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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Coarclay, and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: And we're deal making for Elon Musk. His SpaceX has

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Speaker 2: reached a deal worth about seventeen billion dollars with EchoStar

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Speaker 2: for spectrum licenses that it's going to use to beef

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Speaker 2: up its Starlink satellite network. We want to talk more

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Speaker 2: about this deal and what it means for both companies

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Speaker 2: and the stock of EchoStar, which is doing quite nicely today.

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Speaker 2: I want to bring in John Butler, Bloomberg Intelligence senior

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Speaker 2: at Telecom Analyst. He's joining us from our Bloomberg Princeton office. John,

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Speaker 2: good to see you. Let's just talk with talk about

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Speaker 2: what this deal is going to allow SpaceX to do

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Speaker 2: that it can't currently do.

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Speaker 3: So the key to this deal alexis is a spectrum

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Speaker 3: called AWS four. So if you look at Starlink and

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Speaker 3: its sprivals in the satellite space, they all hold spectrum,

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Speaker 3: but they're not allowed to offer wireless spectrum, I'm sorry,

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Speaker 3: wireless services over that spectrum. AWS four spectrum, according to

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Speaker 3: the FCC, can be used flexibly. It's called flexible use spectrum,

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Speaker 3: meaning the satellite providers can offer anything from mobile services

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Speaker 3: to satellite data, downlink services, video, whatever. It's open use

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Speaker 3: spectrum if you want to think of it that way.

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Speaker 3: And so Starlink getting its hands on this key spectrum

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Speaker 3: will allow them at some point in the future to

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Speaker 3: potentially enter the wireless market as a competitor to AT

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Speaker 3: and T, Verizon and T Mobile.

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Speaker 2: So Echostars shareholders seem to like this deal. The stock

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Speaker 2: is up about fourteen percent right now. What are they

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Speaker 2: going to do with the proceeds? What will Echo Star

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Speaker 2: do with the proceeds of the sale?

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Speaker 3: So for Echostarre, it's a very good deal as well.

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Speaker 3: They have really struggled to get their wireless service off

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Speaker 3: the ground. They've been building this five G wireless network

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Speaker 3: and have a relatively weak prepaid brand called Boost and

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Speaker 3: they've really struggled there. So this brings in much needed

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Speaker 3: funds for them to pay down debt. They've been a

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Speaker 3: bit stretched on that front, over leveraged, and you know,

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Speaker 3: this deal together with a deal a couple of weeks

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Speaker 3: ago with AT and T is going to bring in

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Speaker 3: billions of dollars to reduce debt. That's number one, and

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Speaker 3: number two, it brings in fresh capital for them to

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Speaker 3: invest in the business. And I have a feeling they're

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Speaker 3: probably going to take a step back and reevaluate the

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Speaker 3: strategy here based on the fresh funding and side what

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Speaker 3: the best avenues of growth may be going forward.

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Speaker 2: And I'm wondering if this is going to satisfy the

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Speaker 2: FCC this deal, because I know that they were sort

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Speaker 2: of on Echo Star's case, if you will. They wanted

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Speaker 2: them to sell some of their airwaves as the company

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Speaker 2: looks to roll out its five G technology. I know

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Speaker 2: they sold some spectrum licenses to AT and T recently.

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Speaker 2: So do you think this is going to sort of

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Speaker 2: take the FCC off their backs?

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Speaker 3: I do. I mean, I think Starlink was working with

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Speaker 3: the FCC. They had written a letter about Echostars under

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Speaker 3: use of this spectrum. Starlike obviously really wants to get

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Speaker 3: their hands on it. And I think the FCC really

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Speaker 3: took their side on this one. I think they understood

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Speaker 3: that EchoStar, being the only owner of this flexible use.

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Speaker 3: Spectrum had not really put it to use to date,

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Speaker 3: so in their view it was being underutilized, and being

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Speaker 3: such a glasset felt that, you know, a sale might

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Speaker 3: make sense, and so they really Echo Star really got

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Speaker 3: into it with the FCC trying to protect those licenses.

