WEBVTT - Nick Colas Says Public Equity Market May Be a Broken Concept 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm pim Fox. 0:00:08.119 --> 0:00:11.159 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:19.960 the trading floor. Find the Bloomberg P and L Podcast 0:00:20.000 --> 0:00:29.480 on iTunes, SoundCloud and at Bloomberg dot com. Well recently, 0:00:29.760 --> 0:00:34.800 David Einhorn, who is well respected hedge fund manager frequently 0:00:34.840 --> 0:00:39.600 gets calls right, suggested that General Motors should divide its 0:00:39.640 --> 0:00:43.159 shares into two classes, one that would be for capital 0:00:43.159 --> 0:00:46.479 appreciation and the other which would be for its hefty dividend. 0:00:46.560 --> 0:00:51.600 His goal to unlock value in these shares. This raised 0:00:51.600 --> 0:00:53.440 a lot of questions for Nick Cholas, who joins us 0:00:53.560 --> 0:00:56.440 right now. He's chief market strategistic converge x UH and 0:00:56.480 --> 0:00:59.680 wrote a fascinating piece about how this highlights some of 0:00:59.720 --> 0:01:04.720 the broken aspects of the public equity market. Nick, Yeah, 0:01:04.959 --> 0:01:07.720 that's exactly right, because as I started thinking about iron 0:01:07.720 --> 0:01:10.520 Horn's proposal, I realized that it's really part of a continuum, 0:01:10.760 --> 0:01:13.120 and that you've seen other kind of little chips away 0:01:13.160 --> 0:01:16.360 at the classical equity market structure over the past decade 0:01:16.480 --> 0:01:18.560 or so. So you look at Snap with its recent 0:01:18.600 --> 0:01:21.440 I p O not offering voting shares, You see dual 0:01:21.440 --> 0:01:23.880 classes of stock, and a lot of the most successful 0:01:23.920 --> 0:01:26.839 tech companies Google, Facebook and so forth, and you begin 0:01:26.880 --> 0:01:29.280 to realize that there's something going on much bigger than 0:01:29.360 --> 0:01:32.120 just GM iron horning in one company and a debate 0:01:32.120 --> 0:01:34.840 about cyclical companies and valuations. Right, and you point to 0:01:34.880 --> 0:01:38.280 also initial public offerings and how much uh, the total 0:01:38.400 --> 0:01:40.479 volume of i p O s in any given year 0:01:40.640 --> 0:01:43.480 has gone down dramatically over the past a few decades. 0:01:43.600 --> 0:01:45.240 And this is also an issue that Jay Clayton, who 0:01:45.240 --> 0:01:48.480 has been nominated to be SEC chair, raised in front 0:01:48.520 --> 0:01:51.000 of Congress when he testified, saying that this is one 0:01:51.040 --> 0:01:53.760 area that he wants to address. Why do you think 0:01:54.080 --> 0:01:57.200 that there is a sort of structural flaw that is 0:01:57.360 --> 0:02:00.600 increasingly prevalent in public equity markets? Yeah, this is the 0:02:00.680 --> 0:02:03.760 single most important question nobody really talks about very much, 0:02:03.760 --> 0:02:07.480 because the key issue is that public equity shareholders must 0:02:07.520 --> 0:02:10.520 have access to the very best companies that a society 0:02:10.600 --> 0:02:13.079 can create. The reason is if they don't have access 0:02:13.080 --> 0:02:15.440 to that, they're just stuck with the losing companies because 0:02:15.440 --> 0:02:17.960 the nature of disruption is such that the new companies 0:02:18.000 --> 0:02:21.480 started out in California go on to grow and really 0:02:21.520 --> 0:02:23.920 impinge on the growth of other companies that are publicly 0:02:23.960 --> 0:02:25.799 held currently. So you have to be able to buy 0:02:25.840 --> 0:02:29.120 the new ones to basically benefit from society's innovation. If 0:02:29.120 --> 0:02:31.600 you don't have access