --> 0:09:44.120 it's location location. 0:09:44.280 --> 0:09:47.000 We have our view, Yeah, exactly, it's location dependent for sure. 0:09:47.040 --> 0:09:49.160 But the thing I get you can think about is 0:09:49.200 --> 0:09:52.439 incomes grew a lot and that really grew affordability. Now 0:09:52.480 --> 0:09:55.080 interest rates have risen a lot, and that takes away affordability. 0:09:55.280 --> 0:09:57.520 What we think about this is that the marginal home 0:09:57.640 --> 0:10:00.480 sale is what determines the price. You have the stock 0:10:00.480 --> 0:10:02.480 of homes, then you have the flow of homes. The 0:10:02.520 --> 0:10:06.320 flow is down fifty percent because about seventy percent of 0:10:06.440 --> 0:10:09.280 us homeowners went out and were able to refinance into 0:10:09.280 --> 0:10:11.840 a mortgage that was sub four percent, So that means 0:10:11.880 --> 0:10:14.440 that's seventy percent of the sixty percent of homes, so 0:10:14.480 --> 0:10:15.839 maybe forty fifty percent. 0:10:15.600 --> 0:10:17.200 Of all the homes in the country. 0:10:17.360 --> 0:10:19.720 The person living there would literally have to double their 0:10:19.720 --> 0:10:22.640 mortgage payment to replace the same home. So in the 0:10:22.640 --> 0:10:24.960 mortgage world, we call this the lock and effect when 0:10:25.000 --> 0:10:27.960 a group of homeowners are really disincentivized from moving. So 0:10:28.040 --> 0:10:30.440 think about what that does is supply it brings down, 0:10:30.640 --> 0:10:33.920 So we can't really see home prices fall just because 0:10:34.000 --> 0:10:36.800 rates went up, because there's really no homes for sale. 0:10:37.000 --> 0:10:40.400 In the meantime, I think overall we may be underestimating 0:10:40.440 --> 0:10:43.320 how much incomes grew, so houses may not be as 0:10:43.440 --> 0:10:45.679 unaffordable as they were. But there's definitely a case of 0:10:45.760 --> 0:10:48.160 a strange statistic today that even we can't tell you 0:10:48.200 --> 0:10:50.959 what the how this is going to turn out. But ordinarily, 0:10:51.120 --> 0:10:53.680 if you were to lease a home versus buying the home, 0:10:53.760 --> 0:10:56.040 you would your monthly payment would be a little bit higher, 0:10:56.320 --> 0:10:58.400 and that's because the person leasing the home has to 0:10:58.400 --> 0:10:59.560 take on repairs and maintenance. 0:11:00.640 --> 0:11:02.599 So if you buy the home, you take on the responsibilities. 0:11:02.640 --> 0:11:05.160 So your principal interest, tax and assurance will be slightly 0:11:05.200 --> 0:11:09.439 lower than your rental payment. That's inverted now it's inverted significant. 0:11:09.760 --> 0:11:11.400 It's way cheaper to rent than it is to buy 0:11:11.440 --> 0:11:13.760 because you just had this shot to the system. So 0:11:13.800 --> 0:11:17.160 we think that that probably you will correct itself over time. 0:11:17.559 --> 0:11:20.280 It may correct from rents rising. But you mentioned before 0:11:20.280 --> 0:11:22.760 about sort of locations and location and pricing. One of 0:11:22.760 --> 0:11:24.840 the things that we're really really after this is like, 0:11:24.920 --> 0:11:27.640 not exactly ingenious. People need to be able to afford 0:11:27.640 --> 0:11:30.880 the product. No, yeah, so our rents are sort of 0:11:30.920 --> 0:11:32.880 below twenty five percent of law does this school the 0:11:32.880 --> 0:11:35.320 first year exactly, I try try to sell something your 0:11:35.320 --> 0:11:36.120 customers can afford. 0:11:36.360 --> 0:11:36.720 Ding Ding. 0:11:37.120 --> 0:11:40.200 So for us, we're sort of enthused by the fact 0:11:40.240 --> 0:11:42.559 that our rents are about a quarter of the family's 0:11:43.640 --> 0:11:46.600 gross income and that makes them really sustainable and it 0:11:46.640 --> 0:11:48.000 means they can float as income trix. 0:11:49.640 --> 0:11:50.479 It's interesting. 0:11:50.600 --> 0:11:53.480 So let me go back to all right, so then 0:11:53.760 --> 0:11:55.520 what worries you about the outlook? 