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Speaker 3: But in the end here, I think, if you want

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Speaker 3: to think of it this way, the FCC won the

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Speaker 3: day and net I think it's a good deal for

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Speaker 3: both echo Star and Starlink and the FCC.

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Speaker 2: Now I knew SpaceX or Starlink had a deal with

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Speaker 2: T Mobile, right, how is this spectrum acquisition with EchoStar different,

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Speaker 2: if at all?

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Speaker 3: So, I think ultimately Starlink could go from being a

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Speaker 3: partner with T Mobile to being a competitor of Team Mobiles.

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Speaker 3: As I said a moment ago, this Spectrum opens the

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Speaker 3: door for them to get into wireless directly without having

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Speaker 3: to partner with a terrestrial carrier. The current deal with

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Speaker 3: T Mobile basically has Starlink. I think the best way

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Speaker 3: to think about it is they're almost like a tower company.

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Speaker 3: They're providing the space based cell sites, if you will,

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Speaker 3: to carry T Mobile traffic and they get paid a

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Speaker 3: fee for that. But they're not earning the level of

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Speaker 3: profits that you could as as a direct carrier. So

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Speaker 3: down the road, Starlink, understanding this, wants to enter the

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Speaker 3: cellular business directly. They have a lot to do before

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Speaker 3: that happens, but I think it longer term puts the

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Speaker 3: deal with T Mobile in jeopardy.

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Speaker 2: And in the remaining seconds we have is seventeen billion

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Speaker 2: dollars a fair price for the spectrum licenses? Do you think?

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Speaker 3: You know? Spectrums a very i liquid market, so it's

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Speaker 3: tough to gauge valuations. But in my mind, I look

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Speaker 3: at it as a fare price given the potential again

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Speaker 3: for Starlink to enter this huge market down the road,

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Speaker 3: and they're very well capped bpitalized as you know, so

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Speaker 3: I think those two factors together probably make it a

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Speaker 3: good deal.

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Speaker 4: Stay with us more from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: I've got a big bank merger to talk about here

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Speaker 2: this Monday, PNC agreeing to buy Colorado's first bank for

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Speaker 2: about four billion dollars. This is a big push by

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Speaker 2: PNC to really go coast to coast and here to

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Speaker 2: break it down for US as Herman Shan Bloomberg Intelligence

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Speaker 2: as senior analyst for US regional banks joining us live

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Speaker 2: here in a New York studios. Herman, good to see you.

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Speaker 4: Thanks for having me.

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Speaker 2: First off, I'm just wondering our regulator is going to

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Speaker 2: be okay with this because the combined company is going

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Speaker 2: to hold fifteen percent of deposits in what is it, Colorado.

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Speaker 5: Yeah, in the Denver market. So that's what's real push

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Speaker 5: for this deal in particular. But the regulartory landscape has

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Speaker 5: been really great for banking and getting bank deals done.

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Speaker 5: That's why you've seen some more bank deals over the

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Speaker 5: past couple of months. You saw Huntington, which is based

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Speaker 5: in Ohio, go into Texas for Vera tex And you've

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Speaker 5: see in emerging vehicles in the Southeast with so Novas

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Speaker 5: and Pinnacle, And this is sort of like the third

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Speaker 5: large regional bank deal over.

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Speaker 4: The past couple of months.

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Speaker 5: So it just sort of signals that the bank, the

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Speaker 5: Trump administration is really open for bank of an am.

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Speaker 6: And this is not PNC's first attempt at really expanding

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Speaker 6: its Colorado presence. It had previously sought to open sixteen

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Speaker 6: locations in Colorado. Why is Colorado such a hot market

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Speaker 6: for P ANDC?

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Speaker 3: Right?