to them, then over time investors 0:02:31.639 --> 0:02:33.679 and take their money and go away because they don't 0:02:33.680 --> 0:02:35.040 want to own just the losers, they want to own 0:02:35.040 --> 0:02:37.799 the winners as well. Matt Levin and Bloomberg view columnists 0:02:37.800 --> 0:02:40.480 here and I were talking about this extensively last week, 0:02:40.639 --> 0:02:43.239 and we were talking about, you know, how the public 0:02:43.280 --> 0:02:46.920 equity markets have been part of the American dream of 0:02:47.000 --> 0:02:50.440 you know, sharing in dynamism and getting a part of 0:02:50.480 --> 0:02:54.200 the fastest growing companies. But you know, I would argue, 0:02:54.400 --> 0:02:57.440 couldn't you say that public equity markets haven't gotten worse 0:02:57.919 --> 0:03:00.920 but that private debt mark it's have just gotten so 0:03:01.000 --> 0:03:04.000 much better private debt and equity, and you know, you 0:03:04.080 --> 0:03:07.200 have this incredible ground swell in the amount of debt 0:03:07.600 --> 0:03:10.840 that has been issued, You have cheaper rates thanks to 0:03:10.880 --> 0:03:16.760 the Fed and Frank's thanks to also changing dynamic in demographics. Um, 0:03:16.919 --> 0:03:20.480 couldn't investors just participate through the debt markets. Um, they 0:03:20.520 --> 0:03:23.079 could do it degree, but ultimately the way you get 0:03:23.120 --> 0:03:25.400 upside an investment is owning the equity piece of the 0:03:25.400 --> 0:03:27.920 balance sheet, because that's why all the residual cash flows go. 0:03:28.360 --> 0:03:30.120 I think you raised the right points, though, and that 0:03:30.280 --> 0:03:32.400 VC has gotten a lot bigger, a lot deeper, and 0:03:32.440 --> 0:03:34.680 a lot better. And there's a lot of really smart 0:03:34.760 --> 0:03:37.880 investors out there in VC land that's just do venture 0:03:37.920 --> 0:03:41.720 capital investment. Additionally, we're going through this big macro stage 0:03:41.720 --> 0:03:44.440 in the economy where there's a lot of disruption. Disruption 0:03:44.480 --> 0:03:46.600 takes a long time to invest in and see the 0:03:46.600 --> 0:03:48.800 benefits of that. And I think one other reason why 0:03:48.800 --> 0:03:50.440 there's not a lot of I p o S is 0:03:50.520 --> 0:03:53.520 venture capital is reluctant to give voting control or even 0:03:53.600 --> 0:03:57.760 voting input to public equity investors for projects that might 0:03:57.760 --> 0:04:00.440 be still five or ten years down the road, and 0:04:00.480 --> 0:04:02.520 so they keep them private instead of taking them public. 0:04:02.800 --> 0:04:04.200 And just to give some numbers behind that, as you 0:04:04.280 --> 0:04:07.640 highlighted in your recent report, in a late ninety nineties, 0:04:07.680 --> 0:04:10.960 there were often thirty eight i p o s per month. 0:04:11.280 --> 0:04:14.600 Now that number is more like ten to twenty time 0:04:14.920 --> 0:04:17.160 twenty I p O s per month. So, Nick, you 0:04:17.240 --> 0:04:21.200 raise a good, quite good point with voting rights. Do 0:04:21.240 --> 0:04:24.479 you think that we're going to see more companies stripping 0:04:24.480 --> 0:04:26.800 away voting rights in their I p o s and 0:04:27.040 --> 0:04:31.000 frankly stock buyers being okay with that? Yeah, absolutely, I 0:04:31.000 --> 0:04:33.479 think that's definitely the way of the future, because ultimately 0:04:33.680 --> 0:04:35.479 the goal is to get these companies out into the 0:04:35.480 --> 0:04:38.960 public domain. Let investors investors they want, or if they don't, 0:04:39.000 --> 0:04:41.560 then they don't have to. But whatever it takes to 0:04:41.640 --> 