0:11:56.320 --> 0:12:00.160 Well, look, you have this crazy cross current now to 0:12:00.200 --> 0:12:02.800 where we're in our view, there was too much fiscal 0:12:02.800 --> 0:12:03.280 support to. 0:12:03.720 --> 0:12:05.440 The economy of an overreaction. 0:12:06.160 --> 0:12:08.840 Now you have the Federal Reserve sort of counterblinance that 0:12:08.880 --> 0:12:11.240 with what we would argue was way too fast of 0:12:11.280 --> 0:12:14.440 reaction in monetary policy. So what this does is it 0:12:14.520 --> 0:12:16.640 just slows down the velocity of capital. So we think 0:12:16.640 --> 0:12:20.640 in ten twenty thirty year cycles, we think about affordability, 0:12:20.720 --> 0:12:23.080 we think about rent growth, income growth, national growth, what 0:12:23.160 --> 0:12:24.120 happens to each city. 0:12:24.559 --> 0:12:26.520 And now you just have a point in time where everyone. 0:12:26.240 --> 0:12:27.719 Is a little bit nervous to make it a big 0:12:27.760 --> 0:12:30.080 decision because you only get to capitalize your investment in 0:12:30.120 --> 0:12:32.640 these things once and you're not sure are they going 0:12:32.640 --> 0:12:35.240 to be less expensive tomorrow or more expensive tomorrow. And 0:12:35.280 --> 0:12:37.200 when you just have this much uncertainty in the market, 0:12:37.240 --> 0:12:39.160 you can see it in quoted volatility, you can see 0:12:39.200 --> 0:12:40.280 it in the shape of the e Oeld curve. 0:12:40.559 --> 0:12:42.719 What the real result of all this is people just 0:12:42.760 --> 0:12:43.559 don't do anything. 0:12:43.800 --> 0:12:45.520 So I think the thing that concerns this is just 0:12:46.120 --> 0:12:49.080 if capital becomes there's really no longer a penalty for 0:12:49.120 --> 0:12:52.120 not being invested, and so it just slows down long 0:12:52.200 --> 0:12:53.080 term capital formation. 0:12:53.960 --> 0:12:56.680 We've just got about forty five seconds left here. So 0:12:56.760 --> 0:12:59.040 you're the residential guy that was on the panel, I mean, 0:12:59.080 --> 0:13:01.080 you guys do mortgage backs, securities. Should you do some 0:13:02.040 --> 0:13:06.120 commercial I'm just curious your take on office since you're. 0:13:06.400 --> 0:13:09.400 Yeah, so we're in there. We we have a portfolio loans, 0:13:09.440 --> 0:13:10.360 we have some loans that have. 0:13:10.320 --> 0:13:13.040 Defaulted, and we've taken some properties over, and I sent 0:13:13.040 --> 0:13:15.079 the last year really working closely with our team to 0:13:15.160 --> 0:13:18.840 understand what the alternative use cases are for office. Suburban 0:13:18.840 --> 0:13:21.840 office probably has more flexibility than urban office, okay, and 0:13:21.920 --> 0:13:24.160 so the suburban offices, we're taking some down and putting 0:13:24.200 --> 0:13:27.000 back logistics centers, and so it's. 0:13:26.880 --> 0:13:28.520 Really like logistics center, it's too. 0:13:28.480 --> 0:13:31.160 Much supply and it's real estate. We can take it down. 0:13:31.240 --> 0:13:33.160 Does the data tell you that there's more more pain 0:13:33.200 --> 0:13:35.120 to come, a lot more pain to come, a lot 0:13:35.160 --> 0:13:37.600 more pain to about. 0:13:38.320 --> 0:13:40.720 Well, I mean a lot of the pains already hear. 0:13:40.720 --> 0:13:42.320 The only question is how long before we all reckon? 0:13:42.360 --> 0:13:44.680 But is it again like the lower tier we talked 0:13:44.679 --> 0:13:45.679 about on the panel. 0:13:45.760 --> 0:13:48.360 There's like the top one percent of the office market. 0:13:48.360 --> 0:13:51.400 Everyone dyings about No. One vandor belt and two in 0:13:51.400 --> 0:13:54.120 all rents. That's interesting but not really important. 0:13:54.960 --> 0:13:57.960 Thank you. So see it flew and you kept your voice. 0:13:58.280 --> 0:13:59.520 Thank you, Thank you so much. 0:13:59.559 --> 0:14:00.440 Fun to have you on the panel. 0:14:00.520 --> 0:14:02.560 Fun to have you back here, Shundabs and Chairman, CEO 0:14:02.600 --> 0:14:04.199 and Chief Investment officer at Amherst. 0:14:04.360 --> 0:14:09.040 Right here on Bloomberg, you're listening to the Bloomberg Business 0:14:09.040 --> 0:14:12.679 Week Podcast. Catch us live weekday afternoons from three to 0:14:12.720 --> 0:14:16.600 six Eastern Listen on Bloomberg dot com, the iHeartRadio app 0:14:16.640 --> 0:14:20.720 and the Bloomberg Business App, or watch us live on YouTube. 