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Speaker 5: I would take a step back and sort of highlight

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Speaker 5: that the P and C, which is mostly in the Northeast,

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Speaker 5: mid Atlantic a Midwest, that they've expanded across the sun

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Speaker 5: Belt states in Colorado with the twenty twenty one deal

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Speaker 5: for BBVA US and they sort of double down on

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Speaker 5: those markets with this expansion plan to grow organically by

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Speaker 5: opening up new branches, and this deal today that they

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Speaker 5: announced really sort of supports that growth and accelerates it

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Speaker 5: in Colorado and in Arizona.

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Speaker 2: So, Herman, you obviously you're a specialist here in US

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Speaker 2: regional banks. This is your sweet spot. So I'm just

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Speaker 2: wondering as you look out onto the landscape now, who

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Speaker 2: might be the next takeover candidate? Who might we be

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Speaker 2: talking about in the not too distant future.

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Speaker 5: Yeah, So you've seen some of these deals where these

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Speaker 5: slower growth Midwest banks grow into areas like Texas, Florida, Colorado.

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Speaker 5: So the banks are sort of smaller in size and

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Speaker 5: we're talking about the first banks about twenty billion in assets,

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Speaker 5: So banks of Slummer of that size in these higher

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Speaker 5: growth markets are really attractive to some of these larger institutions.

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Speaker 6: So with this purchase, PNC's total assets approaches six hundred

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Speaker 6: billion dollars. It will bring closer to the number one

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Speaker 6: regional bank, which is US Bank Corp.

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Speaker 4: Is US Bankrup still a regional bank?

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Speaker 5: Yeah, I would say there are three super regional banks,

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Speaker 5: and I will put P and C, US Bank Corp

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Speaker 5: and Truest where they're sort of below that seven to

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Speaker 5: fifty mark, but larger than your typical regional bank. And

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Speaker 5: they P and C now is a coast to coast lender,

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Speaker 5: so and have operations all from the northeast all the

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Speaker 5: way down to Florida, Texas, California, So you can't really

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Speaker 5: call them a regional bank at this point.

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Speaker 4: I would view them as more super regional.

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Speaker 2: And I want to tie it back to the FED

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Speaker 2: next week in interest rates, because don't all roads really

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Speaker 2: lead there? At this point, I want to talk about

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Speaker 2: what again, if this is going to be an environment

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Speaker 2: of lower interest rates for the foreseeable future, what is

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Speaker 2: this going to mean for the banks, but especially these

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Speaker 2: smaller regional banks, because I'm thinking it may even squeeze

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Speaker 2: their profitability more.

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Speaker 1: Yeah.

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Speaker 5: Yeah, it's interesting because we had a few federick cut

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Speaker 5: at the end of last year, and the regional banks

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Speaker 5: that I cover were able to navigate that pretty well.

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Speaker 5: They're able to keep their net interest margins, which is

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Speaker 5: a key metric for profitability, fairly stable. And that's one

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Speaker 5: of the reasons why they've been able to do that

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Speaker 5: is they've been able to lower their deposit costs, which

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Speaker 5: was one of the things that really is a key

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Speaker 5: metric for banks to really show top line growth. On

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Speaker 5: top of that, lower interest rates could help.

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Speaker 4: Loan growth.

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Speaker 5: You've seen some companies like Rockets Mortgage be very abuiliant

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Speaker 5: for lower interest rates, and so that could help improve

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Speaker 5: some of the demand for lending, and that's something that

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Speaker 5: we're seeing so far over.

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Speaker 4: The first half of the year.

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Speaker 6: So they'll make it up in volume. What they lose

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Speaker 6: in profitability, they plan to make up.

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Speaker 5: They can make it in volume. You'll see some dents

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Speaker 5: in like the rates that they charge for loans, but

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Speaker 5: they'll also make it up in volume and lowering their

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Speaker 5: funding costs.

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Speaker 6: When you look at the landscape overall of M and

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Speaker 6: A in the banking sector. It feels like we've been

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Speaker 6: waiting for something to happen for a long time, and

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Speaker 6: maybe this is kind of the domino, the first domino

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Speaker 6: that falls. Yeah, well, the big banks and I'm here,

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Speaker 6: I'm talking about the JP Morgans, the Bank of America's

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Speaker 6: well as Fargo's.

