Speaker 1: This is Bloomberg business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Hi, everyone, Welcome to the weekend edition of Bloomberg Business Week.
Speaker 2: Carol Masser along with Matt Miller, who is filling in
Speaker 2: for Tim. We had a week of big macro thoughts
Speaker 2: thanks to four global central bankers, including Federal Reserve Chair
Speaker 2: j Powell, reminding us of persistent inflation and the need
Speaker 2: for more interest rate hikes. Meantime, Russia appears to have
Speaker 2: avoid a disaster following last week's mutiny, although details on
Speaker 2: all of that continue to emerge. And then, of course,
Speaker 2: geopolitics weighing on semiconductors and technology, highlighted by US plans
Speaker 2: to tighten export controls in order to restrict sales of
Speaker 2: some artificial intelligence chips to shine out, least according to sources.
Speaker 2: Now in a moment, we'll get a research and investment
Speaker 2: perspective on some of the world's largest markets, and one
Speaker 2: in particular that appears poised to enjoy the brightest economic future.
Speaker 2: Also ahead, Ken can Sell of Churchill Asset Management on
Speaker 2: the golden age of private credit, luxury real estate developer
Speaker 2: Michael schro on the market for high end commercial properties,
Speaker 2: and Carnival CEO Josh Weinstein details while the world's largest
Speaker 2: cruise line may finally be back to smooth sailing. All
Speaker 2: of that to come. We begin with a look at
Speaker 2: where the money is flowing abroad as firms and individuals
Speaker 2: seek viable options beyond Beijing. With this in mind, our
Speaker 2: first guest is just back from India. This past Monday,
Speaker 2: Matt and I spoke with David Riedel, founder and president
Speaker 2: of Retal Research Group, which has analysts on the ground
Speaker 2: around the globe in some fifteen countries covering companies in
Speaker 2: those areas. We began by asking David which ones are
Speaker 2: top of mind for his clients.
Speaker 3: Well, they usually begin with China and more recently they'll
Speaker 3: talk a little bit about India, but they will talk
Speaker 3: about the impact of Russia on those those countries. You know,
Speaker 3: India has and China both have tried to tried a
Speaker 3: pretty fine line, China a little bit more in support
Speaker 3: of Russia. India kind of trying to play both sides.
Speaker 3: Both of them are big oil importers, so it's important
Speaker 3: for them to maintain a relationship with Russia.
Speaker 4: Does the mutiny though that we witnessed over the weekend
Speaker 4: and the I guess the solution to that problem have
Speaker 4: any impact on your markets?
Speaker 3: I don't think so at this point. You know, it'd
Speaker 3: all wrapped up over the weekend, so we didn't really
Speaker 3: see its impact on trading. I think, you know, a
Speaker 3: lot of people were surprised overnight.
Speaker 5: When when that protest or that rebellion or whatever it
Speaker 5: was took place, but it seemed like it was people
Speaker 5: were pretty satisfied by Monday morning.
Speaker 2: Well, it is interesting too that you did have China's
Speaker 2: Foreign Ministry saying it supports Russia's actions to maintain national stability.
Speaker 2: A brief statement by a ministry spokesperson who said, it's
Speaker 2: Russia's internal affairs. But it's just like China saying, wait,
Speaker 2: we got stuff going on too, and it's our internal affairs.
Speaker 3: That's one of their favorite phrases. As you know, they
Speaker 3: think that the Taiwan straight is their domestic waters. They
Speaker 3: think that the Taiwan issue is a domestic issue. Of course,
Speaker 3: they think the weaker issue, and the Tibet issue and
Speaker 3: the Hong Kong issue are all internal affairs. So they
Speaker 3: don't like the idea of people being involved in other
Speaker 3: people's domestic activities.
Speaker 2: But I guess so just to follow internal they'll.
Speaker 4: Have a problem with China being involved in Ukraine's domestic activities.
Speaker 3: I know, but these people always pick and choose when
Speaker 3: it's wrong and when it's right when they're doing it,
Speaker 3: I guess.
Speaker 2: It's okay, Well, pick and choose for us. I mean
Speaker 2: in terms of I guess we're all trying to as
Speaker 2: international investors, trying to understand which internal affairs become global
Speaker 2: affairs become global investment stories. So how do you kind
Speaker 2: of play that out?
Speaker 3: Well, One of the things that I think we've seen
Speaker 3: over the last five years is really people questioning the
Speaker 3: sensibleness the reasonableness of having so many supply chains linked
Speaker 3: back to one country China. I think COVID and the
Speaker 3: breakdown and supply chains really reminded people how much risk
Speaker 3: we were taking on having so much of our economy
Speaker 3: connected back to one economy. So I think you've got
Speaker 3: a lot of people looking around the world for alternative
Speaker 3: places to manufacture, whether that's Indonesia or Brazil or Mexico
Speaker 3: a country that we really like, or increasingly India. India
Speaker 3: has made some really major fundamental changes in their policies
Speaker 3: and the way that they run their country that I
Speaker 3: think are changing the growth trajectory for that country. And
Speaker 3: they are definitely set to benefit from people diversifying away
Speaker 3: from China. They've got the large population that one point
Speaker 3: four billion people, They've got the right demographics, a lot
Speaker 3: more young people in India, and they are a positioned
Speaker 3: to perhaps take some of that manufacturing activity and some
Speaker 3: of those supply chains from China.
Speaker 2: But still issues tell us about you just back, what
Speaker 2: were you doing, who were you visiting? What did you
Speaker 2: want to see? Specifically? There's stuff you can get on
Speaker 2: the ground that you can cannot get from afar.
Speaker 3: It was fascinating. I was mostly in Bombay and the
Speaker 3: area around Mumbai and it was amazing to see how
Speaker 3: much infrastructure they're building. One of the frustrations with India
Speaker 3: for a long time was that the national government couldn't
Speaker 3: mobilize enough tax resources across the country to build the
Speaker 3: infrastructure that they needed in the big cities. India's of course,
Speaker 3: a very large democracy, largest democracy in the world. But
Speaker 3: that meant that some of those voters expected to have
Speaker 3: infrastructure projects in their provinces, in their cities, in their villages,
Speaker 3: and so that really left the capital cities Delhi and
Speaker 3: the big city like Mumbai without a lot of money
Speaker 3: for infrastructure. Boy, has that changed. They really changed their
Speaker 3: tax basis a few years ago, looking at goods and
Speaker 3: services tax that's much simplified. And they are on a
Speaker 3: building spree, building a huge elevated train through huge parts
Speaker 3: of Bombay and really spending a lot of money on infrastructure,
Speaker 3: which is sorely needed.
Speaker 4: What about the middle class? What's the trajectory looked like there?
Speaker 4: You know, China, obviously that was a massive part of
Speaker 4: the story over the past twenty years. So is it
Speaker 4: going to look the same way in India?
Speaker 3: You know, I think it's going to. You almost always
Speaker 3: have a situation where rising wages drive the development of
Speaker 3: a middle class. If you've got enough employment for those people,
Speaker 3: that'll drive demand for motorcycles and then eventually cars, it'll
Speaker 3: drive for apartments and eventually houses, life insurance and other
Speaker 3: sort of products that come with that rising wealth. So
Speaker 3: I think you'll see pretty much the same trajectory in
Speaker 3: India that we saw in China, perhaps not as smooth
Speaker 3: a road. China, having a very centrally planned and organized economy,
Speaker 3: had the advantage of really driving through a lot of
Speaker 3: the changes that they wanted to make without worrying too
Speaker 3: much about voters and the getting other people involved in
Speaker 3: the decision making. So India as a democracy, perhaps stronger institutions,
Speaker 3: but maybe a little bit a few more fits and
Speaker 3: starts on their road to ros parity.
Speaker 2: David, I'm going to probably sound pretty naive, but yeah,
Speaker 2: I'm going to just go for it. India, China, Saudi Arabia, Russia.
Speaker 2: Money trumps all. Investment opportunities trump all even if we
Speaker 2: have some problems about our concerns about internal affairs in
Speaker 2: a part of the country or in part of the world.
Speaker 4: It does.
Speaker 3: You know, people investors are looking for opportunities around the world,
Speaker 3: and I think they're looking for opportunities for something to
Speaker 3: surprise to the upside. I think if you look at
Speaker 3: a Saudi or something like that, that's a country that's
Speaker 3: pretty much a one trick pony. In most ways. It's
Speaker 3: really a hydrocarbons play it's a country like an Indonesia
Speaker 3: or a Brazil or in this case, India, has a
Speaker 3: diverse and deep and developing economy that has the ability
Speaker 3: to really create a cycle of value when money comes
Speaker 3: into the system. It has things that it can invest in,
Speaker 3: and has a domestic market that can be growing. And
Speaker 3: so that's the kind of environment you're looking for, the
Speaker 3: large population with relatively stable government that's on a new
Speaker 3: trajectory of growth. And I think that's what people are
Speaker 3: starting to see in India today.
Speaker 2: But I guess my point is that if there's an
Speaker 2: opportunity to make money, I'm thinking about, you know, I'm
Speaker 2: going to go back to Saudi Arabia that we all
Speaker 2: kind of forgot about, you know, our many have you know,
Speaker 2: the killing of Jamal Koshogi. And yet you know we're seeing,
Speaker 2: you know, the PGA tour and live golf. Like it's
Speaker 2: just when there's money to be made or opportunities that
Speaker 2: we kind of turn and look the other way of it.
Speaker 3: Unfortunately. I think that's true, and I think that's been
Speaker 3: true with regard to our enthusiasm for China for many years.
Speaker 3: Really thinking that changing in involving them more in the
Speaker 3: global fabric and the global business fabric was going to
Speaker 3: change their behavior, and it really didn't. So I think
Speaker 3: that people do need to be careful who they're investing with,
Speaker 3: who they're investing alongside. But in a growing environment, maybe
Speaker 3: you could pick some winners that don't have as much
Speaker 3: downside or as much baggage.
Speaker 6: All right, very interesting stuff.
Speaker 4: India must be the best of those options that Carol listed, right,
Speaker 4: and they happen to have the best growth trajectory as
Speaker 4: far as we can see from this point, they really do.
Speaker 3: It's amazing. A lot of people haven't followed this story,
Speaker 3: but over the last ten years they did iris scans
Speaker 3: and fingerprints of every single citizen, which created an environment
Speaker 3: where they could open four hundred million new bank accounts,
Speaker 3: and it created a system where the government can distribute
Speaker 3: all their benefits, payments and things like that electronically directly
Speaker 3: to the consumer, not through other governments which tend to
Speaker 3: foster a lot of corruption. So they've really stitched together
Speaker 3: a digitized and mostly cash lists economy that's much more
Speaker 3: efficient for taxation and for growth.
Speaker 2: David Yes or nos is a point that my five
Speaker 2: ten years from now, we look back and We're going
Speaker 2: to say this has been the world turn from China
Speaker 2: to India.
Speaker 3: It's going to happen. It's already happening today.
Speaker 2: It's bound to happen, all right, listen. So good to
Speaker 2: check in with you as always. David Ridal, He's present
Speaker 2: and founder of Retal Research Group on zoom from San Francisco.
Speaker 2: I do think about this, Matt, these turning points in
Speaker 2: our world.
Speaker 4: Yeah, it does feel like we've hit that. As David said,
Speaker 4: from his perspective, we already have.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: We've had a flurry of private credit and lending stories
Speaker 2: over the past couple of weeks. Just today, pe firms
Speaker 2: finding a way to get more financing for their portfolio
Speaker 2: companies while screoting provisions meant to protect existing creditors, tapping
Speaker 2: the one and a half trillion dollars private credit market. Matt,
Speaker 2: I'm obsessed with the private markets. I'm making you obsessed
Speaker 2: with it.
Speaker 6: No, No, I love it.
Speaker 4: I mean I used to go to Super Return every
Speaker 4: year in Berlin, which is this big private anty conference,
Speaker 4: and I know you go to Milk, and I'm a
Speaker 4: little bit jealous.
Speaker 7: I would like to go there as well.
Speaker 8: Well.
Speaker 2: I brought a little bit of milk in to you.
Speaker 7: Thank you.
Speaker 2: We have a great voice on all of this, and
Speaker 2: someone who's got it. Really a fascinating career when it
Speaker 2: comes to finance Wall Street, including Chase and Direxelburn and
Speaker 2: we talked about it. Ken can Sell is with US,
Speaker 2: president and CEO of Churchill Asset Management. It's the forty
Speaker 2: six billion dollar private capital affiliate of Nuveene. So there's
Speaker 2: your backdrop size and scope. Like we like to do
Speaker 2: a Bloomberg. He's here in studio. It's so great to
Speaker 2: have you here.
Speaker 6: How are you good.
Speaker 9: Great to see you again, Carol and Matt great too
Speaker 9: great to join you here.
Speaker 2: I feel like I have a million questions I do.
Speaker 4: I have questions for me, and I have questions from listeners.
Speaker 4: I've been talking to people all day on the Bloomberg
Speaker 4: like IB like, oh, I got Ken can Sell later,
Speaker 4: and so you know, Ryan sent me a whole list
Speaker 4: of questions.
Speaker 6: Okay, right.
Speaker 2: So, Ken, first, I want to start with you. After
Speaker 2: we talked at Milkin, and we're going to get into stuff.
Speaker 2: You said you were going to go have dinner with
Speaker 2: a bunch.
Speaker 9: Of milk and alone with milk and alumni.
Speaker 6: That's exactly right.
Speaker 9: So Mike hosts a dinner every year at the conference
Speaker 9: and it's it's a lot of fun.
Speaker 2: So I am curious. I'm not going to ask you
Speaker 2: for all the details. And I'm sure there was a
Speaker 2: lot of pleasantries and fun things, But what was top
Speaker 2: of mind for you guys when it comes to kind
Speaker 2: of the business world or the financial market world. Was
Speaker 2: there something that dominated or no?
Speaker 9: Well, I mean, first of all, Mike spent a lot
Speaker 9: of time talking about his book, right, So you know
Speaker 9: during COVID he you know, he had been working on
Speaker 9: a book on you know, you've had you had him
Speaker 9: on to talk about it. Yeah, so that's a whole
Speaker 9: nother story. But you know, it was fascinating. But no,
Speaker 9: I would say, you know, in many respects, the growth
Speaker 9: of private credit and private capital was very much a
Speaker 9: topic that everyone was talking about. And if you think
Speaker 9: about when we were, you know, in our heyday at Drexel,
Speaker 9: we were doing high el bond deals and bringing companies
Speaker 9: to the capital markets hoping to raise hoping to raise
Speaker 9: money for good ideas and great companies. The fact that
Speaker 9: it's advanced so far to the point now where in
Speaker 9: individual investors can can invest directly in private credit, where
Speaker 9: you know, asset management is when we come to dominate
Speaker 9: the space. It's it's really amazing the transition.
Speaker 4: So I the difference between the your original crew, you know,
Speaker 4: the like barbarians at the gate guys, and the kids
Speaker 4: who are in direct lending now or BDCs.
Speaker 9: Or well many of many, many of them is still
Speaker 9: in direct lending today. In fact, many of the folks
Speaker 9: that I work directly with at Drexel who were in
Speaker 9: my class so to speak, are now you know, leading
Speaker 9: major private credit firms, Apollo for example. I mean a
Speaker 9: lot of those folks you know, were with me at
Speaker 9: Drexel in a long time ago. So it's it's great
Speaker 9: to see, you know, everyone's kind of gone out and
Speaker 9: done their things. So you know, that's been, it's been.
Speaker 4: What I was going to ask about then, So you
Speaker 4: guys are in a great position to advise the young guys.
Speaker 4: I mean, when you started, you were a kid, right, yes,
Speaker 4: and so was everybody in your shop. You were like
Speaker 4: in your twenties or max thirties, right, and so people
Speaker 4: who are in their twenties.