0:04:45.159 connect the public equity investor to this tremendous growth engine 0:04:45.200 --> 0:04:47.960 that's going on in Silicon Valley and in sand Hill 0:04:48.080 --> 0:04:50.320 Road an adventure capital around the world, that's the most 0:04:50.360 --> 0:04:52.560 critical thing that can happen for equity markets in the 0:04:52.560 --> 0:04:54.400 next five to ten years. How much of mom and 0:04:54.400 --> 0:04:57.640 pop investors lost out by not being able to participate 0:04:57.720 --> 0:05:00.880 in these early stages of these Silicon val companies. Well, 0:05:00.960 --> 0:05:03.800 let's think about Ubert, for example, still private worth by 0:05:03.839 --> 0:05:07.360 any estimate sixty seventy billion dollars. It would have been 0:05:07.400 --> 0:05:10.279 great if public equity investors could have bought that company. 0:05:10.440 --> 0:05:12.960 Was when it was twenty or five billion dollars, still 0:05:12.960 --> 0:05:16.240 a very viable market cap for a public company something 0:05:16.279 --> 0:05:19.040 they could have done and benefited from that. So that's 0:05:19.080 --> 0:05:21.159 just one example. I'm sure there's many others. Yeah, but 0:05:21.160 --> 0:05:23.800 couldn't somebody argue that there also were a lot of 0:05:23.839 --> 0:05:27.560 flops that managed to go bankrupt and squander a lot 0:05:27.560 --> 0:05:33.000 of money that public equity investors were saved from. Yeah, 0:05:33.000 --> 0:05:35.599 there's two ancillary points that. The first is that you 0:05:35.600 --> 0:05:39.280 still need all the right disclosures, financial disclosures, risk disclosures, 0:05:39.520 --> 0:05:42.360 good investment banking, due diligence, the whole nine yards on that. 0:05:42.920 --> 0:05:45.440 But on top of that, you do ultimately have to 0:05:45.480 --> 0:05:47.480 take some risk in order to make a return, and 0:05:47.520 --> 0:05:50.359 that includes potentially buying some flops along the way, And 0:05:50.440 --> 0:05:53.600 that's okay as long as you're invested in broadly diversified portfolio. 0:05:54.120 --> 0:05:58.760 How much do the sort of regulatory burdens that Jake 0:05:58.800 --> 0:06:01.880 Clayton highlighted as being owners for a lot of companies, 0:06:02.040 --> 0:06:06.920 how much does that factor into corporations decision to or 0:06:07.000 --> 0:06:09.400 not to have an I p O. You know, ultimately 0:06:09.440 --> 0:06:12.600 there is definitely some issue with all the regulations, our 0:06:12.680 --> 0:06:15.320 bins Oxley and disclosures and what happens if you get 0:06:15.360 --> 0:06:19.080 it wrong and having corporate officers signed off on on statements, 0:06:19.080 --> 0:06:22.200 all of which are kind of post crisis developments, But 0:06:22.279 --> 0:06:25.000 the overwhelming issue seems to be that venture capital is 0:06:25.040 --> 0:06:27.320 really reluctant to let go of their babies. They think 0:06:27.360 --> 0:06:29.599 they have really figured out the next week of disruption, 0:06:30.040 --> 0:06:31.839 and they don't want to have a lot of outside 0:06:31.839 --> 0:06:35.719 investors having to vote on who the new CEO is 0:06:35.839 --> 0:06:37.799 or if this company is going to emerge earlier or later. 