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Speaker 2: And we're deal making for Elon Musk. His SpaceX has
Speaker 2: reached a deal worth about seventeen billion dollars with EchoStar
Speaker 2: for spectrum licenses that it's going to use to beef
Speaker 2: up its Starlink satellite network. We want to talk more
Speaker 2: about this deal and what it means for both companies
Speaker 2: and the stock of EchoStar, which is doing quite nicely today.
Speaker 2: I want to bring in John Butler, Bloomberg Intelligence senior
Speaker 2: at Telecom Analyst. He's joining us from our Bloomberg Princeton office. John,
Speaker 2: good to see you. Let's just talk with talk about
Speaker 2: what this deal is going to allow SpaceX to do
Speaker 2: that it can't currently do.
Speaker 3: So the key to this deal alexis is a spectrum
Speaker 3: called AWS four. So if you look at Starlink and
Speaker 3: its sprivals in the satellite space, they all hold spectrum,
Speaker 3: but they're not allowed to offer wireless spectrum, I'm sorry,
Speaker 3: wireless services over that spectrum. AWS four spectrum, according to
Speaker 3: the FCC, can be used flexibly. It's called flexible use spectrum,
Speaker 3: meaning the satellite providers can offer anything from mobile services
Speaker 3: to satellite data, downlink services, video, whatever. It's open use
Speaker 3: spectrum if you want to think of it that way.
Speaker 3: And so Starlink getting its hands on this key spectrum
Speaker 3: will allow them at some point in the future to
Speaker 3: potentially enter the wireless market as a competitor to AT
Speaker 3: and T, Verizon and T Mobile.
Speaker 2: So Echostars shareholders seem to like this deal. The stock
Speaker 2: is up about fourteen percent right now. What are they
Speaker 2: going to do with the proceeds? What will Echo Star
Speaker 2: do with the proceeds of the sale?
Speaker 3: So for Echostarre, it's a very good deal as well.
Speaker 3: They have really struggled to get their wireless service off
Speaker 3: the ground. They've been building this five G wireless network
Speaker 3: and have a relatively weak prepaid brand called Boost and
Speaker 3: they've really struggled there. So this brings in much needed
Speaker 3: funds for them to pay down debt. They've been a
Speaker 3: bit stretched on that front, over leveraged, and you know,
Speaker 3: this deal together with a deal a couple of weeks
Speaker 3: ago with AT and T is going to bring in
Speaker 3: billions of dollars to reduce debt. That's number one, and
Speaker 3: number two, it brings in fresh capital for them to
Speaker 3: invest in the business. And I have a feeling they're
Speaker 3: probably going to take a step back and reevaluate the
Speaker 3: strategy here based on the fresh funding and side what
Speaker 3: the best avenues of growth may be going forward.
Speaker 2: And I'm wondering if this is going to satisfy the
Speaker 2: FCC this deal, because I know that they were sort
Speaker 2: of on Echo Star's case, if you will. They wanted
Speaker 2: them to sell some of their airwaves as the company
Speaker 2: looks to roll out its five G technology. I know
Speaker 2: they sold some spectrum licenses to AT and T recently.
Speaker 2: So do you think this is going to sort of
Speaker 2: take the FCC off their backs?
Speaker 3: I do. I mean, I think Starlink was working with
Speaker 3: the FCC. They had written a letter about Echostars under
Speaker 3: use of this spectrum. Starlike obviously really wants to get
Speaker 3: their hands on it. And I think the FCC really
Speaker 3: took their side on this one. I think they understood
Speaker 3: that EchoStar, being the only owner of this flexible use.
Speaker 3: Spectrum had not really put it to use to date,
Speaker 3: so in their view it was being underutilized, and being
Speaker 3: such a glasset felt that, you know, a sale might
Speaker 3: make sense, and so they really Echo Star really got
Speaker 3: into it with the FCC trying to protect those licenses.
Speaker 3: But in the end here, I think, if you want
Speaker 3: to think of it this way, the FCC won the
Speaker 3: day and net I think it's a good deal for
Speaker 3: both echo Star and Starlink and the FCC.
Speaker 2: Now I knew SpaceX or Starlink had a deal with
Speaker 2: T Mobile, right, how is this spectrum acquisition with EchoStar different,
Speaker 2: if at all?
Speaker 3: So, I think ultimately Starlink could go from being a
Speaker 3: partner with T Mobile to being a competitor of Team Mobiles.