0:14:23.320 --> 0:14:25.400 Carol Masser along with Jess Mettin, She's back at our 0:14:25.400 --> 0:14:29.080 Bloomberg Interactive Broker's studio. I'm here live in Beverly Hills 0:14:29.200 --> 0:14:32.840 at the Milkin Institute Global Conference. I'm reading from a book, 0:14:33.320 --> 0:14:35.840 and here's what it says. Those first weeks that United 0:14:35.880 --> 0:14:38.560 were a frenzy of NonStop activity, from the moment I 0:14:38.600 --> 0:14:40.680 walked into the office on my first day to the 0:14:40.680 --> 0:14:44.040 moment my heart stopped thirty seven days later. This book 0:14:44.760 --> 0:14:48.120 is called Turnaround Time, Uniting an Airline and its employees 0:14:48.160 --> 0:14:51.320 in the Friendly Skies, and it's written by Oscar Munios. 0:14:51.360 --> 0:14:53.600 He's the former CEO of United Airlines, which then became 0:14:53.720 --> 0:14:56.880 United Continental and then back to United. He was also 0:14:56.960 --> 0:15:00.600 executive chairman at United. Oscar, it is so wonderful I 0:15:00.640 --> 0:15:03.280 wish I was back in our studio with you, and 0:15:03.360 --> 0:15:07.440 I know you're there with Jess. Congratulations on the book. 0:15:07.560 --> 0:15:10.760 It's very personal, and you talk about your time at United. 0:15:11.360 --> 0:15:14.720 Tell us a little bit about when you landed No 0:15:14.800 --> 0:15:18.720 pun intended as CEO in twenty fifteen. It was five 0:15:18.800 --> 0:15:21.560 years after their merger. What was top of mind? What 0:15:21.600 --> 0:15:22.280 were you seeing? 0:15:23.280 --> 0:15:25.640 Oh, well, thanks, thanks for having me, both of you. 0:15:25.720 --> 0:15:28.280 It's great to see you. And I listened to you 0:15:28.320 --> 0:15:30.600 guys quite a bit, so it's good to see you personally. 0:15:31.160 --> 0:15:34.520 You know, I think we you know, I had a 0:15:34.560 --> 0:15:36.800 lot of insight into the business only because I was 0:15:36.840 --> 0:15:39.360 on the board, but as we all know, being on 0:15:39.400 --> 0:15:41.800 the board and needing something is a very different situation. 0:15:41.960 --> 0:15:44.600 So even in a short few days as I met 0:15:44.600 --> 0:15:48.320 Tonight traveled, I could I could sense, you know, there 0:15:48.320 --> 0:15:51.240 were smiles and nagulation and people wanting him to say hello, 0:15:51.320 --> 0:15:53.840 but there was always this kind of this lingering, holding 0:15:53.840 --> 0:15:56.040 on to a sleeve sort of thing and look at like, 0:15:56.760 --> 0:16:00.120 almost without being dramatic, you know, help me, help us 0:16:00.160 --> 0:16:02.760 sort of thing. So I could send something and I 0:16:02.840 --> 0:16:07.720 think my first my first interview, I use the terms 0:16:08.160 --> 0:16:12.160 I'm finding our team disillusion disenfranchised, and disengaged, you know, 0:16:12.240 --> 0:16:15.400 the three d's, just because they had And I also said, 0:16:15.680 --> 0:16:17.440 I'm a little embarrassed as a board member that we 0:16:17.480 --> 0:16:21.520 didn't see this before. And so that's what I found 0:16:21.760 --> 0:16:24.120 to your question. And then, of course, lots of things happened. 0:16:24.680 --> 0:16:26.640 Everybody wants to know what you're gonna do first, and 0:16:26.680 --> 0:16:29.480 I thought I would ask my team rather than myself. 0:16:32.040 --> 0:16:34.600 All right, there's a lot, I'm sure of conversations and 0:16:34.640 --> 0:16:37.400 talking to your team one month in though you did 0:16:37.440 --> 0:16:41.120 suffer in your fatal heart attack, I can't even imagine 0:16:42.240 --> 0:16:47.120 some of the things that you were dealing with personally, professionally. 0:16:47.560 --> 0:16:49.520 Give us a little bit of what that was like. 0:16:49.560 --> 0:16:51.400 I read a little bit of a passage from your book, 0:16:51.720 --> 0:16:53.000 but I just can't even imagine. 0:16:53.040 --> 0:16:54.480 Take us again back there. 0:16:56.520 --> 0:16:56.720 You know. 0:16:56.920 --> 0:16:58.960