Speaker 9: And I remember was an all nighter my first day
Speaker 9: on the job at Drexelbournam. Literally I had to call
Speaker 9: my my wife and tell her that I was probably
Speaker 9: not going to come home for my first literally my
Speaker 9: first day on the job. So it's it was a
Speaker 9: different world.
Speaker 7: This is how it's going to orientation, yeah, exactly.
Speaker 4: But what I what I wonder is the new kids
Speaker 4: have never seen any rate cycles. I mean, they kind
Speaker 4: of have if they went like two thousand and four
Speaker 4: two six, but not really. What is this like in
Speaker 4: this business that is so affected by rates seeing you know,
Speaker 4: five hundred and twenty five basis points in a year.
Speaker 9: Well, it's certainly I think given some of the younger
Speaker 9: folks in our business a perspective, right, I Mean if
Speaker 9: you think about, you know, the fact that we've been
Speaker 9: in basically a ten year you know bull run of
Speaker 9: you know, continual growth and low interest rates fueling that growth.
Speaker 9: You know the fact that you know we've seen kind
Speaker 9: of a you know, a hard reset in the fed approach,
Speaker 9: and obviously what that's doing to companies I think is
Speaker 9: teaching a lot of young people in our business a lesson,
Speaker 9: which is, you know, these these times don't go on forever.
Speaker 9: You know, you need to be investing in a more
Speaker 9: conservative way financing companies for the long term. So, you know,
Speaker 9: I think it's been a bit of an education for
Speaker 9: younger people in our business for sure.
Speaker 2: Ken higher rates though problematic for the private lending world.
Speaker 2: And I bring it up because we've done a few
Speaker 2: stories here at Bloomberg just in the last couple of
Speaker 2: weeks about you know, as these rates go up, you know,
Speaker 2: is it a problem for the portfolio companies? Too expensive?
Speaker 2: Can't manage it? Do they go under? And that certainly
Speaker 2: we have an impact on the private lenders and they're investors.
Speaker 9: Well on one on one hand, it's good news for investors,
Speaker 9: right Suddenly those same conservative loans that we made, you know,
Speaker 9: a year ago at six percent or seven percent, are
Speaker 9: now yielding twelve percent.
Speaker 1: Right.
Speaker 9: So in many respects, that's why everybody wants to talk
Speaker 9: about private credit, right because they're looking at private credits
Speaker 9: saying wait a second, this is a pretty attractive dynamic
Speaker 9: it's look higher.
Speaker 2: Returns as long as the companies can pay.
Speaker 7: Correct.
Speaker 9: But remember we're talking about new loans we're making today,
Speaker 9: at least for new investors, right, So if you're an
Speaker 9: investor coming into private credit, you're looking at much higher returns,
Speaker 9: lower leverage, better financial covenants, generally higher quality companies that
Speaker 9: are raising capital right now, because the lesser quality companies
Speaker 9: are probably not being sold in raising capital and more equity.
Speaker 3: Right.
Speaker 9: So from a credit perspective, from a new credit perspective,
Speaker 9: it's the best of time.
Speaker 2: What about the old ones, where it's a fluid.
Speaker 9: Correct From an old credit perspective, an existing credit perspective.
Speaker 7: It's a different story.
Speaker 3: Right.
Speaker 9: So now what we're seeing are the more aggressive lenders
Speaker 9: who are out there, maybe getting slightly higher returns, kind
Speaker 9: of pushing the envelope. From a credit perspective, Suddenly those
Speaker 9: companies just don't work anymore.
Speaker 3: Right.
Speaker 9: You know, a company that was six or even seven
Speaker 9: times levered in the old world, you know, at current
Speaker 9: interest rates, is underwater, right. They can't meet their interesting expense.
Speaker 9: So I think there are going to be we are
Speaker 9: going to go through a time where there is is
Speaker 9: you know, kind of the Old saying, Warren Buffett saying, right,
Speaker 9: when the tide goes out, right, you realize kind of
Speaker 9: who's you know, where he's got Who's got a bang soon?
Speaker 3: Maybe who not?
Speaker 9: And so I think you're going to see that the
Speaker 9: more conservative lenders, the lenders that really have you know,
Speaker 9: kind of you know, been more traditional and focused on
Speaker 9: higher quality, are going to show to be shown to
Speaker 9: have performed very well, and those firms are going to
Speaker 9: raise more capital, and I would say the more marginal
Speaker 9: players are going to get washed out.
Speaker 4: What I find fascinating is how this whole thing started
Speaker 4: in terms of the whole that was there left by
Speaker 4: banks abandoning the mid tier market, right, And so you
Speaker 4: guys got in and made an industry. Yes, are they
Speaker 4: coming back now? Like when Ken Griffin says private credit
Speaker 4: is one of the main opportunities for me in the
Speaker 4: next year, don't banks want to get in on that too?
Speaker 6: They don't.
Speaker 9: And I would say that if anything, the latest banking
Speaker 9: crisis and the dynamics around you know, deposits and some
Speaker 9: of the challenges of maintaining funding and deposit funding is
Speaker 9: just making making banks even more conservative and making making
Speaker 9: them really pull back further from putting out long term investments,
Speaker 9: long term financing in basically ill liquid investments right as
Speaker 9: good as a credit environment as we're in, those loans
Speaker 9: are still private and ill liquid, right, So in many respects,
Speaker 9: it's just like, gee, there are great mortgages, right, but
Speaker 9: if you can't lookify them, you know, banks.
Speaker 2: Are directly You've seen that as absolutely.
Speaker 9: Absolutely today there are really no banks that we're seeing,
Speaker 9: you know, either thinking about entering the market let alone.
Speaker 9: I mean, I would say, if anything, they're thinking about,
Speaker 9: you know, pulling back from you know, further direct lending.
Speaker 9: So we're doing more than and we're doing more as
Speaker 9: a result. And I would say that the big change though,
Speaker 9: that I think you'll see over the next several years
Speaker 9: is that the larger scaled direct lenders, the firms that
Speaker 9: can deliver a five hundred million a billion dollar solution,
Speaker 9: are simply going to continue to dominate even more the
Speaker 9: business of direct lanning. So in many respects, the asset managers,
Speaker 9: the direct lenders have replaced the banks. Right twenty years ago,
Speaker 9: you go to JP Morgan or Chase Manhattan or a
Speaker 9: chemical bank and they would provide a loan package for
Speaker 9: you if you were a mid market company and they
Speaker 9: would underwrite and hold for five six hundred million dollar financing.
Speaker 9: Today banks don't want to hold that financing. The economics
Speaker 9: of middle market lending are not particularly compelling for banks,
Speaker 9: right They'd rather underwrite a deal, distribute it to investors,
Speaker 9: hold zero of the loan, and generate a much higher
Speaker 9: return on equity.
Speaker 2: Still the golden age of private credit very much so.
Speaker 9: I mean, if you think about the risk adjusted returns
Speaker 9: that were able to deliver to investors twelve percent today
Speaker 9: for a regular way high quality mid market loan with
Speaker 9: lower leverage, better covenance, more equity. And I think an
Speaker 9: interesting phenomena that the quality of the companies we're seeing
Speaker 9: today is actually better than it's ever been because the
Speaker 9: marginal companies, the businesses that are more challenged, are really
Speaker 9: not being sold. And the vast majority of the financings
Speaker 9: we're doing, our companies that are either in our portfolio
Speaker 9: or our new deals that are are being sold into transacting,
Speaker 9: and I would say that those marginal companies are not
Speaker 9: coming to market today, so the quality of the deals
Speaker 9: we're seeing is actually better.
Speaker 2: Well, we talk about another shoe to drop, and I
Speaker 2: know when we were at Milk and I think I
Speaker 2: talked about you with you about transparency and concerns about
Speaker 2: not really understanding what's going on in the private lending market.
Speaker 2: I mean, is there a possibility in some of the
Speaker 2: lower tier maybe companies that maybe don't have the greatest
Speaker 2: financial system, that we could see some problems maybe not systemic,
Speaker 2: but could it be problematic.
Speaker 6: Oh.
Speaker 9: I think if you look across the portfolios right of
Speaker 9: existing lenders, I don't think there's any question that the
Speaker 9: you know, as we move through environment, and certainly if
Speaker 9: rates stay higher for longer, I think you will start
Speaker 9: to see cracks in those smaller companies, companies that maybe
Speaker 9: are not market leading businesses, businesses that are you know,
Speaker 9: are are facing pressure from you know, either an ability
Speaker 9: to pass on price increases or otherwise. I think you
Speaker 9: will see lenders have problems in their portfolios, you know,
Speaker 9: particularly in those areas. But but I would also say that,
Speaker 9: you know, for for the largest scaled players in the
Speaker 9: business that are highly diversified, I think this is absolutely
Speaker 9: the best time to be to be investing. And we're
Speaker 9: extremely active right now. I mean, we had a very
Speaker 9: busy first quarter, but you know. I also think that
Speaker 9: you know, I alluded to this earlier. The longer this
Speaker 9: high interest rate environment goes on, the more problematic it gets,
Speaker 9: you know, And I know the FED is obviously being
Speaker 9: very aggressive about trying to get great inflation down and
Speaker 9: I think that's the reason, right the damage and the
Speaker 9: damage in the GFC was really done in that last
Speaker 9: year when you know, when we were stuck in the
Speaker 9: GFC for really three full years. I think that that
Speaker 9: is the key here, is to try to get this
Speaker 9: interest rate environment down and normalized sooner rather than later.
Speaker 9: And obviously the Fed's doing everything can to.
Speaker 2: They make a mistake in pausing, then, do you think
Speaker 2: and not continuing to.
Speaker 9: I think it was a short pause, and I think
Speaker 9: it's really an assessment of Okay, what was the impact
Speaker 9: of the banking issues, you know, what has been the
Speaker 9: impact and some of the other external pressures. But I
Speaker 9: would expect the FED to continue to raise rates, you know,
Speaker 9: longer than maybe initially thought. I think there was a
Speaker 9: point where the number of us thought that maybe by
Speaker 9: the end of the year, you know, rates would start
Speaker 9: to crest and come back. I don't think that's going
Speaker 9: to happen now. I think we're going to be you know,
Speaker 9: I think we're going to be in a higher rate
Speaker 9: environment through through the end of this year, but hopefully
Speaker 9: by early next year things will start to normalize. And
Speaker 9: I do think once they do start to normalize, you
Speaker 9: will see deal activity pick up quite a bit.
Speaker 4: By the way, do you have companies in your portfolio
Speaker 4: that we're looking at, you know, Live war plus five hundred,
Speaker 4: putting them at six or seven percent and now they're
Speaker 4: at thirteen?
Speaker 9: Well, every company, at every company in our portfolio, all
Speaker 9: of our senior loans are floating rate.
Speaker 3: Yeah.
Speaker 9: Right, So the yield, if you will, across our entire
Speaker 9: senior loan portfolio is up, you know, roughly five hundred
Speaker 9: basis points from where it was, you know, just just
Speaker 9: a year, year and a half ago.
Speaker 7: So are there going to be defaults? You think?
Speaker 4: Are there specific sectors where you think we're going to
Speaker 4: see defaults more or regions?
Speaker 9: I think that in certain sectors, I think leverage got
Speaker 9: a bit out of hand in terms of you know,
Speaker 9: you know, higher leverage. Right, So there were areas, for example,
Speaker 9: when software, you're seeing companies that were leveraged six seven
Speaker 9: times cash flow. I mean the numbers don't work at
Speaker 9: six or seven times cash flow today, right. I mean
Speaker 9: if you literally just look at the current interest rate
Speaker 9: environment against you know, against where coverage ratios were, I
Speaker 9: think you're going to see, you know, areas where leverage
Speaker 9: was was was high, they're going to be more more
Speaker 9: challenging dynamics. And certainly, you know, I would say technologies
Speaker 9: an area that we you know, we saw leverage, you know,
Speaker 9: creep up quite a bit. You saw loans that were
Speaker 9: being made based on just value, you know, aar loans
Speaker 9: that were being made based on just the underlying value
Speaker 9: in g If the company can't pay the law off,
Speaker 9: will just run off the business.
Speaker 1: Right.
Speaker 9: We were never big believers and loans like that, So
Speaker 9: all of our loans are more traditional lending. But certainly
Speaker 9: areas where leverage was was was high, you're you're gonna
Speaker 9: have to be seeing a re set, no question.
Speaker 4: I always wonder what the delta is between private and public,
Speaker 4: Like what's the interest rate or the yield differential between
Speaker 4: one of your loans and then a similarly rated you know, bought.
Speaker 9: The public public public loan. Typically the premium that we
Speaker 9: call it the yield premium is around one hundred to
Speaker 9: two hundred basis points between a you know, a broadly
Speaker 9: syndicated loan, a publicly traded loan new issue, and a
Speaker 9: and a private a similar private credit. So and the
Speaker 9: theory is of course that it's private and a liquid
Speaker 9: and therefore you should get a yield premium for you know,
Speaker 9: for ill liquidity. But I would say even more than
Speaker 9: a yield premum from a premium for illiquidity, you're getting
Speaker 9: a yeld, You're getting a credit premium, right They Now,
Speaker 9: our loans tend they have a lower leverage, they tend
Speaker 9: to have, you know, they do have you know, traditional
Speaker 9: financial covenants. You know, so structurally you're getting, if you will,
Speaker 9: a premium as well. And so that that's typically been
Speaker 9: the you know, Ben the difference and maybe even wider today.
Speaker 2: Ken just got about forty seconds or so. What's top
Speaker 2: of mind for you every morning?
Speaker 9: My people in my firm top of mind. I'm always
Speaker 9: focused on attracting, developing, promoting, nurturing, mentoring my people. If
Speaker 9: I look back and we've grown in eight short years
Speaker 9: from zero capital to now over sixty billion, there's no
Speaker 9: question that the difference maker was the talent and the
Speaker 9: capabilities of our people. And if there's one thing I've
Speaker 9: learned from my background, it's all about looking to inspire
Speaker 9: and develop those people and motivate those people. And so
Speaker 9: as much as the markets move around and change, at
Speaker 9: the end of the day, the one thing you can't
Speaker 9: replace the talent. And once you're known as a place
Speaker 9: where people want to work. For example, our firm is
Speaker 9: over fifty percent women and minorities, and so you know,
Speaker 9: people are attracted to that environment. In creating, nurturing and
Speaker 9: growing that environment and attracting talent is absolutely number one
Speaker 9: thing in my mind all the time.
Speaker 2: Thank you so much. This is a treat come back soon,
Speaker 2: great great consact, so appreciate it. Presidentcye have Churchill Asset Management,
Speaker 2: and we do highly recommend go listen to Barry Ray Hills.
Speaker 2: He had a really long, in depth conversation, but we'll
Speaker 2: get came back soon. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: We try to figure out when we should go apply
Speaker 2: to be a Citadel intern. In the meantime, we continue
Speaker 2: to kind of pass through economic data points headlines on
Speaker 2: a lot of things. We talked about residential housing earlier
Speaker 2: with our team, and we know the current issue of
Speaker 2: Bloomberg Business Week is all about the office real estate
Speaker 2: market and noting that it's getting scary. But then we
Speaker 2: hadessel Green yesterday selling a stake in a park a
Speaker 2: Park Avenue tower. A value of about two billion put
Speaker 2: on that skyscraper as a result of the deal, and
Speaker 2: that showed to be or was looked at Matt as
Speaker 2: some optimism when it comes to the office real estates peace.
Speaker 2: I think in certain market, certain areas.
Speaker 7: I won't use the.
Speaker 4: Tale of two Cities cliche, but clearly there's a difference,
Speaker 4: right if you have a great office building on Park
Speaker 4: Avenue in a place where everybody wants to be, or
Speaker 4: if you've got one of the buildings on the Third
Speaker 4: Avenue canyon down here that nobody wants to work in
Speaker 4: or will ever be able to live in.