Speaker 3: As I said a moment ago, this Spectrum opens the
Speaker 3: door for them to get into wireless directly without having
Speaker 3: to partner with a terrestrial carrier. The current deal with
Speaker 3: T Mobile basically has Starlink. I think the best way
Speaker 3: to think about it is they're almost like a tower company.
Speaker 3: They're providing the space based cell sites, if you will,
Speaker 3: to carry T Mobile traffic and they get paid a
Speaker 3: fee for that. But they're not earning the level of
Speaker 3: profits that you could as as a direct carrier. So
Speaker 3: down the road, Starlink, understanding this, wants to enter the
Speaker 3: cellular business directly. They have a lot to do before
Speaker 3: that happens, but I think it longer term puts the
Speaker 3: deal with T Mobile in jeopardy.
Speaker 2: And in the remaining seconds we have is seventeen billion
Speaker 2: dollars a fair price for the spectrum licenses? Do you think?
Speaker 3: You know? Spectrums a very i liquid market, so it's
Speaker 3: tough to gauge valuations. But in my mind, I look
Speaker 3: at it as a fare price given the potential again
Speaker 3: for Starlink to enter this huge market down the road,
Speaker 3: and they're very well capped bpitalized as you know, so
Speaker 3: I think those two factors together probably make it a
Speaker 3: good deal.
Speaker 4: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 2: I've got a big bank merger to talk about here
Speaker 2: this Monday, PNC agreeing to buy Colorado's first bank for
Speaker 2: about four billion dollars. This is a big push by
Speaker 2: PNC to really go coast to coast and here to
Speaker 2: break it down for US as Herman Shan Bloomberg Intelligence
Speaker 2: as senior analyst for US regional banks joining us live
Speaker 2: here in a New York studios. Herman, good to see you.
Speaker 4: Thanks for having me.
Speaker 2: First off, I'm just wondering our regulator is going to
Speaker 2: be okay with this because the combined company is going
Speaker 2: to hold fifteen percent of deposits in what is it, Colorado.
Speaker 5: Yeah, in the Denver market. So that's what's real push
Speaker 5: for this deal in particular. But the regulartory landscape has
Speaker 5: been really great for banking and getting bank deals done.
Speaker 5: That's why you've seen some more bank deals over the
Speaker 5: past couple of months. You saw Huntington, which is based
Speaker 5: in Ohio, go into Texas for Vera tex And you've
Speaker 5: see in emerging vehicles in the Southeast with so Novas
Speaker 5: and Pinnacle, And this is sort of like the third
Speaker 5: large regional bank deal over.
Speaker 4: The past couple of months.
Speaker 5: So it just sort of signals that the bank, the
Speaker 5: Trump administration is really open for bank of an am.
Speaker 6: And this is not PNC's first attempt at really expanding
Speaker 6: its Colorado presence. It had previously sought to open sixteen
Speaker 6: locations in Colorado. Why is Colorado such a hot market
Speaker 6: for P ANDC?
Speaker 3: Right?
Speaker 5: I would take a step back and sort of highlight
Speaker 5: that the P and C, which is mostly in the Northeast,
Speaker 5: mid Atlantic a Midwest, that they've expanded across the sun
Speaker 5: Belt states in Colorado with the twenty twenty one deal
Speaker 5: for BBVA US and they sort of double down on
Speaker 5: those markets with this expansion plan to grow organically by
Speaker 5: opening up new branches, and this deal today that they
Speaker 5: announced really sort of supports that growth and accelerates it
Speaker 5: in Colorado and in Arizona.
Speaker 2: So, Herman, you obviously you're a specialist here in US
Speaker 2: regional banks. This is your sweet spot. So I'm just
Speaker 2: wondering as you look out onto the landscape now, who
Speaker 2: might be the next takeover candidate? Who might we be
Speaker 2: talking about in the not too distant future.
Speaker 5: Yeah, So you've seen some of these deals where these
Speaker 5: slower growth Midwest banks grow into areas like Texas, Florida, Colorado.
Speaker 5: So the banks are sort of smaller in size and
Speaker 5: we're talking about the first banks about twenty billion in assets,
Speaker 5: So banks of Slummer of that size in these higher
Speaker 5: growth markets are really attractive to some of these larger institutions.
Speaker 6: So with this purchase, PNC's total assets approaches six hundred
Speaker 6: billion dollars. It will bring closer to the number one
Speaker 6: regional bank, which is US Bank Corp.
Speaker 4: Is US Bankrup still a regional bank?