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Speaker 4: Will they play any role in this consolidation.

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Speaker 5: They're already too big, so there's that they are prohibited

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Speaker 5: from from doing such deals because they just have dominant

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Speaker 5: market share in their markets. One thing that we did

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Speaker 5: see during the height of the regional banking crisis a

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Speaker 5: couple of years back is that JP Morgan bought First

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Speaker 5: Republic in an FDIC failed bank acquisition. So if we

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Speaker 5: in the sense that if there we do get to

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Speaker 5: a place like that, that's when the big banks can play,

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Speaker 5: but in a straight M and A type scenario.

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Speaker 4: To clean up messes. They can clean can't.

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Speaker 5: Clean up messes, but they can't outwardly buy a bank

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Speaker 5: at this point, they're just way too big.

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Speaker 2: And just what about the consumer out there only shopping

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Speaker 2: for the best deal. You know, it used to be

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Speaker 2: that these smaller regional banks would be the place to

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Speaker 2: go for the better CD rates, right or a more

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Speaker 2: friendly mortgage terms. Is that still the case in the

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Speaker 2: thirty seconds we've got Yeah?

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Speaker 3: Sure.

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Speaker 5: So that's what really great about these markets that P

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Speaker 5: and C is going to where they can have really

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Speaker 5: dominant market share in Denver and Arizona and just having

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Speaker 5: that marketing and having the branches really helps with deposit

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Speaker 5: taking and helping your consumer out.

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Speaker 4: Stay with us more from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: I want to talk a little commercial real estate. Now,

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Speaker 2: call me crazy, but I actually get excited, Scarlett about

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Speaker 2: commercial real estate, right, John, because I think it tells

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Speaker 2: us a lot about the broader economy. Let me look

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Speaker 2: at how it's doing.

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Speaker 6: Yeah, it's long term investments and so they don't move things,

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Speaker 6: aren't reacting to day to day movements and expectations on

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Speaker 6: interest rates. But once rates are moving down, then you

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Speaker 6: can expect slow gradual movement. But see change in how

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Speaker 6: people perceive it.

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Speaker 2: So where are we now? Right after years of high

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Speaker 2: inflation limited growth, is the commercial real estate industry coming

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Speaker 2: back to life? We wanted to bring in a pro.

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Speaker 2: She's here in on New York studio, Lisa, the managing

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Speaker 2: partner and head of real estate at Eisner Amper. Lisa,

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Speaker 2: thanks so much for being with us. Just in my

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Speaker 2: little cosmic world here in Midtown east of Manhattan. I'm

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Speaker 2: seeing storefronts that had gone empty for so long now

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Speaker 2: having tenants. I'm going to call it a mini upswing.

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Speaker 2: Am I right in saying that.

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Speaker 7: Well, thank you for having me, And yes, I get

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Speaker 7: excited too while we talk about commercial real estate.

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Speaker 4: So we're in the right group.

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Speaker 7: So office in New York has definitely taken a new

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Speaker 7: surgeons again. And so I think I made a prediction

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Speaker 7: at the beginning of this year that's saying by the

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Speaker 7: end of twenty twenty six that we were going to

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Speaker 7: be pretty much at capacity for New York City, and

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Speaker 7: vacancy for office is definitely moving down. And so rents

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Speaker 7: in New York City are about little under seventy five

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Speaker 7: dollars a square foot and the level of volume is

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Speaker 7: really close to twenty nineteen, which is really amazing when

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Speaker 7: you're seeing that so so pree pandemic pre pandemic levels

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Speaker 7: is the amount of volume that we've seen in office

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Speaker 7: leasing in New York City, and you can be excited

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Speaker 7: about other cities.

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Speaker 4: San Francisco as well.

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Speaker 7: We talked about earlier in the year with AI dollars

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Speaker 7: being spent. So when you look at fifty five billion

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Speaker 7: dollars of AI that was gone has been spent in

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Speaker 7: San Francisco rents, there are about seventy two dollars a foot.