0:06:37.960 --> 0:06:39.919 They want to maintain that control because they feel they 0:06:40.000 --> 0:06:43.120 understand the landscape better. So, worst case scenario, if this 0:06:43.200 --> 0:06:47.000 trend continues of only the losers remaining in the public 0:06:47.000 --> 0:06:50.520 equity market, what do you think will happen? You know, ultimately, 0:06:50.720 --> 0:06:53.960 in the worst case scenario, people start to invest less. So, 0:06:54.040 --> 0:06:57.240 for example, we all know Amazon has really killed it 0:06:57.560 --> 0:06:59.680 and driven a lot of bricks and mortar companies and 0:06:59.800 --> 0:07:02.640 the tubes. What if Amazon had never gone public, we 0:07:02.680 --> 0:07:05.240 wouldn't have access to that company, it wouldn't have grown 0:07:05.240 --> 0:07:07.440 as it has, and more importantly, would only be stuck 0:07:07.440 --> 0:07:10.720 owning the department stores, which are now really struggling against 0:07:10.720 --> 0:07:13.200 the Amazon threat. So it's super critical to have the 0:07:13.200 --> 0:07:15.320 winners in the market as well as the losers so 0:07:16.480 --> 0:07:18.920 you know, it's interesting to me. I find that often 0:07:19.040 --> 0:07:22.120 when markets are entering a kind of boring state or 0:07:22.160 --> 0:07:25.520 one that is neither one of incredible upside or downside, 0:07:25.600 --> 0:07:27.880 is a time when people get deeply philosophical about the 0:07:27.880 --> 0:07:30.120 meaning of of these markets. I mean, it's part of 0:07:30.160 --> 0:07:33.520 the reason why we're seeing some of these existential questions emerged, 0:07:33.560 --> 0:07:37.120 because the FED is kind of managing things well and 0:07:37.160 --> 0:07:39.600 everything is just kind of chugging along, and nobody can 0:07:39.640 --> 0:07:41.920 really make a much more of a dramatic statement than that. 0:07:42.280 --> 0:07:43.640 I think there's a piece of it, but I think 0:07:43.680 --> 0:07:45.240 we're also I think there's a lot of people, I'm 0:07:45.280 --> 0:07:48.560 sure everybody in this building deeply intrigued by artificial intelligence, 0:07:48.840 --> 0:07:53.760 autonomous driving, new technologies generally, and I think everybody understands 0:07:53.760 --> 0:07:56.760 it's important that investors have access to those technologies as 0:07:56.760 --> 0:07:59.880 they go through development and become public companies, because other 0:08:00.000 --> 0:08:02.800 wise you could have a situation where venture capital continues 0:08:02.840 --> 0:08:05.760 to own all the disruption and what gets disrupted is 0:08:05.800 --> 0:08:07.720 still in the public markets, and you don't want to 0:08:07.720 --> 0:08:10.000 see that happen because capital will stop circulating as well 0:08:10.000 --> 0:08:11.920 as it has before. Nikki used to work in the 0:08:11.960 --> 0:08:15.200 auto industry. Right, So have you talked with anyone about 0:08:16.240 --> 0:08:18.880 David Idhorn's proposal. Yeah. I spent ten years covering the 0:08:18.920 --> 0:08:21.800 autos at the old First Boston Credit Suites, and I 0:08:21.840 --> 0:08:26.880 have been in contact with several former CEO s CFOs treasurers. 0:08:26.920 --> 0:08:29.800 To a person, they don't like the idea very much, 0:08:29.920 --> 0:08:31.840 but I will tell you that they also understand the 0:08:31.920 --> 0:08:35.080 frustration because they've all lived through multiple cycles of this 0:08:35.120 --> 0:08:39.120 group never outperforming from cyclotrough to CycL trough. Several lived 0:08:39.160 --> 0:08:42.200 through the bankruptcies during the financial crisis, and they get 0:08:42.240 --> 0:08:44.720 that there's a problem. They're just reluctant to try to 0:08:44.880 --> 0:08:47.240 fix it aggressively at this point in the cycle. Well, 0:08:47.280 --> 0:08:50.200 how could they fix it? You know, on horse proposals 0:08:50.200 --> 0:08:52.920 and intriguing one because at least addresses the issue of who, 0:08:53.000 --> 0:08:56.280 you know, maintaining a shareholder base that is explicitly loyal 0:08:56.320 --> 0:08:58.959 to your financial structure. So if you're a dividend investor, 0:08:59.240 --> 0:09:00.920 you buy the dividends stock if you just want the 0:09:00.920 --> 0:09:03.160 bio back by the buy back stock. So it's an 0:09:03.160 --> 0:09:05.640 attempt to answer answering that question, but I think it's 0:09:05.720 --> 0:09:09.680 not the final word. Just to sort of dovetail into 0:09:09.720 --> 0:09:12.319 the FED. I mean, do you think that a FED, 0:09:13.280 --> 0:09:16.239 a few more FED rate hikes or a possible announcement 0:09:16.240 --> 0:09:19.320 of the unwinding of its four point five trillion dollar 0:09:19.360 --> 0:09:23.600 balance sheet will upend stocks in any way, or that 0:09:23.640 --> 0:09:26.440 you know, this will become a major disruption that is 0:09:26.440 --> 0:09:28.600 not on the radar right now. Yeah, And the context 0:09:28.640 --> 0:09:30.160 of the market that we see right now, in the 0:09:30.200 --> 0:09:32.080 economy that we see right now, the answer is no. 0:09:32.320 --> 0:09:34.960 I think everybody has a fairly good feeling that we're 0:09:34.960 --> 0:09:37.120 going to grow one and a half to two two 0:09:37.160 --> 0:09:39.040 and a half percent this year in terms of GDP, 0:09:39.480 --> 0:09:41.440 that inflation is going to get back to two percent 0:09:41.559 --> 0:09:43.480 and kind of stay there, and the FED is going 0:09:43.559 --> 0:09:46.800 to raise twice more. And that's the playbook everybody's using. 0:09:46.800 --> 0:09:48.280 And so as long as we sort of follow that 0:09:48.280 --> 0:09:51.840 playbook and everything else, the two rate increases is probably fine. 0:09:52.400 --> 0:09:55.120 The unwinding of the balance sheets a more complex issue, 0:09:55.160 --> 0:09:57.800 and it's much about how the FED chooses to do 0:09:57.840 --> 0:09:59.880 that and at what pace and how they give guidance 0:09:59.880 --> 0:10:01.880 of about it. And I doubt they'll do that until 0:10:01.880 --> 0:10:03.560 the back half of the year. So we have a 0:10:03.559 --> 0:10:05.800 few more months of just thinking about June as an 0:10:05.800 --> 0:10:07.960 ax creating increase, and then I think they'll start talking 0:10:08.000 --> 0:10:10.640 about not just the pace of the unwind, but the 0:10:10.640 --> 0:10:13.360 mechanics of the unwind. What do you make between the 0:10:13.480 --> 0:10:19.440 divergence between soft economic data and hard economic data? Boy, 0:10:19.520 --> 0:10:22.920 you know it's it's it's it's like a viral cat video. 0:10:23.080 --> 0:10:26.760 You know, it's it's sometimes it's not that exciting. Actually, 0:10:27.720 --> 0:10:29.559 it's one of those themes that just feels like it 0:10:29.679 --> 0:10:31.680 exploded out of nowhere and it will be gone again 0:10:31.720 --> 0:10:34.480 in two days. I think it's an important notion, but 0:10:34.520 --> 0:10:36.760 I think it speaks to your point that people don't 0:10:36.760 --> 0:10:39.320 have much else to talk about at the moment, and 0:10:39.400 --> 0:10:41.720 as a result, trying to parse the data even more 0:10:41.760 --> 0:10:44.280 finally than before. The bottom line is are we growing 0:10:44.360 --> 0:10:47.079 or not growing? The answers, yes, we're growing. Are we overheating? No, 0:10:47.200 --> 0:10:50.360 we're not overheating. I love that, By the way, I 0:10:50.440 --> 0:10:52.800 love the idea of the difference between soft and hard 0:10:52.880 --> 0:10:57.199 data being a viral cat video. Anything that we should 0:10:57.200 --> 0:11:00.360 be talking about real quick that we aren't. No, that's definitely. 