Speaker 6: There's a very big difference in the value of those.
Speaker 2: Assets not apples to apples. Well, we have a great
Speaker 2: guest to comment on the commercial real estate world with
Speaker 2: us is Michael Chaveau. He is founder, chairman, and CEO
Speaker 2: of the international real estate development and investment company that
Speaker 2: bears his name. Is company owns the Transamerica Pyramid in
Speaker 2: San Francisco, brought that back in twenty twenty other properties
Speaker 2: around the world, and we welcome him in our Bloomberg
Speaker 2: Interactive Brokers studio.
Speaker 6: Hello, Hello, Hello, good morning, good afternoon.
Speaker 2: It's morning somewhere is it morning? Yeah?
Speaker 6: Bloom this morning.
Speaker 4: When when Carol and I get our Citadel internships, have
Speaker 4: you got a place for us to hang out in Miami?
Speaker 6: By the way, the Citadel play in Miami is something
Speaker 6: that everybody's been talking about because you know, the move
Speaker 6: of Citvielle to Miami from Chicago has been a big
Speaker 6: generator of kind of other companies moving there. This whole
Speaker 6: interest thing is a phenomenal marketing tool. Right now, You've
Speaker 6: got every top, every top, Yeah, coming the Citadel. But
Speaker 6: you know, when you're looking at the market and you
Speaker 6: talk about the l deal that eessel Green deals is
Speaker 6: interesting if you if you go through the details a
Speaker 6: lot of it was actually a transfer of debt, right,
Speaker 6: so the Japanese firm actually took over a bunch of
Speaker 6: the debt.
Speaker 7: But the fact that it was great for sl Greens.
Speaker 6: It was amazing for Estel Green, and the fact that
Speaker 6: the building is worth more than the debt was a
Speaker 6: miracle on that specific asset. But as you said, it's
Speaker 6: not even a tale of two cities, it's it's it's
Speaker 6: a building specific today, and the separation between good and
Speaker 6: not good, or good and really bad is huge. There's
Speaker 6: no more in between. It's either your winner, which means
Speaker 6: you're a trophy building, you're generating rents of two hundred
Speaker 6: bucks a foot plus in that market's on fire, or
Speaker 6: you're dead. There's no in between. Because, as you said,
Speaker 6: nobody wants to go to Third Avenue because those buildings
Speaker 6: have expired. The idea that real state lasts forever is
Speaker 6: something that people are now realizing is probably not true.
Speaker 4: By the way, what do you do with those buildings
Speaker 4: on Third Avenue, because we've heard from people look into it.
Speaker 4: Not only does nobody want to work in them as
Speaker 4: office buildings, but they cannot be repurposed as residential.
Speaker 6: I'm gonna ask you, when you open your fridge and
Speaker 6: you see the milk expired, what do you do with
Speaker 6: the mill? Throw it away exactly. And that's what's gonna
Speaker 6: happen with these buildings. So when we're looking at these buildings,
Speaker 6: we don't buy on Third Avenue because I don't really
Speaker 6: it's it's not our neighborhood. We only focus on super
Speaker 6: prime real estate. But at some point the value of
Speaker 6: those buildings is going to trade at land value and
Speaker 6: there will be an opportunity to demolish them and build
Speaker 6: a new office, a new building. It's not that nobody
Speaker 6: wants to live there, but you can't convert. You can't
Speaker 6: take bad stock and make make you know, you're not
Speaker 6: going to take the sour milk and make a cake
Speaker 6: out of it. It's still going to be a sour cake.
Speaker 6: And that's really the problem with a lot of these
Speaker 6: conversations about converting office to the RESI. It works in
Speaker 6: really specific cases with buildings that have the right column
Speaker 6: with and things of that.
Speaker 4: Native For example, even to the Net in London. Yeous,
Speaker 4: it was a bank and now it's a really cool
Speaker 4: hotel with like nine restaurants.
Speaker 2: But once we take down the sour cake. Are we
Speaker 2: going to build new cakes, in other words, new offices
Speaker 2: or are we going to do something else with that lane?
Speaker 6: Well, we're in certain cases where as there's demand, we're
Speaker 6: going to build new office. I mean, I'm a big
Speaker 6: believer that the idea that everybody's working from home is nonsense.
Speaker 6: You know, pre COVID, we all remember everybody wanted to
Speaker 6: be Google, Apple, Facebook, We all wanted big offices, hold hands,
Speaker 6: you know, and.
Speaker 7: In collaborate years ago.
Speaker 2: I'm just going to I.
Speaker 6: Want to say that every time I come to this office.
Speaker 6: This was built in two thousand and five. What a
Speaker 6: visionary mic was to do this, to bring people together,
Speaker 6: forces you to come together in London as well before
Speaker 6: you go to your office. This is it's brilliant and
Speaker 6: he's a true visionary.
Speaker 10: It's a fantastic place to work.
Speaker 4: And our new office in London, by the way, I
Speaker 4: Norman Foster designed that as well.
Speaker 6: So we're so I just toured that actually with Norman.
Speaker 6: Norman's designing four buildings for us. He's also doing the
Speaker 6: Trans America Pyramid in San Francisco, and you know a
Speaker 6: couple of new office buildings in Miami, The building is amazing.
Speaker 6: But just to go back here to your question, we're
Speaker 6: going to build office, we're going to build residential. We're
Speaker 6: going to build the right thing at the time. But
Speaker 6: the value of the land will start making sense.
Speaker 2: Go to San Francisco. You bought that Transamerica Pyramid back
Speaker 2: in twenty twenty, I think it was six hundred and
Speaker 2: fifty million dollars and you're putting a ton of money
Speaker 2: in to renovate it. Any regrets about that property and
Speaker 2: help me understand San Francisco by.
Speaker 6: Five times again if I could. It's the first thing,
Speaker 6: as I said, focuses only on elevating super prime real estate.
Speaker 6: It doesn't get more prime than the Trans America payiod.
Speaker 2: So what's going on San Francisco. We have a cover
Speaker 2: story on Business Week at San Francisco's going through really tough.
Speaker 6: So if you read the press, you know, and you
Speaker 6: think San Francisco is dead and it's about the sink
Speaker 6: and the cable cars are going down the ocean. You
Speaker 6: guys reported recently about the Trans America Pyramid. We've signed
Speaker 6: multiple leases between two hundred dollars to two hundred and
Speaker 6: fifty dollars a foot in the Pyramid. Now, that makes
Speaker 6: the Trans America Pyramid the third most expensive building in
Speaker 6: the country, more expensive than the building that essel Green
Speaker 6: just sold as far as rents, right, it's at the
Speaker 6: top of the market is rents and this is an
Speaker 6: San Francisco, which a market that in general has a
Speaker 6: lot of negativity. It shows you that even in difficult markets,
Speaker 6: there's there's a flight to quality. And we're getting the
Speaker 6: investment banks, we're getting you know, the vcs there that
Speaker 6: are willing to pay if you give them the right thing.
Speaker 6: And obviously with Norman Foster and we're investing hundreds of
Speaker 6: millions of dollars, we're seeing that. But San Francisco is
Speaker 6: obviously some some existential issues that that will eventually get solved.
Speaker 6: I think that there's a lot of a lot of
Speaker 6: eyes on us with what we're doing at the Pyramid,
Speaker 6: with how we're going to rejuvenate the park. We have
Speaker 6: the Redwood Park there to really ignite that whole neighborhood
Speaker 6: Jackson Square, that's going to happen towards the end of
Speaker 6: the year early next year. So there's a lot of
Speaker 6: hope that that brings life.
Speaker 2: To get ahead of itself. Also I mean, I feel
Speaker 2: like we've been talking about that, the housing problems and situations,
Speaker 2: the expensive nature of San Francisco city like San Francisco
Speaker 2: for years. So did it just kind of need to
Speaker 2: write itself or is it the pandemic?
Speaker 6: I think Look, I think it's a combination. It's it's
Speaker 6: the star aloge, the stars aligned in the wrong location.
Speaker 6: And that says because the pandemic took a hit, the
Speaker 6: largest groups that suffered from the pandemic, or in the
Speaker 6: sense from an office perspective, is the tech tenants because
Speaker 6: they all of a sudden figured we can work from home.
Speaker 6: But that's all changing, right You're seeing a change of that,
Speaker 6: and right now we're seeing even in San Francisco, we're
Speaker 6: seeing Monday to Thursday, you know, the card swipes. Right now,
Speaker 6: people are, people are at the office. Friday is still
Speaker 6: is still quite quiet. But all that really means is
Speaker 6: you've got to give people a reason to come.
Speaker 11: You've got to end the flow.
Speaker 2: Or Ed Lola, who's dinner San Francisco Bureau is listening
Speaker 2: and says, ask him, what's going to happen to downtown
Speaker 2: San Francisco, Westfield and all the corporate real estate is empty.
Speaker 2: Everyone wants it rezoned.
Speaker 6: So well they're working on but again part of part
Speaker 6: of the issue there is, as I said earlier, not
Speaker 6: every building works as as as a conversion, conversion to residential.
Speaker 6: San Francisco from all market needs it more than anything
Speaker 6: else because housing prices are out of control. You know,
Speaker 6: Plumouth in San Francisco is sub three percent today, which
Speaker 6: is something really important to understand. People are there, There
Speaker 6: is gonna be a back to work, but we will
Speaker 6: see the bad stock exactly like Third Avenue you were
Speaker 6: talking about the creators of Third Avenue. There are buildings
Speaker 6: that expired in San Francisco. In every market, Chicago is
Speaker 6: no different than New York is no different. We have
Speaker 6: to get rid, we have to get rid of the
Speaker 6: buildings that are not relevant anymore and build new buildings
Speaker 6: instead of them. And it's that's a transformation. That's what
Speaker 6: we're going right now. COVID has accelerated all this kind
Speaker 6: of all this, I would think that's gonna that was
Speaker 6: gonna happen anyway.
Speaker 4: I would love to hear your take on New York
Speaker 4: because San Francisco, when I see that rents are going
Speaker 4: down there, it just makes me excited because I want
Speaker 4: to live there and maybe I can afford it one day.
Speaker 4: Miami obviously it is white hot, not just Citadel. I
Speaker 4: mean even before Ken Griffin thought about moving to Miami,
Speaker 4: everybody wanted to be there. But New York feels kind
Speaker 4: of dead.
Speaker 7: You know.
Speaker 4: Even on this block we had all of these big
Speaker 4: tenants downstairs, and those stores are empty still, right, J Crew.
Speaker 2: And Furry Secret and Buckle Buds.
Speaker 4: They're all gone. So I just wonder what happens to
Speaker 4: New York.
Speaker 6: You had the container store that went away, right, Yeah.
Speaker 7: We had, and it's gone.
Speaker 2: We used to have Williams Sonoma and Pottery Barn. They
Speaker 2: left and I asked, MGA, why are you leaving? It's
Speaker 2: a great place to be, and they're like, it got
Speaker 2: too expensive.
Speaker 6: Okay, well there was an issue with obviously the cost
Speaker 6: as you said, the costs went up. They couldn't afford it.
Speaker 6: The business interruption. But you're seeing if you look at
Speaker 6: Madison Madison, rents went up from it that it was
Speaker 6: one thousand bucks a foot down to four hundred. You're
Speaker 6: back at nine hundred bucks the foot on Madison. There
Speaker 6: is a bounce back in the locations where people want
Speaker 6: to be.
Speaker 2: We want to roll into the conversation though also our
Speaker 2: Ed Ludlow, who of course is co host of Bloomberg Technology,
Speaker 2: because we've had some news on the EV space. But
Speaker 2: before we get into it, you know, you really kind
Speaker 2: of popped in some good questions on San Francisco. You're
Speaker 2: living in the San Francisco area, do you buy that
Speaker 2: San Francisco is going to be? Okay?
Speaker 8: I don't buy it in either direction. I asked the
Speaker 8: question because it's what the debate is here among everyone, residents,
Speaker 8: the industry. We had our Bloomberg Technology summit last week, Michael,
Speaker 8: and the future of SF was everything that people were
Speaker 8: talking about. Alongside AI and the mayor London. Breed was
Speaker 8: here and I think what we're talking about is downtown SF.
Speaker 8: That the real estate you're talking about, And the mayor's
Speaker 8: proposal is that investors buy in and redevelop existing or
Speaker 8: knock it down and do something new with what's already there.
Speaker 8: And my question to you, Mike was how attractive is
Speaker 8: that as an investor to get involved in a project
Speaker 8: to reimagine what downtown SF looks like.
Speaker 6: So you're asking the person that has the largest investment
Speaker 6: in downtown San Francisco. We have a billion dollars invested
Speaker 6: at the Transfermerica Pyramid Center, which is a full, full
Speaker 6: city block. I've had multiple conversation with the mayor about
Speaker 6: this whole idea. These things take time. It's not happening
Speaker 6: in five minutes. And the biggest issue of San Francisco
Speaker 6: has and has had for a long time is bureaucracy
Speaker 6: of getting things approved right. So now there's an emergency
Speaker 6: there trying to push everything quickly, which is good because
Speaker 6: I think that's going to make a change, but it's
Speaker 6: still going to take time. That is not going to
Speaker 6: be the immediate solution. There's a security issue in San
Speaker 6: Francisco that has to be dealt with, and it's it's
Speaker 6: this cycle where there's no people, so there's more cud.
Speaker 3: How do you deal with that.
Speaker 4: It doesn't seem like that will be dealt with. I
Speaker 4: remember going to San Francisco ten years ago to interview
Speaker 4: people around an Apple product release and Chris Sokka had
Speaker 4: to break up a fight between two homeless people behind
Speaker 4: us because they didn't know who owned the joint right. So,
Speaker 4: I mean, the homeless issue has been a problem for decades.
Speaker 6: That's not going to get solved well, But you didn't
Speaker 6: feel the homeless issue when you had people on the street, right.
Speaker 6: Part of the issue with the homeless issue. When there's
Speaker 6: nobody on the street and it's mostly homeless, and you're
Speaker 6: and you're and and the ratio between homeless that the
Speaker 6: non homeless people is upside down, you feel it a
Speaker 6: lot more right. And that's where you start seeing crime.
Speaker 6: That's where you're seeing drugs. I mean the whole area
Speaker 6: in San Francisco. That's problematic. But on the bright side,
Speaker 6: think about think about what's happening. You're asking what's going
Speaker 6: to change. What I think is going to change is
Speaker 6: that that you have voters and this tremendous amount of
Speaker 6: pressure on the mayor and on the on the entire
Speaker 6: board there to make a difference. You know, they've they've
Speaker 6: changed some of the some of some of the people.
Speaker 6: They're both on the education side and to fight crime.
Speaker 6: If you ask me if they're doing enough, it's probably
Speaker 6: not enough yet, but they're at least directionally going there
Speaker 6: because they know that that there is no option. And unfortunately,
Speaker 6: the press has been has been very brutal on San Francisco.
Speaker 6: But it does. It did give a kick in the
Speaker 6: butt to everybody there to move forward. But I think
Speaker 6: that what's interesting and why I find it fascinating is,
Speaker 6: as I said earlier, if we're getting rents between two hundred,
Speaker 6: two hundred fifty dollars a foot, which is twice the
Speaker 6: market in San Francisco pre COVID. Pre COVID that this
Speaker 6: building was at sixty five to one hundred and five dollars.
Speaker 6: Today we're at one twenty to two fifty trending to
Speaker 6: three hundred. That tells you that that there is a
Speaker 6: first thing that that San Francisco is not dead. There
Speaker 6: is there is a belief at the top of the
Speaker 6: market right that people want to be there. Right So
Speaker 6: at the relevant real state and the relevant locations, I
Speaker 6: think that we're going to see we're going to see
Speaker 6: positive news and and like I said, there's a lot
Speaker 6: of eyes on us, you know, towards the end of
Speaker 6: this year really to be the take Nite downtown San
Speaker 6: Francisco with with opening the Pyramid and opening the park
Speaker 6: and opening that whole neighborhood.