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Speaker 7: So for Class I know, that's really exciting. So for

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Speaker 7: Class A buildings in San Francisco area, that's where the

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Speaker 7: money's going.

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Speaker 4: Now, whether we have a bubble or a boom or

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Speaker 4: what's going.

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Speaker 7: On with AI, it remains to be seen, but people

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Speaker 7: are Initial reports are that people are excited and they

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Speaker 7: do see productivity with AI dollars being spent.

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Speaker 4: So you know the excitement. I'm excited.

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Speaker 2: It's it's there, it's real.

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Speaker 6: We can feel it from you, Lisa, So it makes

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Speaker 6: sen sense. San Francisco, it's an AI story. What's the

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Speaker 6: story here in New York Because the call for folks

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Speaker 6: to return to work the city being busy once again

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Speaker 6: has been in process for a couple of years.

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Speaker 4: Now, is there anything that kind of flipped a switch?

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Speaker 7: So it's again, what's here in the market in demand?

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Speaker 7: And so there wasn't a lot of office being put

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Speaker 7: back into the market, and so now people are absorbing

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Speaker 7: those office units are there. We always know New York

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Speaker 7: is still a hub for financial, for entertainment, for all that,

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Speaker 7: it's still a capital of the world.

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Speaker 4: So people want to be here.

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Speaker 7: They want to live here, they want to work here,

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Speaker 7: and they want to be in that environment. So just

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Speaker 7: creating that excitement around New York again is really going

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Speaker 7: to help with the vacancies and bring back the retail

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Speaker 7: and the retail experience to life, which what you noticed

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Speaker 7: earlier on Yeah.

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Speaker 2: I mean, there's a big high rise going up not

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Speaker 2: too far from where I live, and I'm just wondering

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Speaker 2: who the anchor stores on the bottom will be, because

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Speaker 2: sometimes those buildings go up and those anchor stores remain

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Speaker 2: empty for a long time.

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Speaker 7: So most of those projects have the anchor tenants pretty

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Speaker 7: much in place when they're penciling or they're doing they're

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Speaker 7: mapping out the deals and so making sure that it

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Speaker 7: really does create that energy and that vibe that for

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Speaker 7: the multifamily. And again, when you look at multifamily, you

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Speaker 7: really have to make sure that you're able to sustain

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Speaker 7: the construction costs and the zoning and so a lot

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Speaker 7: of goes into those projects to make sure that those

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Speaker 7: will really work, and everybody wants it to work. That's

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Speaker 7: why we have the City of Yes mandates now and

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Speaker 7: things are going through. So really, the excitement I think

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Speaker 7: is there, and I think it's just as you had

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Speaker 7: said before. It's the long term planning. It's not going

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Speaker 7: to change overnight. It's really knowing that where we're going

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Speaker 7: to be in the next five to ten years with

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Speaker 7: some of these properties.

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Speaker 4: But the rules of the road have changed, right.

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Speaker 6: You had the One Big Beautiful Bill, which you know,

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Speaker 6: the President is a former property developer and in many

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Speaker 6: ways still is a property developer, So I mean, he

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Speaker 6: knows what the industry wants and likes.

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Speaker 4: What did you see in your industry from that bill?

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Speaker 7: So the real estate industry fed fairly well with One

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Speaker 7: Big Beautiful Bill. There's of incentives for both affordable housing

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Speaker 7: for low income housing credits that were awarded by the

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Speaker 7: federal government. What the states do are now a different

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Speaker 7: story of how they award those experience.

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Speaker 4: Points for affordable housing.

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Speaker 7: Same thing with qualified Opportunity zones, where there's in the

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Speaker 7: One Big Beautiful Bill there are incentives to go for

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Speaker 7: some of these economic zones and create new spaces in there,

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Speaker 7: things with bonus appreciation. So the incentives are there in

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Speaker 7: One Big Beautiful Bill. It's whether or not the states

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Speaker 7: and the federal governments are going to be able to

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Speaker 7: work together to make sure that developers can still build

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Speaker 7: in those areas that really really do need economic development

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Speaker 7: and growth.