Speaker 5: Yeah, I would say there are three super regional banks,
Speaker 5: and I will put P and C, US Bank Corp
Speaker 5: and Truest where they're sort of below that seven to
Speaker 5: fifty mark, but larger than your typical regional bank. And
Speaker 5: they P and C now is a coast to coast lender,
Speaker 5: so and have operations all from the northeast all the
Speaker 5: way down to Florida, Texas, California, So you can't really
Speaker 5: call them a regional bank at this point.
Speaker 4: I would view them as more super regional.
Speaker 2: And I want to tie it back to the FED
Speaker 2: next week in interest rates, because don't all roads really
Speaker 2: lead there? At this point, I want to talk about
Speaker 2: what again, if this is going to be an environment
Speaker 2: of lower interest rates for the foreseeable future, what is
Speaker 2: this going to mean for the banks, but especially these
Speaker 2: smaller regional banks, because I'm thinking it may even squeeze
Speaker 2: their profitability more.
Speaker 1: Yeah.
Speaker 5: Yeah, it's interesting because we had a few federick cut
Speaker 5: at the end of last year, and the regional banks
Speaker 5: that I cover were able to navigate that pretty well.
Speaker 5: They're able to keep their net interest margins, which is
Speaker 5: a key metric for profitability, fairly stable. And that's one
Speaker 5: of the reasons why they've been able to do that
Speaker 5: is they've been able to lower their deposit costs, which
Speaker 5: was one of the things that really is a key
Speaker 5: metric for banks to really show top line growth. On
Speaker 5: top of that, lower interest rates could help.
Speaker 4: Loan growth.
Speaker 5: You've seen some companies like Rockets Mortgage be very abuiliant
Speaker 5: for lower interest rates, and so that could help improve
Speaker 5: some of the demand for lending, and that's something that
Speaker 5: we're seeing so far over.
Speaker 4: The first half of the year.
Speaker 6: So they'll make it up in volume. What they lose
Speaker 6: in profitability, they plan to make up.
Speaker 5: They can make it in volume. You'll see some dents
Speaker 5: in like the rates that they charge for loans, but
Speaker 5: they'll also make it up in volume and lowering their
Speaker 5: funding costs.
Speaker 6: When you look at the landscape overall of M and
Speaker 6: A in the banking sector. It feels like we've been
Speaker 6: waiting for something to happen for a long time, and
Speaker 6: maybe this is kind of the domino, the first domino
Speaker 6: that falls. Yeah, well, the big banks and I'm here,
Speaker 6: I'm talking about the JP Morgans, the Bank of America's
Speaker 6: well as Fargo's.
Speaker 4: Will they play any role in this consolidation.
Speaker 5: They're already too big, so there's that they are prohibited
Speaker 5: from from doing such deals because they just have dominant
Speaker 5: market share in their markets. One thing that we did
Speaker 5: see during the height of the regional banking crisis a
Speaker 5: couple of years back is that JP Morgan bought First
Speaker 5: Republic in an FDIC failed bank acquisition. So if we
Speaker 5: in the sense that if there we do get to
Speaker 5: a place like that, that's when the big banks can play,
Speaker 5: but in a straight M and A type scenario.
Speaker 4: To clean up messes. They can clean can't.
Speaker 5: Clean up messes, but they can't outwardly buy a bank
Speaker 5: at this point, they're just way too big.
Speaker 2: And just what about the consumer out there only shopping
Speaker 2: for the best deal. You know, it used to be
Speaker 2: that these smaller regional banks would be the place to
Speaker 2: go for the better CD rates, right or a more
Speaker 2: friendly mortgage terms. Is that still the case in the
Speaker 2: thirty seconds we've got Yeah?
Speaker 3: Sure.
Speaker 5: So that's what really great about these markets that P
Speaker 5: and C is going to where they can have really
Speaker 5: dominant market share in Denver and Arizona and just having
Speaker 5: that marketing and having the branches really helps with deposit
Speaker 5: taking and helping your consumer out.
Speaker 4: Stay with us more from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 2: I want to talk a little commercial real estate. Now,
Speaker 2: call me crazy, but I actually get excited, Scarlett about
Speaker 2: commercial real estate, right, John, because I think it tells
Speaker 2: us a lot about the broader economy. Let me look
Speaker 2: at how it's doing.
Speaker 6: Yeah, it's long term investments and so they don't move things,
Speaker 6: aren't reacting to day to day movements and expectations on
Speaker 6: interest rates. But once rates are moving down, then you
Speaker 6: can expect slow gradual movement. But see change in how
Speaker 6: people perceive it.
Speaker 2: So where are we now? Right after years of high
Speaker 2: inflation limited growth, is the commercial real estate industry coming
Speaker 2: back to life? We wanted to bring in a pro.