Speaker 2: And I want to bring you in because initially we
Speaker 2: wanted to talk to you about what's going on at Stilantis,
Speaker 2: and I'm thinking about EV charging units. Right, You've got
Speaker 2: another kind of Stillantis taking a page from Tesla's playbook
Speaker 2: in terms of lining up other automakers and I and
Speaker 2: we can talk about EV infrastructure.
Speaker 8: Tell us the news though, Okay, so summing up the
Speaker 8: news from Stilantis. They're basically making a standalone power unit,
Speaker 8: much like Tesla has, so down the road they can order,
Speaker 8: they can offer the charging at home infrastructure, energy storage,
Speaker 8: and then the charging products. The thing is, we don't
Speaker 8: know anything about it. It's going to be through third
Speaker 8: party partnerships, investments through their venture arm and in this country,
Speaker 8: Matt's probably thinking what is he talking about? In this country,
Speaker 8: Stillantis has no EVY offering at all, So you know,
Speaker 8: they are so behind the curve here. I think the
Speaker 8: big question for everyone is do they join the NACS club,
Speaker 8: which we discussed last week. Right, they joined Tesla's technology standard,
Speaker 8: but this is at least Stillantis making squeaks raises a
Speaker 8: good point for Michael though Carroll, which is, you know,
Speaker 8: where does the energy come from the private sector or
Speaker 8: the public sector? Always talking about the infrastructure bill, but
Speaker 8: you know, the private sector just gets going quicker. It
Speaker 8: just does it like Tesla just did it. In the
Speaker 8: case of this charging.
Speaker 2: Network, Michael, how do you think about this stuff?
Speaker 6: So we just completed the Mandarin Oriental Residences in Beverly
Speaker 6: Hills on Wilshire Boulevard, and you know, in California, obviously,
Speaker 6: as you know, evs are are extremely popular. I think
Speaker 6: you know, a quarter a third of our parking spaces
Speaker 6: are actually are actually all facilitated with private charge station
Speaker 6: and we provide that to people that move in. And
Speaker 6: that's where you're seeing. As you said, the private sector
Speaker 6: is much quicker to react because there's there's a true ROI. Right,
Speaker 6: if I have a guy that wants to buy or
Speaker 6: a family that wants to buy an apartment that the
Speaker 6: poor bedroom and needs three charging stations, there's a true
Speaker 6: ROI and providing these facilities versus you know, waiting for
Speaker 6: the you know, waiting waiting for the government to do it,
Speaker 6: or waiting for for for the for public funds for that.
Speaker 2: So it's becoming a bigger, bigger part, right is it
Speaker 2: becoming a bigger part of you as you develop.
Speaker 6: For sure on the West coast on the way I
Speaker 6: think that it's really the mindset of the consumer. The
Speaker 6: West Coast consumer is very focused and there's a lot
Speaker 6: of demand for ev for for for evs.
Speaker 4: But don't you have to plan ahead, like if you're
Speaker 4: putting up a building or you know, re engineering a
Speaker 4: building here in New York, if you're building something in Miami,
Speaker 4: don't you have to say, like, okay, as Ed pointed out,
Speaker 4: Stillantis doesn't have electric vehicles in America this year, but
Speaker 4: in two or three years they're going to have a
Speaker 4: ton of them, and so eventually, you know, I mean,
Speaker 4: you've got to think five, ten, twenty, five, thirty years ahead,
Speaker 4: right do you?
Speaker 6: I'm thinking about my internship at I said. But the
Speaker 6: answer to question is yes, New York is a unique market.
Speaker 6: You don't really we don't build a lot of parking here.
Speaker 6: And as a good point, you know, there's just a change,
Speaker 6: even this change that you see now with with the
Speaker 6: taxes on on traffic that was proposed yesterday here in
Speaker 6: New York City, but in Miami, for sure, Miami is
Speaker 6: another market that we are incorporating EV charging stations, the
Speaker 6: whole energy you know, we're the building we're building with
Speaker 6: Norman Foster in Miami Beach is in is it totally?
Speaker 7: You know, is an energy.
Speaker 6: Efficient building where very much like your headquarters in London,
Speaker 6: you know, being environmentally friendly and environmentally neutral.
Speaker 2: Where's your favorite place for opportunities or to build? Right
Speaker 2: now when you look around the globe and let.
Speaker 4: Me ask you about the US versus the rest of
Speaker 4: the world on that note, good, you know, because right
Speaker 4: now America is going through a tough time. My wife's
Speaker 4: from Spain and she has issues with our government and
Speaker 4: our people, you know, But how do you look at
Speaker 4: it as someone who immigrated here also, you know, twenty
Speaker 4: thirty years ago.
Speaker 6: Well, that's a load of question. We don't have that
Speaker 6: many that much time left they even answer that. But
Speaker 6: if you think about how other people look at how
Speaker 6: foreigners look at at America, We're still looked at the
Speaker 6: best place to invest. And that's it goes back to
Speaker 6: the sel Green deal. The Japanese just put tremendous amount
Speaker 6: of investment in here because the US has looked at
Speaker 6: it's the safest place to invest. Europe is a disaster
Speaker 6: from an investment point of view. They have you know, Spain, Germany.
Speaker 6: I mean, these markets have tremendous amount of problems. We
Speaker 6: all have the same issue with cost of capital. Right,
Speaker 6: cost of capital is expensive here, it's expensive in Europe,
Speaker 6: but there's the sense that the US is a more
Speaker 6: advanced market and it's safer market to invest. So we're
Speaker 6: just seeing, I mean, we're partners with some of the
Speaker 6: largest German state owned pension funds and insurance companies. They're
Speaker 6: still investing in the US more and more now here
Speaker 6: than they are in their in their own in their
Speaker 6: own backyard, because they do have problems there that have
Speaker 6: to do with you know, with regular regulation, and for
Speaker 6: years they were in very low return environment that now
Speaker 6: is with high cost of capital. It just kills you.
Speaker 2: So, Michael, thirty seconds left here. So I'm not gonna
Speaker 2: poo poo some of the journalism that we've all been
Speaker 2: doing and the narrative out there about the concerns about
Speaker 2: office real estate. But do you think there is a
Speaker 2: crisis brewing? And just got about thirty seconds twenty five.
Speaker 6: It's as you said, there's it's not a crisis. It's
Speaker 6: not an overall market. It's there's a crisis in the
Speaker 6: B and C class office and and it's not a
Speaker 6: crisis that has expired. It's got to be demolished, it's
Speaker 6: got to be a replacement.
Speaker 2: I talked to someone who was overseeing kind of all
Speaker 2: of the old assets from like sears and so and
Speaker 2: so forth, and just saying, you know, I'm so glad
Speaker 2: we're not talking about the demise of the mall anymore.
Speaker 2: Like we've moved on to office and it just sounds
Speaker 2: like we're cleaning house at this point, just a little bit.
Speaker 6: There's a reset and like you said, old inventory out,
Speaker 6: new inventory in, and people are paying for it. The
Speaker 6: good thing is there's a lot of money out there
Speaker 6: to pay for new inventory.
Speaker 2: Come back soon. This was really really fun pleasure.
Speaker 6: Thank you so much, Michel Sfoe.
Speaker 2: He's founder, chairman, and CEO of the company that bears
Speaker 2: his name here in our interactive broker And thanks Ed, Yes,
Speaker 2: thank you, Ed Ludlow.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 2: Also obsessed with what's going on in Houston, We've been
Speaker 2: talking about how electricity demand in the second largest US
Speaker 2: state surpassed the record set during the summer of twenty
Speaker 2: twenty two as searing temperatures boosted ac use we're of
Speaker 2: course talking about Texas types of one hundred and ten
Speaker 2: degrees fahrenheit. So let's get into it, because what's going
Speaker 2: on is certainly we're looking at the grid, the stresses,
Speaker 2: if you will, And there's a great story on the
Speaker 2: Bloomberg by our Bloomberg Newspower Extreme I'm sorry, by our
Speaker 2: climate crisis reporter Noreene Malick and team about what's going
Speaker 2: on in terms of our grid and really just how
Speaker 2: America's biggest power source we're talking about net gas wasn't
Speaker 2: built for it. Joining us right now though, to talk
Speaker 2: about the story is Elizabeth Elkin. She's interim team leader
Speaker 2: for Bloomberg's Power Team, and she joins us on the
Speaker 2: phone here on this Tuesday. So Elizabeth, come on in
Speaker 2: on this story because we are we talked to somebody
Speaker 2: out of Houston earlier about the temperatures. They're saying the
Speaker 2: grid is working so far, but there are stresses on
Speaker 2: the system and not gas to blame or it just
Speaker 2: isn't ready for it.
Speaker 12: Yes, yes, absolutely, So we are watching the grid in
Speaker 12: Texas very very closely, and like you said, Narene had
Speaker 12: this fantastic story come out today. She's our grid expert.
Speaker 12: She has been looking into gas generation and how that
Speaker 12: might be impacting some of these blackout risks. So there's
Speaker 12: been a lot of gas generation come on in the
Speaker 12: last fifteen or so years, right, become cheap and readily
Speaker 12: available in the US, and it's of course cleaner than coal, right,
Speaker 12: So it's not inherently a bad thing that we have
Speaker 12: all this gas generation coming online, but it does tend
Speaker 12: to perform badly in extreme weather. And so obviously the
Speaker 12: last few years we've seen it get really really cold
Speaker 12: or really really hot in Texas and that can cause
Speaker 12: problems for these these gas plants. And now we're looking
Speaker 12: at extreme weather appearing to get more and more common,
Speaker 12: and so it's it's pretty concerning.
Speaker 4: So what's the problem with gas plants in cold weather?
Speaker 4: Do they literally like not have insulation or you know,
Speaker 4: does somebody leave the door open?
Speaker 7: I mean that's wrong.
Speaker 12: Yeah, absolutely, And it is actually a number of factors
Speaker 12: that hit all of these plants in a different ways.
Speaker 12: So like the facilities aren't uniformly winterized, right, and so
Speaker 12: when it gets really cold, like, different plants perform better
Speaker 12: in different temperatures, right. Some of them rely on like
Speaker 12: a single gas pipeline for supply. So like say that
Speaker 12: pipeline has an issue, Say it's really cold in that
Speaker 12: pipeline freezes, like that can be a real problem for
Speaker 12: that plant, right. And so part of the problem is
Speaker 12: is that there's not one single problem that makes these
Speaker 12: plants either fail or not perform the way that we
Speaker 12: hope they perform.
Speaker 3: Right.
Speaker 4: It's a very cool story because not only does she
Speaker 4: kind of uncover the vulnerabilities of gas power plants for us,
Speaker 4: I had no idea that this was part of the problem,
Speaker 4: but she also kind of walks us through in a way,
Speaker 4: how these power grids work. We always talk about the grid,
Speaker 4: and I don't really know what that means out there,
Speaker 4: you know, And apparently there are different grids that serve
Speaker 4: different groups, right, And she highlights, for example, the largest
Speaker 4: power grid in the US serve sixty five million people
Speaker 4: in thirteen states in Washington, d C. So it's great
Speaker 4: to learn all of this kind of wonky detail about
Speaker 4: how the how the power market work in the US.
Speaker 4: What's the upshot though here in terms of, you know,
Speaker 4: what has to happen. Does this mean we need to
Speaker 4: rewinterize or you know, rebuild these gas power plants or
Speaker 4: it's supposed to be a bridge solution, right. The idea
Speaker 4: is that natural gas takes us from dirty coal to
Speaker 4: clean renewable So yeah, can't we just like kind of
Speaker 4: make it through to the other side.
Speaker 12: Yeah, yeah, So that has been the idea has been.
Speaker 12: Gas is supposed to be sort of a bridge right
Speaker 12: between we hear about coal and then and then we
Speaker 12: think like you know, like solar, wind, et cetera, and
Speaker 12: we are there, we are building solar plants and wind
Speaker 12: plants and all. But gas has grown by so much
Speaker 12: that it's tough to just say, okay, now we're just
Speaker 12: gonna you know, not use these gas plants, right.
Speaker 4: And we're the biggest gas producers in the world, right,
Speaker 4: the US.
Speaker 12: Yes, yes, absolutely, And so a lot of people have
Speaker 12: a variety of ideas of how we could help solve
Speaker 12: these issues. Some of them include like building more pipelines
Speaker 12: for some of these plants so that like if one
Speaker 12: pipeline fails, you know, you can use another one. Keep
Speaker 12: keeping extra gas on hand right in case there's an
Speaker 12: issue like getting all of the gas that we need,
Speaker 12: which sometimes happens, or even like having backup fuels in
Speaker 12: case like they run out of gas. But it is
Speaker 12: just really hard to change a system that has become
Speaker 12: so prominent right the last you know, fifteen or so years.
Speaker 2: No, But in the meantime, the story points out that
Speaker 2: increasingly we're seeing what more than seven hours of power
Speaker 2: interruptions for US household on average in twenty twenty one,
Speaker 2: more than double the rate reported in twenty thirteen. And
Speaker 2: as you guys also point out the story that polar vortex,
Speaker 2: remember back in January twenty fourteen, so that's when we
Speaker 2: you know, extreme weathers unusual, don't laugh. But it's almost
Speaker 2: ten years since then and we're continuing to see problems.
Speaker 2: So we haven't kind of figured our way around this.
Speaker 2: So that's worrisome.
Speaker 4: And I can't believe twenty fourteen whole or ten years
Speaker 4: or tech ago, I know.
Speaker 2: Right listen, Elizabeth, thank you so much, Elizabeth Elkin, So
Speaker 2: glad we could get to the story. Interim team leader
Speaker 2: for Bloomberg's Power Team. We do want to point out
Speaker 2: Mike Bloomberg founder majority owner of course at Bloomberg LP,
Speaker 2: parent company on Bloomberg News, has committed five hundred million
Speaker 2: dollars to be on Carbon, a campaign aimed at closing
Speaker 2: the remaining coal fired plants in the US by twenty
Speaker 2: thirty in halting the development of new net gas fired plants.
Speaker 2: So we just wanted to point that out there. Check
Speaker 2: out the story. It's online and at Bloomberg dot com.
Speaker 2: Really deep dive and explain so much. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Easter on Bloomberg Radio,
Speaker 1: the Bloomberg Business app, and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just Say Alexa play Bloomberg eleven thirty.
Speaker 2: Carol Master along with Matt Miller, who is in for
Speaker 2: Tim Stenovik. Plenty ahead in our second hour of the
Speaker 2: weekend edition of Bloomberg Business Week, including the business of
Speaker 2: sailing from the world's largest cruise line to an upstart
Speaker 2: racing league that's striving to be F one Formula one
Speaker 2: on the water. Plus we'll look at the viability of
Speaker 2: art as an investment option with author, advisor and curator
Speaker 2: Maria Brido. First up this hour, I check on the
Speaker 2: cruising industry courtesy of Carnival, which reported quarterly results on
Speaker 2: Monday and an annual forecast that beat estimates. Even so,
Speaker 2: shares posted their biggest one day drop in months. Right
Speaker 2: after the earnings report. Carnival's president and CEO and chief
Speaker 2: climate Officer Josh Weinstein joined Matt and Me with his
Speaker 2: thoughts on the numbers, the business, and the outlook.