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Speaker 2: You talked about Class A buildings a moment ago. I

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Speaker 2: know Boston has been having some real struggles there and

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Speaker 2: what happens to the non Class A buildings. So all

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Speaker 2: the other buildings that would need to be retrofitted or

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Speaker 2: that people they just don't seem that desirable anymore given

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Speaker 2: these new buildings coming up with amenities.

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Speaker 7: So I was in Boston maybe a month ago, and

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Speaker 7: that Seaport district looks great and vibing and.

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Speaker 4: Doing really things.

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Speaker 2: So the A market, as you said.

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Speaker 4: Before, is going to fare very well.

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Speaker 7: The bee and the obsolete buildings are really going to

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Speaker 7: be the ones that struggle, and that's what's going to

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Speaker 7: remain the scene is does the capital markets, which there's

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Speaker 7: a lot of money out there, where are they going

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Speaker 7: to put those investments to put back into the marketplace.

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Speaker 7: Is it going to continue in the Class A or

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Speaker 7: is somebody going to come and try to revamp those

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Speaker 7: Class bs and the obsolete buildings or what are we

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Speaker 7: going to do with them as those properties? And that's

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Speaker 7: a great question and it'll remain to be seen as

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Speaker 7: in the next seven to ten years of areas. But

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Speaker 7: that seaport district is really exciting in Boston.

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Speaker 2: I was there just dropping off my son to college

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Speaker 2: a couple of weeks ago, and we went for some

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Speaker 2: seafood down by the seaport and it was bustling and

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Speaker 2: it was hard to get a reservation.

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Speaker 6: Yeah, I mean that feels like every city these days.

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Speaker 6: I'm telling you, Lisa, how much of your day or

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Speaker 6: how many of your conversations focus around data centers, because

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Speaker 6: that is an area you're smiling alright aside.

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Speaker 4: Can tell us Polley, would you say more than half?

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Speaker 7: I wouldn't say more than half, but it's definitely an

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Speaker 7: area of interest of where people are dedicating to time

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Speaker 7: to see where it makes sense if they should be

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Speaker 7: investing in data centers building data centers.

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Speaker 4: It's interesting we talk.

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Speaker 7: With real estate about square feet everything square foot, but

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Speaker 7: on data centers it's on energy consumption and how much

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Speaker 7: energy usage it is in those centers.

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Speaker 4: So it's a little bit different of a mine shift

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Speaker 4: and change.

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Speaker 7: And the places that or the regions that can house

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Speaker 7: these centers are much different than when we're talking the

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Speaker 7: downtown Boston and so really it's an entirely different niche

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Speaker 7: within industrial figuring out to make sure that if where

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Speaker 7: dollars get allocated and the excitement around those data centergy

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Speaker 7: and energy, I have to make sure I say it

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Speaker 7: energy consumption.

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Speaker 2: In the thirty seconds, we have left the most affordable

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Speaker 2: commercial real estate market right now. Oh that's a tough one.

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Speaker 4: That is a tough one.

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Speaker 7: I think when people are looking everyone still likes the

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Speaker 7: sun belts and the mountain regions.

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Speaker 2: Sure is still because.

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Speaker 7: Again, when we talk about affordable, it has to be

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Speaker 7: where people want to be, and so you need to

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Speaker 7: look to see where people are moving towards and where

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Speaker 7: they want to be around interest rates matter because when

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Speaker 7: we talk affordable, it's what we're going to see what happens,

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Speaker 7: what the Feds do in this month, how many basis

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Speaker 7: points that they reduce interest rates and affordable definitely goes

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Speaker 7: hand in hand with worth seeing that, and we didn't

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Speaker 7: talk about tariffs, thankfully.

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Speaker 2: But both both are uncertain days.

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Speaker 1: Yeah, this is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

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