Speaker 2: She's here in on New York studio, Lisa, the managing
Speaker 2: partner and head of real estate at Eisner Amper. Lisa,
Speaker 2: thanks so much for being with us. Just in my
Speaker 2: little cosmic world here in Midtown east of Manhattan. I'm
Speaker 2: seeing storefronts that had gone empty for so long now
Speaker 2: having tenants. I'm going to call it a mini upswing.
Speaker 2: Am I right in saying that.
Speaker 7: Well, thank you for having me, And yes, I get
Speaker 7: excited too while we talk about commercial real estate.
Speaker 4: So we're in the right group.
Speaker 7: So office in New York has definitely taken a new
Speaker 7: surgeons again. And so I think I made a prediction
Speaker 7: at the beginning of this year that's saying by the
Speaker 7: end of twenty twenty six that we were going to
Speaker 7: be pretty much at capacity for New York City, and
Speaker 7: vacancy for office is definitely moving down. And so rents
Speaker 7: in New York City are about little under seventy five
Speaker 7: dollars a square foot and the level of volume is
Speaker 7: really close to twenty nineteen, which is really amazing when
Speaker 7: you're seeing that so so pree pandemic pre pandemic levels
Speaker 7: is the amount of volume that we've seen in office
Speaker 7: leasing in New York City, and you can be excited
Speaker 7: about other cities.
Speaker 4: San Francisco as well.
Speaker 7: We talked about earlier in the year with AI dollars
Speaker 7: being spent. So when you look at fifty five billion
Speaker 7: dollars of AI that was gone has been spent in
Speaker 7: San Francisco rents, there are about seventy two dollars a foot.
Speaker 7: So for Class I know, that's really exciting. So for
Speaker 7: Class A buildings in San Francisco area, that's where the
Speaker 7: money's going.
Speaker 4: Now, whether we have a bubble or a boom or
Speaker 4: what's going.
Speaker 7: On with AI, it remains to be seen, but people
Speaker 7: are Initial reports are that people are excited and they
Speaker 7: do see productivity with AI dollars being spent.
Speaker 4: So you know the excitement. I'm excited.
Speaker 2: It's it's there, it's real.
Speaker 6: We can feel it from you, Lisa, So it makes
Speaker 6: sen sense. San Francisco, it's an AI story. What's the
Speaker 6: story here in New York Because the call for folks
Speaker 6: to return to work the city being busy once again
Speaker 6: has been in process for a couple of years.
Speaker 4: Now, is there anything that kind of flipped a switch?
Speaker 7: So it's again, what's here in the market in demand?
Speaker 7: And so there wasn't a lot of office being put
Speaker 7: back into the market, and so now people are absorbing
Speaker 7: those office units are there. We always know New York
Speaker 7: is still a hub for financial, for entertainment, for all that,
Speaker 7: it's still a capital of the world.
Speaker 4: So people want to be here.
Speaker 7: They want to live here, they want to work here,
Speaker 7: and they want to be in that environment. So just
Speaker 7: creating that excitement around New York again is really going
Speaker 7: to help with the vacancies and bring back the retail
Speaker 7: and the retail experience to life, which what you noticed
Speaker 7: earlier on Yeah.
Speaker 2: I mean, there's a big high rise going up not
Speaker 2: too far from where I live, and I'm just wondering
Speaker 2: who the anchor stores on the bottom will be, because
Speaker 2: sometimes those buildings go up and those anchor stores remain
Speaker 2: empty for a long time.
Speaker 7: So most of those projects have the anchor tenants pretty
Speaker 7: much in place when they're penciling or they're doing they're
Speaker 7: mapping out the deals and so making sure that it
Speaker 7: really does create that energy and that vibe that for
Speaker 7: the multifamily. And again, when you look at multifamily, you
Speaker 7: really have to make sure that you're able to sustain
Speaker 7: the construction costs and the zoning and so a lot
Speaker 7: of goes into those projects to make sure that those
Speaker 7: will really work, and everybody wants it to work. That's
Speaker 7: why we have the City of Yes mandates now and
Speaker 7: things are going through. So really, the excitement I think
Speaker 7: is there, and I think it's just as you had
Speaker 7: said before. It's the long term planning. It's not going
Speaker 7: to change overnight. It's really knowing that where we're going
Speaker 7: to be in the next five to ten years with
Speaker 7: some of these properties.
Speaker 4: But the rules of the road have changed, right.
Speaker 6: You had the One Big Beautiful Bill, which you know,
Speaker 6: the President is a former property developer and in many
Speaker 6: ways still is a property developer, So I mean, he
Speaker 6: knows what the industry wants and likes.