Speaker 13: Well, thank you first of all for having me. It's
Speaker 13: a pleasure to be with you. You know, I got
Speaker 13: to be honest with you. Over the last call it
Speaker 13: nine months, ten months, our trajectory has only been in
Speaker 13: one direction, and that has been up, and that is
Speaker 13: despite you know, a good amount of geopolitical uncertainty and
Speaker 13: disco and that's you know, we're global company and so
Speaker 13: that's part of our global trade and we adapt and
Speaker 13: we evolved and we move on. I'd say, in the
Speaker 13: last three months it's been pretty fascinating. We usually have
Speaker 13: our peak demand in bookings in the first quarter, and
Speaker 13: our first quarter is December January February of the year,
Speaker 13: and in fact, We did have a record first quarter
Speaker 13: in bookings, highest bookings in the company's history, and we
Speaker 13: thought that was great, and then we got to our
Speaker 13: second quarter and we shattered it. And so the demand
Speaker 13: that we see is carrying on in the first three
Speaker 13: weeks of our third quarter.
Speaker 11: For the month of June, it hasn't stopped.
Speaker 13: And so despite the fact that there is geopolitical uncertainty,
Speaker 13: that is something that our consumers, our guests are taking
Speaker 13: in stride.
Speaker 11: And at the end of the.
Speaker 13: Day, they've got a desire to travel, they've got a
Speaker 13: desire for new experiences, and they have a lot of
Speaker 13: pent up demand for experience, as you know, and that
Speaker 13: plays very well into our business.
Speaker 2: Josh, it feels like though investors maybe think it's as
Speaker 2: good as it gets, considering the bounce back that we've
Speaker 2: seen in your share price this year. You know how
Speaker 2: it goes as someone who's been at Carnival for a
Speaker 2: while now and looked at it from very several different angles.
Speaker 2: But we still have the stock down from about eighty
Speaker 2: percent from a high back in January of twenty eighteen.
Speaker 2: Is it as good as it gets? Do you think
Speaker 2: in terms of bookings and visibility?
Speaker 14: Right?
Speaker 11: Now, oh not at all, you know, you know, so
Speaker 11: the short answer is no.
Speaker 13: It as a matter of fact, even though we're all
Speaker 13: the way back in our booking curve for our North
Speaker 13: American brands, we're still only about ninety percent back for
Speaker 13: our European brands, and so their trajectory is the same thing,
Speaker 13: going in the right direction, but they've got a ways
Speaker 13: to run. But to show you the strength of our
Speaker 13: portfolio of world class brands, our European brands, in the
Speaker 13: second quarter, they actually as compared to twenty nineteen, not
Speaker 13: only do they have double digit increased percentages in the
Speaker 13: volume is booked for the rest of this year, for
Speaker 13: the second half of the year, it was on double
Speaker 13: digit price increases. And so first quarter seven and a
Speaker 13: half points up in pricing, second quarter of this year
Speaker 13: seven and a half percent percent up in pricing. With
Speaker 13: that demand on a forward looking basis, as wind in
Speaker 13: our back, we're very well booked for the rest of
Speaker 13: this year into the first half of next year. So
Speaker 13: with all due respect to you know, to the market.
Speaker 13: You know, any one day you're gonna have ups, you're
Speaker 13: gonna have downs.
Speaker 11: As you said, we've been.
Speaker 13: On a pretty big tear about a one hundred percent
Speaker 13: or so since the start of the year. Our job
Speaker 13: is to focus on the business, focus on that demand generation,
Speaker 13: and continue to drive our business forward.
Speaker 4: Josh Matt Miller here with Carol. What needs to happen
Speaker 4: to bring the stock back to pre pandemic levels or
Speaker 4: why hasn't it come back? Is it just that you
Speaker 4: took on a lot of debt that you have a
Speaker 4: lot of investment to do. I mean, you're trading in
Speaker 4: the teams right now, and be the pandemic hit you
Speaker 4: were treating more like fifty sixty seventy dollars a share.
Speaker 13: Yeah, well, you know, our profile has definitely been impacted
Speaker 13: by what happened in twenty twenty and what we had
Speaker 13: to do to get through it. Frankly, you know, we
Speaker 13: were a company that entered in with probably about you know,
Speaker 13: the market cap and the and the debt. If you
Speaker 13: added it together, it's probably not too dissimilar to exactly
Speaker 13: where we are now if you add it together.
Speaker 11: It's just that our debt, which used to.
Speaker 13: Be about thirteen billion dollars, is thirty three billion dollars
Speaker 13: and hence the value of the of the equity is
Speaker 13: down and it's our job over the next you know,
Speaker 13: several years to effectively transfer that back by generating free
Speaker 13: cash flow. We have a good amount of headroom to
Speaker 13: do to take that and delever and pay down debt.
Speaker 13: We have the lowest order book of new builds in
Speaker 13: frankly my history. I've been here for twenty one years.
Speaker 13: And when I started back in November of two thousand
Speaker 13: and seven as the treasurer as one of the stops
Speaker 13: along my path here at Car Corporation, we had twenty
Speaker 13: four ships on order, and so our ability to generate
Speaker 13: a lot of cash and we will continue to do
Speaker 13: that and use it to de lever is quite strong,
Speaker 13: to tell you the truth. Now, as far as you know,
Speaker 13: what are the other factors involved? For us, it's about
Speaker 13: getting back to not only full capacity, full occupancy, but
Speaker 13: really leveraging our brands. Our brands are phenomenal. I mean
Speaker 13: they are world class. We have Carnival Cruise Line as
Speaker 13: America's cruise line. Ada in Germany created modern day cruising.
Speaker 13: They own Germany Piano Cruises in the UK they are
Speaker 13: synonymous with cruising. They have a Union Jack as their livery.
Speaker 13: We own those markets. They are very good markets for us,
Speaker 13: and they're rebounding, and so the as far as I'm concerned,
Speaker 13: there's only one way that we're going, and it's up.
Speaker 4: Can I just ask about your debt? You have a
Speaker 4: weighted average fixed coupon of six point nine four percent,
Speaker 4: which is not bad considering where we are right now,
Speaker 4: and we're I guess at about two.
Speaker 2: Point nine billion maturing in twenty twenty four.
Speaker 4: Which is where it would be, which is much lower
Speaker 4: than it would be if you had to refinance. Now,
Speaker 4: is my point right? You guys got in on this
Speaker 4: early and filled your coffers first. Do you think that
Speaker 4: puts you at an advantage relative to your competitors?
Speaker 11: I think we're we're in good shape.
Speaker 13: You know, we've we've basically gotten to a point where
Speaker 13: we ended the quarter at about seven point two billion
Speaker 13: seven point three billion of liquidity, and we've already started
Speaker 13: to de lever. As far as we're concerned, we can
Speaker 13: always be opportunistic, we can refinance, we can look at
Speaker 13: what's available, but we as far as we see the future,
Speaker 13: we have no need to go out to the markets
Speaker 13: at this point. We can delever with the liquidity buffer
Speaker 13: that we have and starting to generate again all of
Speaker 13: that cash flow.
Speaker 11: We do have export credits as well, So for.
Speaker 13: The new bills that we do have on order, we've
Speaker 13: got about three billion dollars of very competitively priced export
Speaker 13: credit facilities ready and waiting for us if we choose
Speaker 13: to use them between now and two years from now,
Speaker 13: in the.
Speaker 11: Middle of twenty twenty five, when our last order.
Speaker 13: So we're in a very strong position when it comes
Speaker 13: to our ability to manage our debt down and manage
Speaker 13: our interests expens down over time. You know, as a
Speaker 13: matter of fact, one of the one of the drivers
Speaker 13: that we had for being able to add two hundred
Speaker 13: and seventy five million dollars to the bottom line in
Speaker 13: our guidance change from March to June was in fact
Speaker 13: interest expends savings from starting that process of delevering.
Speaker 11: So we're very we're very pleased with that. With that trajectory, Well, talk.
Speaker 2: To us about you know, Matt and I are going
Speaker 2: back and forth. We're looking at different functions here, so
Speaker 2: tell us we want to make sure we have this right.
Speaker 2: Is it two point nine billion? Is that correct? Maturing
Speaker 2: in twenty twenty four, I was looking at some of
Speaker 2: our research.
Speaker 11: You know what, I don't want to give you the
Speaker 11: wrong number in a live program.
Speaker 2: That's fair.
Speaker 13: We don't get back to you, and we'll make sure
Speaker 13: we get it squared away for you well.
Speaker 2: And the other thing is is you talked about, you know,
Speaker 2: operating good cash flow, and forgive me, we just want
Speaker 2: to make sure we're we're hitting it right too. You
Speaker 2: know the amount that the ships are not inexpensive. You
Speaker 2: guys did a lot of replacement during the pandemic and
Speaker 2: getting rid of some of the older ships and so on.
Speaker 2: But I do wonder, Josh, can you I don't know,
Speaker 2: what's the capex that you're looking for that you can
Speaker 2: continue to spend which is really important, you know, certainly
Speaker 2: to your business. And can you do it with the
Speaker 2: debtload the current debtload?
Speaker 13: Yeah, I mean the short answer is yes, I think
Speaker 13: we can, you know, And as far as we have
Speaker 13: new build capex and we have non new build capecks,
Speaker 13: our new build order pipeline, as I said, is the
Speaker 13: smallest we have had in anyone's memory, and so we
Speaker 13: are very well placed to be able to manage that
Speaker 13: type of capex spend.
Speaker 11: And as I mentioned it does come with.
Speaker 13: With export credits packaged with it, should we choose to
Speaker 13: use them as export credits are rolling off because we're
Speaker 13: paying them down every year in the normal course. On
Speaker 13: top of that new build capex, we've got, we've got
Speaker 13: maintenance capex, we've got you know, making sure our ships
Speaker 13: are in good condition. That you know, we're forecasting it's
Speaker 13: going to be you know, give or take about one
Speaker 13: point five billion for this year in in twenty twenty three,
Speaker 13: and about one point seven billion on an annual basis
Speaker 13: thereafter for the foreseeable future.
Speaker 11: That profile, that entire capex profile.
Speaker 13: Is significantly less than what we were living with and
Speaker 13: how we were operating pre pause. And so that's why
Speaker 13: we're so bullish that the amount of cash flow that
Speaker 13: will be able to generate.
Speaker 11: And then utilized to d lever is not insignificant.
Speaker 13: You know, we're basically planning between twenty four, twenty five
Speaker 13: and twenty six something in the magnitude of about five
Speaker 13: billion of cash from operations, where if you net out
Speaker 13: all these with the capex, with the debt, export credits
Speaker 13: coming in, export credits getting paid off, we anticipate over
Speaker 13: over eight billion dollars will be available for us to
Speaker 13: be able to de lever. And that's on top of that,
Speaker 13: you know, couple a couple billion we're doing this year.
Speaker 2: Josh. One thing I want to ask you, and you
Speaker 2: mentioned this too, that you know, among the different hats
Speaker 2: that you've worn at Carnival, and you've been there, I
Speaker 2: think almost twenty years. I think I'm right if I'm
Speaker 2: looking at.
Speaker 11: It, twenty one one.
Speaker 2: Is treasure and so you understand the importance of the
Speaker 2: financial side of that. Having said that, I am also
Speaker 2: curious when you, you know, look at what really moves
Speaker 2: the bottom line. You know, when people come on board, Yep,
Speaker 2: it's the tickets, but it's also excursions and other things.
Speaker 2: Are they upping the spend ahead of time? That gives
Speaker 2: you even greater visibility and that's where you make a
Speaker 2: lot of money.
Speaker 11: Oh, it absolutely is. You know.
Speaker 13: We we've made a concerted effort over you know, since
Speaker 13: since getting back in our restart to really augment the
Speaker 13: onboard spend profile.
Speaker 11: And we can do that through several mechanisms. You know.
Speaker 11: One of them is the fact is the inflationary environment.
Speaker 13: If you think about twenty nineteen to twenty twenty three,
Speaker 13: people are used to paying more when they go into
Speaker 13: their local restaurant, their local bar, local entertainment, and so
Speaker 13: we have adjusted our pricing accordingly for this for similar experiences,
Speaker 13: and that's taken just just fine with the consumer.
Speaker 11: We're not being out of the ordinary.
Speaker 13: As a matter of fact, our service levels are so
Speaker 13: much better than what you can find on land based
Speaker 13: alternatives that it's a great value. On top of that,
Speaker 13: we're finding different ways to pull forward that spend, as
Speaker 13: you are referring to, and we can do that by
Speaker 13: bundled ticket prices with onboard packages. We can sell people
Speaker 13: specific packages, whether that's beverage or spa packages, and.
Speaker 2: They're buying it, and they're buying it ahead of time.
Speaker 13: Oh they are, they are. It's you know, we've made
Speaker 13: about a step change for us, but a remarkable opportunities
Speaker 13: to do more. I want to say that it's about
Speaker 13: sixty percent increase per person per day the amount of
Speaker 13: our onboard spend that's being purchased before you get on
Speaker 13: the ship. Now, that's great, but it is still a
Speaker 13: minority of our overall onboard spend revenue. So we've got
Speaker 13: a tremendous opportunity to keep that momentum going by finding
Speaker 13: different ways to get people to want to put down
Speaker 13: money for those experiences in advance.
Speaker 2: All right, don't kill me, Josh. But thirty seconds left here,
Speaker 2: do you guys think about recession? Are you factoring the
Speaker 2: possibility of a recession? Just quickly?
Speaker 3: Yeah?
Speaker 11: We do, you know, we do. That's part of our job.
Speaker 13: The great thing about our business and our company is
Speaker 13: number one, we are well booked. We're about in any
Speaker 13: one time, about fifty percent book for the next twelve months,
Speaker 13: and obviously that's much more weighted in the first half.
Speaker 13: On top of that, we are an outrageous value when
Speaker 13: you compare us to land anywhere from twenty five to
Speaker 13: fifty percent, and that boats very well when people are
Speaker 13: thinking about how do I maintain commuication?
Speaker 2: Forgive me, I got to run because the computer is
Speaker 2: going to take me out. Josh, come back soon. Josh Weinstein,
Speaker 2: President and CEO and chief Climate Officer at Carnival Corporation.
Speaker 2: On zoom in New York.
Speaker 1: City, you're listening to the Bloomberg Business Week podcast. Catch
Speaker 1: us live weekday afternoons from three to six Eastern Listen
Speaker 1: on Bloomberg dot Com. The iHeartRadio app and the Blomberg
Speaker 1: Business App or wants us live on YouTube.
Speaker 2: Carol Mats along with Matt Miller. Matt, of course, as
Speaker 2: you know in for Tim here on Bloomberg Business Week.
Speaker 2: I gotta say this next guest his company. It's been
Speaker 2: described by some as Formula one on the water. It
Speaker 2: involves fast paced and high tech fifty foot hydrofoiling race boats.
Speaker 2: They're catamarans from different nations and they're all racing against
Speaker 2: one another. We're both pretty.
Speaker 4: We're both pretty cited. I mean, I grew up sailing
Speaker 4: and haven't been lately. You go sailing all the time,
Speaker 4: and I think we both like racing.
Speaker 2: So let's get to it. He's a five time America's
Speaker 2: Cup winner. Let's slid out there. He was three times
Speaker 2: a skipper in those winnings of the Cup. He's an
Speaker 2: Olympic champion as well. We welcome Sir Russell Coots excuse me,
Speaker 2: CEO Sale GP with us on Zoom and New Zealand.
Speaker 2: Sir Russell, it is so nice to have you here
Speaker 2: with us. Tell us a little bit about sale GP SALESGP.
Speaker 14: Well, thanks Carolyn, thanks Matt. It's great to be here.
Speaker 14: Can you hear me okay, yes, yes, okay, well yeah, salgp, Yes,
Speaker 14: it's it's certainly exciting Grand Prix racing on water. It's
Speaker 14: I think we're one of the fastest growing new sports
Speaker 14: and entertainment properties. As you've described, Carol, we feature high
Speaker 14: speed racing between rival nations, close to shore racing, with
Speaker 14: an expanded calendar or expanding calendar of events as we
Speaker 14: as we develop, so our events span the globe, and
Speaker 14: we have the top athletes in the sport racing and
Speaker 14: as you said, identical very fast hydrofoiling fifty catamarants. In
Speaker 14: fact that our top speed last year was set by
Speaker 14: the French team just under one hundred kilometers per hour.
Speaker 14: I think they were That.
Speaker 2: Is crazy, and like I was kidding with that. I sail.
Speaker 2: I've sailed for thirty years and a top speed might
Speaker 2: be eight nuts.
Speaker 14: That is yeah, in US terms, I guess it's sixty two.
Speaker 14: It's the equivalent of roughly sixty two miles prayer, So
Speaker 14: you know we're driving along the freeway. The speeds on water,
Speaker 14: of course, powered by nature.
Speaker 4: That's the coolest thing. So Russell I grew up as
Speaker 4: a Formula one fan and since then have gotten smart
Speaker 4: and started watching Moto GP because it's so much better.
Speaker 4: But both of those sports are dirty, loud and dirty, right,
Speaker 4: just powered by fossil fuels. And the cool thing about
Speaker 4: Sale GP is that obviously you're powered by the wind,
Speaker 4: and in fact you're in a way an impact organization, right,
Speaker 4: you're pushing to fight climate change.
Speaker 14: Absolutely well it we'll certainly you know, in terms of
Speaker 14: our purpose, were I think fortunate to be a sport
Speaker 14: powered by nature, and we are really champed being a
Speaker 14: world powered by nature in other words, the wind, the
Speaker 14: sun and the water, and our I guess our focus
Speaker 14: is accelerating or showcasing the accelerating the transition to clean
Speaker 14: energy as the number one global energy source. So so
Speaker 14: we're very passionate about that. I think everyone in our
Speaker 14: organization is extremely passionate about it. We have what we
Speaker 14: call an Impact League. Athletes compete not only on the water,
Speaker 14: but they also we also track their their carbon footprint
Speaker 14: and they look to reduce that and they compete for
Speaker 14: points and then and prize money is awarded to their
Speaker 14: impact partner. So each of the teams has an impact partner,
Speaker 14: and we think that's pretty cool.
Speaker 4: Actually, how do the teams get How do the teams
Speaker 4: make money? How do the skippers get paid? You know,
Speaker 4: because we're.
Speaker 14: Well, they get they get paid, They get paid fees
Speaker 14: like any other professional sport to compete, but they also
Speaker 14: compete for prize money, and our prize money is growing,
Speaker 14: so it's set at five million dollars at this stage
Speaker 14: for season four and with the final event being a
Speaker 14: million dollars. But they also receive either a salary or
Speaker 14: fees to race on the boat.
Speaker 4: So how do we watch it?
Speaker 7: You know what? Yeah, I guess.
Speaker 4: With Formula one now in this country you can see
Speaker 4: it on TV, depending what your cable provider is, Moto
Speaker 4: GP you still have to have a subscription. DRNA sells
Speaker 4: those for one hundred and sixty pounds a year. How
Speaker 4: do we watch sale GP?
Speaker 14: Well, Salgingp's distributed well now in season four to two
Speaker 14: hundred and twelve different territories, so in the US you
Speaker 14: can watch it on CBS or on YouTube, and we're
Speaker 14: expanding that portfolio each year. So we've just announced new
Speaker 14: deals with ITV in the UK and a five year
Speaker 14: or five season extension with Kennel Polus in France. But
Speaker 14: we are with many of the broadcasters Fox Australia, Discovery
Speaker 14: in New Zealand. You know, so each in each of
Speaker 14: our key territories we have key broadcasters. Our audience is
Speaker 14: growing pretty rapidly, so we had a three times increase
Speaker 14: over season two and season three. So our dedicated viewership
Speaker 14: is around one hundred and seventeen or just over one
Speaker 14: hundred and seventeen million viewers, So that's just over if
Speaker 14: you look at it, it's just over what is it,
Speaker 14: ten point six million per event of dedicated viewership. And
Speaker 14: then in terms of secondary viewership, which is obviously news
Speaker 14: and magazines, we also had just under a billion views,
Speaker 14: so we're growing pretty rapidly. Of that dedicated audience, about
Speaker 14: sixty percent is linear TV and about the forty percent digital.
Speaker 2: So I'm curious about you, sir Russell. Are you do
Speaker 2: you ever go out in a monohole and just a
Speaker 2: regular stale because it's such.
Speaker 4: A Carol's a traditional sailer, it does.
Speaker 2: I do feel like, you know, America's cup kind of
Speaker 2: got ruined years ago because it's.
Speaker 7: I am such a harsh statement.
Speaker 2: I'm sorry. I think it's not just about speed, it's
Speaker 2: about technique, and it's harder when you're going slower. It
Speaker 2: really is, So I'm just curious how you see it.
Speaker 14: Yeah, I mean I like all forms of sailing, and
Speaker 14: obviously I grew up racing traditional sailboats, but these new
Speaker 14: classes are so fast and it still requires all of
Speaker 14: the same skills, but it's just happening at a much
Speaker 14: higher speed.
Speaker 2: All right, So where do you go? I would also
Speaker 2: go back to how you started this and why you
Speaker 2: started it.
Speaker 14: Well before souv GP, sailing didn't really have a global
Speaker 14: platform to market the sport on an annual basis. So
Speaker 14: when you look at what we're doing with salve GP,
Speaker 14: it's not that different to what is considered normal in
Speaker 14: most sports. So we put together an annual calendar of events,
Speaker 14: we obviously televised that live and promote it, you know, regularly.
Speaker 14: So really, in many ways, it's intriguing to think that
Speaker 14: sailing didn't have a platform like this before SALVEGP. Know
Speaker 14: that we didn't have a regular professional calendar of events
Speaker 14: where the top athletes in the sport race against each
Speaker 14: other on a regular basis, and so that's that's really
Speaker 14: enabled us to market the sport more professionally and more
Speaker 14: frequently and the growth is really a result of that,
Speaker 14: and I think in truth, we didn't really have a
Speaker 14: platform that really delivered exciting racing before these new high
Speaker 14: speed boats came along. So that's really been a transition,
Speaker 14: as has the sort of the I guess, the way
Speaker 14: that we televise it these days, with our broadcast graphics
Speaker 14: and so forth that are superimposed over the video images.
Speaker 14: That really makes the sport more understandable for the general
Speaker 14: sports fan, and in particular the racing fan. So we're
Speaker 14: not you know, with our audience growth, we're not really
Speaker 14: seeing that growth in sailing fans per se. We're seeing
Speaker 14: it in racing fans primarily and also in general sports fans.
Speaker 14: So you know, that's exciting that we're getting that sort
Speaker 14: of viewership increase.
Speaker 2: So what's the plan going forward and in terms of
Speaker 2: your growth expectations on how you want to build this out, Well,
Speaker 2: we started.
Speaker 14: With sex teams in season one and we've grown that
Speaker 14: to ten teams at the beginning of season four. And
Speaker 14: we started with five venues in season one and now
Speaker 14: we're up to twelve venues in season four, and ultimately
Speaker 14: we want to build to about like Formula one they
Speaker 14: have roughly a race every two weeks if you look
Speaker 14: at the number of races that they do in a season,
Speaker 14: and we want to achieve the same sort of consistency
Speaker 14: of events, So we're looking to build the number of
Speaker 14: events and probably build the number of teams to around twelve.
Speaker 14: Teams obviously linked with the nationalities of their countries.
Speaker 7: So the thing that.
Speaker 4: Gets people watching Formula One is of course the drama
Speaker 4: and the personalities, kind of the soap opera more than
Speaker 4: the races. Right, the same is true. You know, Motor
Speaker 4: GP has been so interesting in the last couple weeks.
Speaker 4: Will Mark Marquez go somewhere else and leave Honda? How
Speaker 4: come the Ducats are always winning? Do you have the
Speaker 4: same kind of storylines you think in sailing?
Speaker 10: Yeah?
Speaker 14: Absolutely. I mean we actually produce a behind the scenes
Speaker 14: documentary series called Racing on the Edge, which we distribute
Speaker 14: on YouTube and also our key broadcasters also distribute that
Speaker 14: as well. But we're looking to do a similar thing
Speaker 14: to what Formula One led with and other sports, which
Speaker 14: obviously their drive to survive programming was extremely successful in
Speaker 14: terms of promoting the sort of behind the scenes view
Speaker 14: of athletes and building those personalities and so we're looking
Speaker 14: to do a similar thing in the future. And you
Speaker 14: know that's I think that's pretty exciting for our sport,
Speaker 14: but any sport these days, I think people really tune
Speaker 14: into that sort of content and really engage with it.
Speaker 14: So yeah, exciting times.
Speaker 4: I think I'm looking at by the way video from
Speaker 4: Racing on the Edge right now and honestly have goosebumps.
Speaker 4: I mean, the sailing is so sick is it dangerous?
Speaker 4: I mean these speeds rustle and with you know, with
Speaker 4: the crew on one of these boats, if they run
Speaker 4: into another one, I can imagine injuries.
Speaker 14: Yeah, there's a there's certainly an element of danger, and
Speaker 14: we obviously take the safety of the league. You know,
Speaker 14: really it's it's obviously a priority for us. But it's
Speaker 14: you know when people come along to our events and
Speaker 14: that or they witness soldip for the first time, that's
Speaker 14: that's surprise. You know, they've got an image of sailing.
Speaker 14: I think white triangles on a blue background would be
Speaker 14: a pretty accurate image of what most people. This is
Speaker 14: so different you know to what that image.
Speaker 2: A lot of money to go basically nowhere. But what's
Speaker 2: interesting is you guys, with what you can do. You're
Speaker 2: close to the shore, people can really see it and
Speaker 2: feel it. And I do wonder about the speed in
Speaker 2: terms of these boats. Russell in that it attracting kind
Speaker 2: of a younger audience, right, I mean, you guys have
Speaker 2: to be thinking about that.
Speaker 14: Sure. Well, we're also the way we format our program,
Speaker 14: so our races over two days and ninety minutes, and
Speaker 14: we have three races or fifteen minute races, three to
Speaker 14: fifteen minute races per program, so that really is tailored
Speaker 14: to the modern viewership sort of trends where audiences don't
Speaker 14: watch long form content as much as what they used to.
Speaker 14: So you know, quite often our viewers you tune into,
Speaker 14: they might only tune into the final race, the final
Speaker 14: fifteen minute race, and as a result of that, we
Speaker 14: are seeing a younger demographic following this our racing.
Speaker 2: Can I just say I looking at Season three, episode nine,
Speaker 2: and I think somebody fell.
Speaker 11: In the water.
Speaker 6: Fell in the water, but it's still tied to the boat.
Speaker 4: So he's like skimming across on the surface.
Speaker 14: That was that was That was not Matt Gottrell from
Speaker 14: from the UK team, And he actually cracks some ribs
Speaker 14: as a result of that because you know, at those speeds,
Speaker 14: hitting the water is like getting concrete. So actually we
Speaker 14: made we reviewed that footage and obviously made some adjustment
Speaker 14: to the to the safety equipment on board, so so
Speaker 14: that can't happen again. But yeah, there is an element
Speaker 14: of danger for sure, but there's you know, it's obviously
Speaker 14: hy adrenaline racing and I think the top athletes, top
Speaker 14: sailing athletes in the world really love this formal racing.
Speaker 4: How have the sponsors reacted You could see some of
Speaker 4: the sponsorship Oracle of course, and other big companies, Emirates,
Speaker 4: I see, how have the sponsors reacted after you know,
Speaker 4: four seasons.
Speaker 14: Well, the thing is that you know, we've we've we've
Speaker 14: obviously grown pretty quickly commercially as well, and we've just
Speaker 14: announced some new partnerships with Barla and Apex and they
Speaker 14: join Rollicks, Oracle and near As as our as our
Speaker 14: big sponsors. And and what the thing that we're seeing
Speaker 14: is that these sponsorships are now or these partners are
Speaker 14: now extending their partnerships to long term partnerships. So we
Speaker 14: have a new tenure agreement with Rollicks, which of course
Speaker 14: is fantastic to have such a premium brand, you know,
Speaker 14: associated with our with our sport and really our format,
Speaker 14: just like other sports, is allowing these long term partnerships
Speaker 14: both with venues and you know, the commercial sponsors.
Speaker 2: So just from a financial basis, and I'm just we've
Speaker 2: just got about a minute or so or just under
Speaker 2: a minute left here, serve us, Well, is this I
Speaker 2: mean the goal to be profitable? Are you profitable? Like,
Speaker 2: how do you think about it on a financial basis?
Speaker 14: Yeah, we we had a plan to be profitable by
Speaker 14: the end of season five and we're tracking ahead of
Speaker 14: that plan now, so we expect to see to be
Speaker 14: profitable as a league by the end of the season
Speaker 14: season four. And you know, our revenue sources are made
Speaker 14: up of pretty similar to most traditional sports, so we
Speaker 14: have obviously eventually media will be a big part of that,
Speaker 14: but you know, right now, our focus is on increasing
Speaker 14: our audience rather than revenue in terms of in terms
Speaker 14: of broadcast and media, but sponsorship and obviously ticketing, merchandising
Speaker 14: and so forth, the traditional revenue sources that both sports have.
Speaker 2: Well, so appreciate you finding some time for us. This
Speaker 2: was really fun for us and look forward to hearing
Speaker 2: from you in the future. Hopefully about updates and how
Speaker 2: things are going. Thank you so much. Have a great weekend.
Speaker 2: So Russell Kutzi's chief executive officers also the founder of
Speaker 2: sale GP, joining us via zoom from New Zealand. And
Speaker 2: I mean check out some of the videos.
Speaker 6: And some of the races.
Speaker 4: I mean, they just had an event in Chicago and
Speaker 4: Los Angeles. Looks like finishes today and coming up centro Pey.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Easter on Bloomberg Radio,
Speaker 1: the Bloomberg Business app and YouTube. You can also listen
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Speaker 1: just Say Alexa playing Bloomberg eleven thirty.
Speaker 2: I got to say, just as a little bit of
Speaker 2: a setup, let's just jump into it because we want
Speaker 2: to talk business and sports. But there is a most
Speaker 2: read story on the Bloomberg about the PGA Tour and
Speaker 2: the Saudi backed live golf.
Speaker 7: What I love that. So I know, here's the thing.
Speaker 4: So I've been working here for twenty three years and
Speaker 4: I've been old editor in chief. Matt Winkler had a
Speaker 4: number of rules. Yeah right, One of them, was that
Speaker 4: you can't say merge. He said, there's no such thing
Speaker 4: as a merger. There's always a buyer and a seller, right,
Speaker 4: And so I guess that's gone away now because everyone
Speaker 4: keeps talking about the Live Golf PGA merger and I
Speaker 4: want to get to the heart of who actually owns
Speaker 4: this thing. So the cool thing about that story is
Speaker 4: it doesn't necessarily answer my question, but it does tell
Speaker 4: me the PGA Tour is going to keep a voting majority,
Speaker 4: so they're going to have voting control, right, But Live
Speaker 4: and PIF they're going to have a majority of the equity,
Speaker 4: so they're going to actually own the thing.
Speaker 2: Yeah, all right, So let's see how our guest what
Speaker 2: he thinks about it. Mark Patrick Coroff is founder and
Speaker 2: CEO of Patrick cough Company. Former banker, media exec. He
Speaker 2: works with athletes like Venus Williams and Aaron Rodgers, who
Speaker 2: was recently our Bloomberg invest event. We're so grateful that
Speaker 2: you found some time for us here in our studio.
Speaker 2: How are you?
Speaker 7: I'm great?
Speaker 2: Yeah, So what do you make?
Speaker 6: What do you make?
Speaker 2: It is a sunny Tuesday, well, and they're talking about
Speaker 2: it getting cloudy again because of the sky.
Speaker 6: The clouds are going to come back.