Speaker 4: What did you see in your industry from that bill?
Speaker 7: So the real estate industry fed fairly well with One
Speaker 7: Big Beautiful Bill. There's of incentives for both affordable housing
Speaker 7: for low income housing credits that were awarded by the
Speaker 7: federal government. What the states do are now a different
Speaker 7: story of how they award those experience.
Speaker 4: Points for affordable housing.
Speaker 7: Same thing with qualified Opportunity zones, where there's in the
Speaker 7: One Big Beautiful Bill there are incentives to go for
Speaker 7: some of these economic zones and create new spaces in there,
Speaker 7: things with bonus appreciation. So the incentives are there in
Speaker 7: One Big Beautiful Bill. It's whether or not the states
Speaker 7: and the federal governments are going to be able to
Speaker 7: work together to make sure that developers can still build
Speaker 7: in those areas that really really do need economic development
Speaker 7: and growth.
Speaker 2: You talked about Class A buildings a moment ago. I
Speaker 2: know Boston has been having some real struggles there and
Speaker 2: what happens to the non Class A buildings. So all
Speaker 2: the other buildings that would need to be retrofitted or
Speaker 2: that people they just don't seem that desirable anymore given
Speaker 2: these new buildings coming up with amenities.
Speaker 7: So I was in Boston maybe a month ago, and
Speaker 7: that Seaport district looks great and vibing and.
Speaker 4: Doing really things.
Speaker 2: So the A market, as you said.
Speaker 4: Before, is going to fare very well.
Speaker 7: The bee and the obsolete buildings are really going to
Speaker 7: be the ones that struggle, and that's what's going to
Speaker 7: remain the scene is does the capital markets, which there's
Speaker 7: a lot of money out there, where are they going
Speaker 7: to put those investments to put back into the marketplace.
Speaker 7: Is it going to continue in the Class A or
Speaker 7: is somebody going to come and try to revamp those
Speaker 7: Class bs and the obsolete buildings or what are we
Speaker 7: going to do with them as those properties? And that's
Speaker 7: a great question and it'll remain to be seen as
Speaker 7: in the next seven to ten years of areas. But
Speaker 7: that seaport district is really exciting in Boston.
Speaker 2: I was there just dropping off my son to college
Speaker 2: a couple of weeks ago, and we went for some
Speaker 2: seafood down by the seaport and it was bustling and
Speaker 2: it was hard to get a reservation.
Speaker 6: Yeah, I mean that feels like every city these days.
Speaker 6: I'm telling you, Lisa, how much of your day or
Speaker 6: how many of your conversations focus around data centers, because
Speaker 6: that is an area you're smiling alright aside.
Speaker 4: Can tell us Polley, would you say more than half?
Speaker 7: I wouldn't say more than half, but it's definitely an
Speaker 7: area of interest of where people are dedicating to time
Speaker 7: to see where it makes sense if they should be
Speaker 7: investing in data centers building data centers.
Speaker 4: It's interesting we talk.
Speaker 7: With real estate about square feet everything square foot, but
Speaker 7: on data centers it's on energy consumption and how much
Speaker 7: energy usage it is in those centers.
Speaker 4: So it's a little bit different of a mine shift
Speaker 4: and change.
Speaker 7: And the places that or the regions that can house
Speaker 7: these centers are much different than when we're talking the
Speaker 7: downtown Boston and so really it's an entirely different niche
Speaker 7: within industrial figuring out to make sure that if where
Speaker 7: dollars get allocated and the excitement around those data centergy
Speaker 7: and energy, I have to make sure I say it
Speaker 7: energy consumption.
Speaker 2: In the thirty seconds, we have left the most affordable
Speaker 2: commercial real estate market right now. Oh that's a tough one.
Speaker 4: That is a tough one.
Speaker 7: I think when people are looking everyone still likes the
Speaker 7: sun belts and the mountain regions.
Speaker 2: Sure is still because.
Speaker 7: Again, when we talk about affordable, it has to be
Speaker 7: where people want to be, and so you need to
Speaker 7: look to see where people are moving towards and where
Speaker 7: they want to be around interest rates matter because when
Speaker 7: we talk affordable, it's what we're going to see what happens,
Speaker 7: what the Feds do in this month, how many basis
Speaker 7: points that they reduce interest rates and affordable definitely goes
Speaker 7: hand in hand with worth seeing that, and we didn't
Speaker 7: talk about tariffs, thankfully.
Speaker 2: But both both are uncertain days.
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