Speaker 7: Wildfires great, It's just great. I was in California for
Speaker 7: two months this winter.
Speaker 15: It was warmer here for I think eleven of the
Speaker 15: fifty days out in California.
Speaker 2: It's so crazy.
Speaker 7: Go figure out the weather.
Speaker 2: Like the merger, well, go figure that out. I know
Speaker 2: you talk with Jason about it at the Bloomberg invest event,
Speaker 2: like it was just hot on everybody's radar.
Speaker 3: What do you think are this out buying?
Speaker 11: Yeah?
Speaker 15: I mean, look, I always think it's last money and
Speaker 15: speaks loudest and almost every transaction, so it kind of
Speaker 15: put all the noise aside, and you know, you sort
Speaker 15: of have to wonder a little bit what PIFF was
Speaker 15: thinking to begin.
Speaker 7: With when they launched this.
Speaker 15: I mean, there really wasn't a path to beat the LEA.
Speaker 15: It's like the USFL in the eighties.
Speaker 7: I said this at the conference.
Speaker 15: I mean, at the end of the day, you're sort
Speaker 15: of playing, you're kind of gaming it to see what
Speaker 15: you can get, you know, and where your money can
Speaker 15: go because of this, where maybe couldn't have gone without
Speaker 15: having funded live. So I think PIFF owns it. I
Speaker 15: don't think it's a merger I think that the optics,
Speaker 15: you know, are what the give was, at least for
Speaker 15: the time being.
Speaker 2: Is it good or bad for the sport and for fans.
Speaker 7: You know, it depends on I guess it depends on
Speaker 7: what you want out of the sport.
Speaker 15: I mean, at the end of the day, the more
Speaker 15: money that goes into a sport, more money the players
Speaker 15: get paid, the more money that trickles down to training
Speaker 15: and facilities. I guess it's a net positive. I mean,
Speaker 15: I'm not I don't see why it wouldn't be at
Speaker 15: the end. You know, for me, it's a little bit
Speaker 15: about and I hear you know, Monahan was, you know,
Speaker 15: talking about twenty one terrorists from nine to eleven who are.
Speaker 7: From Saudi Arabia.
Speaker 15: It's a little bit it's a little bit hard to
Speaker 15: get too deep in that argument for me. I mean, look,
Speaker 15: I've driven a German car and I'm Jewish. I know
Speaker 15: it's at some point it's not entirely fair. On the
Speaker 15: other hand, you know, sports are global, and if we
Speaker 15: don't expect global investment in sports, then we sort of
Speaker 15: can't expect also have global revenue from sports. So it's
Speaker 15: kind and I'm saying I'm advocating it. I just sort
Speaker 15: of think at the end of the day, it's sort
Speaker 15: of what do you expect. I mean, wherever the most
Speaker 15: money is, If this is an appealing asset, money will
Speaker 15: find it.
Speaker 4: Are Are there still though, a lot of other opportunities
Speaker 4: in golf. I mean, we've seen different variations of golf.
Speaker 4: A buddy of mine had this idea sprint golf, you know,
Speaker 4: which he thought was going to take over. And like
Speaker 4: in tennis or paddle sports, we've seen some new things,
Speaker 4: not just pickleball, but padel or whatever it's called. You know,
Speaker 4: there's so many different ways of playing it.
Speaker 7: Like is golf the same way I don't know. I
Speaker 7: mean miniature golf is still you know, kind of a game,
Speaker 7: not a sport.
Speaker 15: And you know his ping ponger sport, I don't know.
Speaker 15: I mean pickleball is funny. We saw every pickup ball deal.
Speaker 15: I never bought into it, and I just read saying
Speaker 15: today about how there were four hundred thousand injuries in
Speaker 15: the last twelve months and pick a ball and it's
Speaker 15: you know, impacting insurance rates. I mean, I think golf
Speaker 15: is is a very trictional sports around for a long time.
Speaker 15: I don't think I know it. It's an eighteen hole sport.
Speaker 15: It requires a certain level of skill that you know,
Speaker 15: separates the kind of amateur from the pros. I don't
Speaker 15: know that you'll see a radical change. I mean, Tiger's
Speaker 15: doing his his thing and indoor golf, night golf. I
Speaker 15: mean there are ways of getting more people involved the sport,
Speaker 15: but from a professional standpoint, there's only so many eyeballs,
Speaker 15: you know, available, and not everybody wants to watch golf,
Speaker 15: and those who do want to watch the best players and.
Speaker 7: They want to watch day golf. Yeah, they and the money.
Speaker 15: Well, we'll make the sport kind of you know, it'll
Speaker 15: it'll evolve.
Speaker 7: I doubt it will change radically.
Speaker 2: Mark what you know. I want to step away for
Speaker 2: a moment because your past does include investment banking, and
Speaker 2: I think about the investment environment and the environment for
Speaker 2: deals and Matt and I talked to lots of different
Speaker 2: folks and leaders like yourself to just kind of get
Speaker 2: a feel of where we are this market environment. Just
Speaker 2: stepping away for sports.
Speaker 4: The cost of capital is kind of unbelievable at the moment.
Speaker 2: Right, yes, yes, in terms of real estate, but how
Speaker 2: do you see it yeah.
Speaker 15: I mean, I don't know that real estate necessarily is
Speaker 15: a predictor for every other asset class.
Speaker 4: No, but just the cast he was saying, the cost
Speaker 4: of capital is vastly different than it has been for
Speaker 4: it today.
Speaker 15: But then if you were to pull out industrial and
Speaker 15: office that might it might not be exactly the same.
Speaker 7: So I just you know, it's a big real estate
Speaker 7: is such a big bang.
Speaker 15: Like you know, when I was investment banking and I
Speaker 15: kind of I started my boutique in right in two
Speaker 15: thousand and eight, the end of two thousand and seven,
Speaker 15: and you know, it got very tough, very fast, because
Speaker 15: you have no choice. You know, a lot of companies
Speaker 15: are just weren't going to get funded and therefore, you know,
Speaker 15: one in the market. So there was a lot of
Speaker 15: m and A activity. I think that I think the
Speaker 15: world's different now. I think there are a lot of
Speaker 15: decent companies that have enough funding where they can ride
Speaker 15: this out. And the I and the option of by
Speaker 15: the way, costs for capital being so expensive to the
Speaker 15: companies that they'd rather hunker down, cut cost, ride this
Speaker 15: out until capital gets a little less expensive because the
Speaker 15: dilution is just just too painful. So you don't see
Speaker 15: as much growth in some of these businesses, but they're
Speaker 15: hanging on. I think we do need to see some
Speaker 15: meaningful IPOs to kind of open up the market. There
Speaker 15: was so much money raised in the last you know,
Speaker 15: a couple of cycles that you know, companies are still
Speaker 15: getting funded. I would say from my perspective, which is
Speaker 15: very different now than when I.
Speaker 7: Was investment banking.
Speaker 15: You know, I run a consumer focused private equity fund
Speaker 15: with you know, these pro athletes, and you know, the
Speaker 15: deal flow stopped for about a year. I mean, we
Speaker 15: did three deals in the last twelve months when we
Speaker 15: had done eight year before. But right now deal flow
Speaker 15: is back, and I would say the pricing is all
Speaker 15: over the place. We haven't seen significant discounts in these companies,
Speaker 15: but the prices are flat or down a bit.
Speaker 7: I remember I got a phone call.
Speaker 15: I won't I won't throw the fund kind of under
Speaker 15: the bus here, but a fun that we all know
Speaker 15: what's really working me to go into a deal dated
Speaker 15: invested in November, I mean, and they paid a ridiculous
Speaker 15: multiple and they want us to come in January and
Speaker 15: promote their investment.
Speaker 7: You know, by whatever.
Speaker 15: It was a couple of turns, and I was like,
Speaker 15: there's no way, it's the option go the opposite direction.
Speaker 7: Six months so we said no. Six months later they
Speaker 7: called us.
Speaker 15: And they need money and they understand it's going to
Speaker 15: be a down round. So you know, but that's a
Speaker 15: business that has no choice. That company, it's a it's
Speaker 15: a small box kind of health and wellness business.
Speaker 7: It needs capital. It won't it won't make it.
Speaker 15: So the businesses that are the solid businesses with good
Speaker 15: characteristics just don't raise money or don't exit during this market.
Speaker 15: And then one that do need money, I'll probably distressed
Speaker 15: and not that interesting unless you're a distressed buyer, which
Speaker 15: I'm sotainly not so okay.
Speaker 2: So add it all up in terms of again just
Speaker 2: macro mark. You know, we talk recession, no recession. We're
Speaker 2: trying to figure it our way forward and get as
Speaker 2: much transparency and visibility recession. Does it feel like we're
Speaker 2: headed towards a recession? You said your deals are.
Speaker 15: Coming when you have people way smarter than I am
Speaker 15: to answer that question here every day, Here's what I
Speaker 15: would say. I don't think the word recession is a
Speaker 15: catch all anymore. There's so many different segments, geographics. I
Speaker 15: just you know, it may be a recession in two
Speaker 15: areas and not in sex other areas.
Speaker 2: And you know, I heard somebody talk about a rolling recession,
Speaker 2: like we had earnings recession in this sector, in the.
Speaker 7: Segment that you're looking at, exactly.
Speaker 15: I also think that public companies are going to be
Speaker 15: valued differently, and you know, maybe more quarter quarter than annually,
Speaker 15: and so that changes the way people look and value
Speaker 15: these companies.
Speaker 7: So I just think that big and I don't.
Speaker 15: I don't, by the way, as an entrepreneur, and I've
Speaker 15: been entrepreneur for a long time, running me just running
Speaker 15: my own business for twenty plus years, I don't think
Speaker 15: macro as much as you do and some other people do,
Speaker 15: only because I can't afford to.
Speaker 7: So I sort of look in the front. Well, there's
Speaker 7: just no way to do it.
Speaker 8: You know.
Speaker 15: I'm worried about what I can control in my day
Speaker 15: to day business. Our business has been basically fine. I
Speaker 15: mean it's not perfect, yeah, and I'm sure it'd be
Speaker 15: better if COVID hadn't happened. And by the way, anyone
Speaker 15: who thought we weren't going to have major roadblocks after COVID,
Speaker 15: I mean, this is so predictable. I mean, and I
Speaker 15: said it on other if not here or somewhere else,
Speaker 15: you know, in middle of twenty twenty, there is no
Speaker 15: question that there are stormy times ahead.
Speaker 7: So anyone who's surprised.
Speaker 15: Now, of course, it takes a couple of years for
Speaker 15: the impact of business just stopping globally for a period
Speaker 15: of time.
Speaker 2: We literally shut everything down, of course, the money and
Speaker 2: then it.
Speaker 7: Came back right, yes, and then they're not closed all over.
Speaker 7: It's over. It's fine.
Speaker 15: It's like you know, it's like, you know, we got back,
Speaker 15: we came through terrorism. We instead all these new rules
Speaker 15: in airports. No one, of course, things are still going
Speaker 15: to happen. I mean, there was a backlash, there was
Speaker 15: a change in lots of areas.
Speaker 4: I was just thinking, you and I have both watched
Speaker 4: recently the movie about Michael Jordan, well, the movie about
Speaker 4: Nike at the name of It, And the coolest part
Speaker 4: about that movie I thought was, beforehand, none of the
Speaker 4: athletes had ever really owned a piece of the product. Right,
Speaker 4: they got paid for their endorsement deal, but they didn't
Speaker 4: actually get a piece of the percentage of the business.
Speaker 4: And now that's starting to finally become a thing, like
Speaker 4: I hope Messi is going to get a huge piece
Speaker 4: of the team that he's playing with, right, So, Mark,
Speaker 4: is this becoming something that superstar athletes are finally getting
Speaker 4: to own a piece of their own legacy?
Speaker 7: Absolutely.
Speaker 15: I mean I was joking with Rob Gronkowski a few
Speaker 15: years ago about his sponsorship deal with Monster and how
Speaker 15: much he made off of it versus how much they
Speaker 15: made off of him, and it wasn't equal. I mean,
Speaker 15: it wasn't it wasn't commensurate with the value that he added.
Speaker 15: I mean, I think the athletes, we're still they're making
Speaker 15: a lot more money, and it does open up more opportunities.
Speaker 15: More money you have, the more more access you have,
Speaker 15: the more people you know. I mean, just it's just
Speaker 15: that they're they're kind of out in the world of
Speaker 15: billionaires now and because of that, they have more control
Speaker 15: over the outcome of they do. Also, the marketing deals, ironically,
Speaker 15: to some extent, have gone down.
Speaker 7: So sure for Messy or for you know, Aaron Rodgers.
Speaker 15: Whomever, they're still making real money in the marketing endorsement deals,
Speaker 15: but because of kind of the diversification fracturing of the audience,
Speaker 15: and how how the value of these NBA players, for example,
Speaker 15: where they might have been when they were ten NBA superstars.
Speaker 15: Nike and deals with compete and they'd pay them millions
Speaker 15: of dollars. They don't only have to do that now
Speaker 15: because there's so many more effective ways of reaching the
Speaker 15: audience they want to reach for less money. So you know,
Speaker 15: it puts the athletes in the different positions. They're not
Speaker 15: giving up a million dollar endorsement deal in exchange for thing.
Speaker 15: But you know, I said this to one of our guys,
Speaker 15: Dwayne Wade, when we were talking about Chilula Hot Sauce,
Speaker 15: which is one of our first investments, and I.
Speaker 7: Said, look, if Chilula paid you.
Speaker 15: One hundred thousand dollars to you know, do six social
Speaker 15: media posts and a television commercial and you know, whatever
Speaker 15: XYZ you do, you do it because you're a good guy,
Speaker 15: and you know, you stick to your agreements and you
Speaker 15: get your hundred thousand dollars and you move on. You
Speaker 15: might not like Chilulot Sauce on that much, wouldn't matter
Speaker 15: because it would be a paid endorsement. You wrote a
Speaker 15: hundred thousand dollars check into that company, which in fact
Speaker 15: he did, and actually more you do it because you
Speaker 15: bled in the brand and you lead into it because
Speaker 15: you know that at the end of the day you're
Speaker 15: an owner of the company.
Speaker 7: You'd be more helpful a company.
Speaker 15: They may not quantify exactly what you're going to do
Speaker 15: for it, But Dwayne ended up doing an Instagram live
Speaker 15: cooking class with his mom and it didn't have to
Speaker 15: say paid endorsement. So it's much more authentic and he
Speaker 15: has a piece of the upside of his own value.
Speaker 2: So what kind of deals do you look for when
Speaker 2: you think about the athletes you work with and how
Speaker 2: much are they saying this is the kind of thing
Speaker 2: I'm looking for?
Speaker 6: Is it?
Speaker 2: I'm a to me, it's not just about returns, although
Speaker 2: that's obviously part of it.
Speaker 7: I mean, it's mostly about returns. I mean well, no, I.
Speaker 15: Mean look, I mean obviously obviously well, I mean if
Speaker 15: you I mean, we tell our we have two hundred
Speaker 15: and thirty athletes.
Speaker 7: I mean there's interests across every category.
Speaker 15: So we did the biggest e commerce and platform for
Speaker 15: musical instruments called Sweetwater, Amazing company, crushing it, not just
Speaker 15: a COVID bump, just really killing it. The athletes love
Speaker 15: music went in, but also athletes to understand that Providence
Speaker 15: is a great lead investor and here are the core
Speaker 15: metrics of the business and this is why we think
Speaker 15: it's a good value proposition long term. And they invested.
Speaker 15: You know, I think for us, the tail can't wag
Speaker 15: the dog. The athletes can't pick the investments because that's
Speaker 15: not what you know that they're you know, they're paid
Speaker 15: to do, so we're paid to do so we we
Speaker 15: do stay though, within the lanes of areas.
Speaker 7: That they understand and and and might be interesting to them.
Speaker 15: So we've done everything from SpaceX to Chilula to Kodiak,
Speaker 15: which is a pancake and waffle mix. We've invested in
Speaker 15: a couple of alcohol brands. We just invested in a
Speaker 15: big travel company with KKR called Get Your Guide. So
Speaker 15: we look at a mix of things that are kind
Speaker 15: of primarily consumer facing auto travel, hospitality, food and beaverage,
Speaker 15: et cetera.
Speaker 7: And that was the first part of our business.
Speaker 15: We're just now getting ready to launch a separate fund,
Speaker 15: which will be a fund. Our core business is more
Speaker 15: of an advisory merchant banking model, so we go deal
Speaker 15: by deal and the athletes get exposure to the deal
Speaker 15: and they could choose which ones they want to invest in.
Speaker 15: They're on the fund that we're about to launch, which
Speaker 15: is just focus on restaurant franchises. So instead of an
Speaker 15: athlete just taking a one off Wendy's or buying, you know,
Speaker 15: to Taco Bell somewhere, we're going to get them exposure
Speaker 15: to a portfolio of franchise opportunities. They'll also be able
Speaker 15: to use their own source and capabilities. And we have
Speaker 15: athletes in fifty with a footprint and fifty two markets.
Speaker 15: It's hometown, college town, and protown. So instead of doing
Speaker 15: things in a slightly less professional way, we're trying to
Speaker 15: empower them to do it in the way that generates
Speaker 15: the most return possible, but also put them in a
Speaker 15: position to learn about franchising to buy their own franchises.
Speaker 15: So it's kind of a bigger picture of thinking that
Speaker 15: we go through to pick the deal.
Speaker 2: I love hearing this because I think about the times
Speaker 2: we've done broadcasts from like Radio Row leading up to
Speaker 2: the Super Bowl, and it breaks my heart when you
Speaker 2: talk to football players and you know, who play for
Speaker 2: a few years, make a ton of money, get hurt
Speaker 2: and then they have no money, Like it's just so
Speaker 2: this idea of you know, taking athletes who are successful
Speaker 2: in helping them invest in waiting much literacy pay off.
Speaker 15: Yeah, but you don't give you I'll give you a
Speaker 15: once quick, very quick story. So I spoke to an
Speaker 15: entire NFL team a few months ago, and I asked,
Speaker 15: I went to the room with fifty five guys, and
Speaker 15: I said how many The first thing I said was
Speaker 15: how many of you think of football as your first career?
Speaker 7: Not one hand went up. I said, how many.
Speaker 15: Of you plan to work after you retire from playing football?
Speaker 15: Not one hand went up. Now, now let's be clear.
Speaker 15: I'm sure a handful of them or wanted to put
Speaker 15: their hands up and were embarrassed. So there's some of that,
Speaker 15: but for the most part, no. So I said, you're
Speaker 15: going to retire somewhere between twenty five and thirty five
Speaker 15: years old. Was somewhere between a million dollars in the
Speaker 15: bank and fifty million dollars in the bank. Do you
Speaker 15: realize you could be a doctor, a lawyer, or an
Speaker 15: investment bank or it could be an investor.
Speaker 7: We have broadcaster, you can be a coach.
Speaker 15: You have so many opportunities, and I don't think you
Speaker 15: want to be sitting around playing video games at thirty five,
Speaker 15: even if you've got money in the bank. Setting that
Speaker 15: example for your children, I don't think you realize that
Speaker 15: you're going to live until ninety five years old and
Speaker 15: you'll be healthy barring CP in their case, and you'll
Speaker 15: have sixty years you've been working. You know, there is
Speaker 15: so much more to do in life. And I think
Speaker 15: you're going to see this now with a better educated
Speaker 15: not just from an academic standpoint, but just from a
Speaker 15: mind of opening their minds perspective. You'll see many more
Speaker 15: great things accomplished by athletes going forward. And you know,
Speaker 15: our firms there first to try to facilitate that, and
Speaker 15: we do it in a whole host of ways, not
Speaker 15: just investing, certainly through some education so forth. But we
Speaker 15: won't be the only ones. And there's you know, it's
Speaker 15: an important, kind of unique group of people who are
Speaker 15: highly relevant, have unbelievable access, are interesting to others because
Speaker 15: of that. Because of that relevance, and have you know,
Speaker 15: many cases, a lot of money, and.
Speaker 4: They're smart, I mean, especially the playbook start somebody, any
Speaker 4: of them are super Yeah.
Speaker 15: And they're gonna own teams. There's no question we helped
Speaker 15: Dwayne buy a piece of the jazz. We just work
Speaker 15: with JJ Watt and his investment in Burnley, the Premier
Speaker 15: League team. You're going to see more and more of that,
Speaker 15: and they should, it's their sport. Why wouldn't you see more?
Speaker 2: Like, you know, can we do something with teams like more,
Speaker 2: you know, fractional ownership or something.
Speaker 7: In public ownership?
Speaker 3: Right?
Speaker 7: You need board? How else do you get diversity?
Speaker 14: Yeah?
Speaker 7: I mean I think I think these teams need.
Speaker 15: Board directors because otherwise I don't see how you'll ever
Speaker 15: get real diversity.
Speaker 7: Representation for an NFL ownership. Yeah, of course they didn't
Speaker 7: like that.
Speaker 2: I'm just kidding.
Speaker 15: Although kind of annoyed me because I would never want
Speaker 15: a team of mine in one sport, I mean a
Speaker 15: coach from another sport.
Speaker 2: You are, Jim and so much fun. Mark Patrick Coff,
Speaker 2: founder and CEO of Patrick Cough Company. You well, good
Speaker 2: to have you.
Speaker 7: Thanks.
Speaker 2: You're listening and watching Bloomberg Radio.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: So we recently covered in Bloomberg BusinessWeek. It was about
Speaker 2: a reset and the collectibles and all investment world, Matt
Speaker 2: and you know, cars, watches, designer bags, art following the
Speaker 2: pandemic where people were spending on everything, which meant that
Speaker 2: values shot up in a big way.
Speaker 3: Yeah.
Speaker 7: Absolutely.
Speaker 4: I mean I always have kind of an ongoing debate
Speaker 4: with John Authors about what's driving inflation, and I think
Speaker 4: people forget to talk about the demand side and the
Speaker 4: incredible amount of fiscal stimulus that flowed into consumers pockets,
Speaker 4: and certainly that's got to be acknowledged as a huge
Speaker 4: part of the driver of prices of not only houses
Speaker 4: and cars, but also collectibles. And we've been kind of
Speaker 4: focused on that.
Speaker 2: Yeah, so let's get into it. We've got a great
Speaker 2: voice with us in our interactive Brokers studio. Maria Brito
Speaker 2: is an art advisor. She's a curator. You might recall
Speaker 2: Bloomberg BusinessWeek wrote about her book earlier this year because
Speaker 2: she is the author of a book on leadership, How
Speaker 2: Creativity Rules the World, The art and business of turning
Speaker 2: your ideas into gold so welcome, welcome you. You reminded
Speaker 2: me that when we spoke last over a year and
Speaker 2: a half ago, it was remotely because we were still
Speaker 2: kind of careful. This is a COVID, so tell us
Speaker 2: about take us back though, go back to COVID the pandemic,
Speaker 2: and people were spending on stuff because they they couldn't
Speaker 2: spend they couldn't go anywhere they could spend money that way,
Speaker 2: so people bought stuff. Tell us what you saw when
Speaker 2: it came to the art market specifically.
Speaker 16: Well, thank you guys for having me. Twenty twenty was
Speaker 16: a year that saw a decrease in the sales in
Speaker 16: the art world, but there were a lot of deals
Speaker 16: to be done because when there is a lot of uncertainty,
Speaker 16: a lot of collectors start selling, which makes it a
Speaker 16: wonderful opportunity for the buyers. Twenty twenty one recovered quite
Speaker 16: a bit, and twenty twenty two was our record year
Speaker 16: were sixty seven point eight billion dollars in cells were
Speaker 16: recorded and that is the second highest number in the
Speaker 16: history of the art market. So definitely collectibles have done
Speaker 16: wonderfully well. The particularities of the art market is are
Speaker 16: that the heat of the market continues there, particularly for
Speaker 16: young artists who are the next celebrities, if you will,
Speaker 16: and the numbers that we're seeing at auction for established artists,
Speaker 16: for example, what we saw last year with Paul Allen,
Speaker 16: the sales that reached one point six billion dollars, and
Speaker 16: that is something that has never been seen in history
Speaker 16: for example. So that type of movement in the art world.
Speaker 16: For many of my clients who are also in finance,
Speaker 16: they consider to be the asset class that has performed
Speaker 16: the best in the last ten years. That's difficult to
Speaker 16: pinpoint exactly, but I consider it to become a very
Speaker 16: important part of people's portfolios when they're trying.
Speaker 2: To go there. Though, Yeah, like bring us to kind
Speaker 2: of what's going on nowday.
Speaker 4: I mean, especially as you know, because in the collectibles market,
Speaker 4: when we talk about things like Michael Jordan's shoes, for example,
Speaker 4: they were worth a lot more last year than they
Speaker 4: are now. It seems to have, if not dropped off, kind.
Speaker 2: Of flatlined a little bit of a reset.
Speaker 4: As you know, people run out of stimulus, money interest
Speaker 4: rates rise, Crypto's dead like that whole Having said that,
Speaker 4: based about thirty one, I don't mean crypto is dead.
Speaker 4: But you know what I mean, there's a lot of
Speaker 4: the exuberance has come out of markets and has does
Speaker 4: the art market look the same.
Speaker 16: The art market has existed for so long, and it
Speaker 16: has been so resilient for so long that it has
Speaker 16: seen a drop, but it's not so dramatic, or at
Speaker 16: least not yet.
Speaker 10: I think that the first.
Speaker 16: Three months of the year, people were scared for a
Speaker 16: variety of reasons. One us all the volatility of the
Speaker 16: financial markets and the uncertainty interest rates, et cetera, and
Speaker 16: crypto coming from all the debate off you know, FDx,
Speaker 16: and all the things that happened at the end of
Speaker 16: twenty twenty two.
Speaker 10: The around April, things.
Speaker 16: Started to recover and everything that had to do again
Speaker 16: with like these young artists having their debut shows a
Speaker 16: big galleries, which was something unheard of ten years ago,
Speaker 16: remains hot. What hasn't performed as well as they did
Speaker 16: in the last two years is the ultra contemporary segment
Speaker 16: at auction, meaning all the young artists who were basically
Speaker 16: being used in a way to flip the artwork and
Speaker 16: profit and speculate. That segment saw a lot of cooling off,
Speaker 16: and I think it's because a lot of collectors realized
Speaker 16: that there is no point in space and until a
Speaker 16: million dollars in someone who's thirty five and has had
Speaker 16: a career of five years, for example.
Speaker 2: Although I would say, and I got to say, you know,
Speaker 2: years ago, I had an opportunity to sit down and
Speaker 2: talk with Eli Broade, master collector not with us anymore,
Speaker 2: and in his warehouse out on the west coast of
Speaker 2: Lichtenstein's and they were unbelievable, just everywhere, everywhere, everywhere, so
Speaker 2: you know, but he also focused on up and coming artists,
Speaker 2: and there were people who became very established, and he
Speaker 2: said that was an important part of his collecting. So
Speaker 2: I do wonder, you know, for someone who's out there
Speaker 2: and you can buy, you know, you can fractually write
Speaker 2: invest in art. What's your advice to someone who's looking
Speaker 2: to start a collection. I think first and he's in
Speaker 2: Stevie Cohen right.
Speaker 16: Well, first of all, buy at galleries because you don't
Speaker 16: want to pay the premium of twenty five percent that
Speaker 16: the auction houses are going to charge you, which happens
Speaker 16: to every year.
Speaker 6: Is unbelievable.
Speaker 4: The amount extra I feel like, you know, Congress is
Speaker 4: worried about Taylor Swift tickets or the extra charges that
Speaker 4: you have to pay on ticket Master. They should look
Speaker 4: at these auction houses.
Speaker 16: And they charge the buyer and the seller. So the
Speaker 16: other thing is it is important to buy emerging artists,
Speaker 16: and I support them and plenty of my clients do too.
Speaker 10: The thing that you have to do.
Speaker 16: Is build the relationships with the galleries and make sure
Speaker 16: that you are following what the artist is doing. And
Speaker 16: here's why the competitive environment on primary market is such
Speaker 16: because collectors are thinking, this is the best price.
Speaker 10: I'm ever going to get. And if I am there
Speaker 10: and I.
Speaker 16: Am the happy winner of one of these twelve paintings
Speaker 16: in the show, even if it's one hundred thousand dollars
Speaker 16: for someone who is thirty, it's still way cheaper that
Speaker 16: if I have to go and get it at auction
Speaker 16: five years later.
Speaker 10: Right.
Speaker 16: But this is the thing you have to ass that
Speaker 16: new collector be paying attention to a variety of different factors.
Speaker 10: Cause there are five thousand galleries.
Speaker 16: In the United States alone, and only three hundred are
Speaker 16: worth buying from. So imagine how you have to filter
Speaker 16: everything that's happening. And I say this not because people
Speaker 16: are going to steal your money.
Speaker 10: But because.
Speaker 16: That are filters like everything, and for this artists to
Speaker 16: show in this important galleries or even in an emerging
Speaker 16: gallery that is committed to building the life of the artists,
Speaker 16: they have to have people behind them that can place
Speaker 16: them in museums, that can place them in great collections,
Speaker 16: because that is what will guarantee the legacy of the artists,
Speaker 16: and that is actually what makes the asset a real
Speaker 16: investment and not just a vanity purchase.
Speaker 4: But so somebody like Damien Hurst, his success you're saying,
Speaker 4: isn't only because of the works he created, the esthetics
Speaker 4: or you know, the design, but because of the dealers
Speaker 4: behind him and surrounding him.
Speaker 16: Well, part of that Damien comes from a generation of
Speaker 16: the young British artists that they are not young anymore,
Speaker 16: but that was like thirty years ago. And he's a
Speaker 16: conceptual artist who came up with a bunch of ideas.
Speaker 16: The beauty of what he does is usually is related
Speaker 16: to the title, and that makes you think a lot
Speaker 16: about you know, his decaying shark instead of the glass
Speaker 16: and the dots and things like that. So yeah, exactly,
Speaker 16: that was his So what people like him do is
Speaker 16: create a style in a given time that creates an
Speaker 16: awareness of something or something that is innovative and unique,
Speaker 16: and he finds the right gallery. In his case it
Speaker 16: was White Cube in London, still very very important, and
Speaker 16: he finds the right collectives.
Speaker 10: So it isn't ecosystem. Not one thing is.
Speaker 16: Going to make an artist he needs or she needs
Speaker 16: or they need a bunch of things to happen for
Speaker 16: that artist to build a career.
Speaker 2: It's just kind of fascinating in terms.
Speaker 6: Of totally fascinating.
Speaker 2: Did I say Lichtenstein or Lichtenstein?
Speaker 6: You said Lichtenstein, Yeah.
Speaker 2: I'm mean Stein. I know, as soon as it came out,
Speaker 2: I'm like, you're talking.
Speaker 4: About Roy Yeah, okay, yeah, I think of the principality.
Speaker 3: Yeah, I know.
Speaker 16: And that's why I'm like, you know, I think you
Speaker 16: were like, what, okay, really.
Speaker 2: Cool stuff and really something to think about. And I
Speaker 2: know it kind of definitely resonates with our audience because
Speaker 2: you know, you do think about diversification. Have a great weekend.
Speaker 2: Thank you so much.
Speaker 10: Thank you guys.
Speaker 2: Check in with you. Maria Brito art advisor, curator and author.
Speaker 2: Check out her book How Creativity Rules.
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