0:11:00.600 --> 0:11:02.600 This to me was like the most important topic that 0:11:02.640 --> 0:11:04.480 I could come up with was what is actually what 0:11:04.559 --> 0:11:06.439 is a vote? Of what is a share supposed to 0:11:06.480 --> 0:11:08.720 do not only for the investor, but for society as 0:11:08.720 --> 0:11:12.199 a whole. Honestly, a super important topic and a very 0:11:12.280 --> 0:11:14.400 very good report that you did, Nicholas, thank you so 0:11:14.480 --> 0:11:17.480 much for joining us. Nic Cholas his chief markets I 0:11:17.600 --> 0:11:22.120 just at converge x talking about why public equity markets 0:11:22.160 --> 0:11:25.359 are deeply flawed right now and how this could potentially 0:11:26.120 --> 0:11:29.960 really badly affect the future of where people put their 0:11:29.960 --> 0:11:44.360 money and how much they invest. Thanks so much, Nick, Well, 0:11:44.600 --> 0:11:48.360 I want to turn the attention to marijuana. Actually, um, 0:11:48.600 --> 0:11:52.320 not the actual plant, but real estate that is involved 0:11:52.400 --> 0:11:55.680 with the cannabis industry. And here to speak about that 0:11:55.760 --> 0:11:59.520 is down is don Sandoval. She's chief operating officer of 0:11:59.640 --> 0:12:03.120 kal X Development Incorporated, which is based in New York City. 0:12:03.440 --> 0:12:05.839 And Donn I was reading about your background. You were 0:12:06.000 --> 0:12:08.400 on Wall Street for a long time, You're a graduate 0:12:08.480 --> 0:12:11.920 of Wharton. Uh, how did you find yourself in the 0:12:11.960 --> 0:12:16.600 cannabis industry. Well, at LESTA, the cannabis industry and my 0:12:16.679 --> 0:12:19.920 interests there really began about seven years ago. Uh as 0:12:20.520 --> 0:12:24.640 developments began in Colorado and we're continuing develop in California. 0:12:25.120 --> 0:12:28.079 And it was quite clear to me that the efficacy 0:12:28.200 --> 0:12:30.520 of the plant and all the various uses that have 0:12:30.600 --> 0:12:35.280 really just garnered increased exposure as research has increasingly better 0:12:35.280 --> 0:12:38.400 research has come online was a trend in my opinion, 0:12:38.400 --> 0:12:42.000 that was going to continue. And so as I started 0:12:42.000 --> 0:12:45.680 to look at various verticals in the cannabis space, it 0:12:45.760 --> 0:12:48.760 was quite clear to me that real estate was a 0:12:48.800 --> 0:12:52.920 sector that was both scalable and somewhat protective in the 0:12:52.960 --> 0:12:56.080 sense that you have bricks and mortar assets as well 0:12:56.120 --> 0:12:59.400 as an opportunity for diversification across the country that could 0:12:59.400 --> 0:13:03.240 provide us strong buffer should the cannabis experiment across the 0:13:03.280 --> 0:13:08.040 country be repealed or simply rolled back in a particular jurisdiction. 0:13:08.240 --> 0:13:11.120 With the cannabis experiment, I like that way of describing it. 0:13:11.160 --> 0:13:15.880 Can that can you dovetail that into present day dynamics 0:13:15.880 --> 0:13:18.200 and sort of the political rhetoric that we hear uh 0:13:18.280 --> 0:13:22.760 from Jeff's sessions about potentially cracking down on marijuana and 0:13:23.920 --> 0:13:26.920 rebuffing attempts to make it legal. I mean, has this 0:13:27.000 --> 0:13:30.679 resulted in a plateau ing of opportunities for your business 0:13:30.679 --> 0:13:33.520 and for cannabis in general in the US? I would say, 0:13:33.559 --> 0:13:37.280 to date, Uh, the comments out of Jeff's sessions as 0:13:37.320 --> 0:13:40.679 well as Sean Spicer on behalf of the administration. UH 0:13:40.840 --> 0:13:44.960 is really saber rattling and certainly a far cry from 0:13:45.000 --> 0:13:49.679 any legislative action. And we know frankly behind closed doors 0:13:49.720 --> 0:13:55.880 that Jeff has has made some of his lieutenants in 0:13:55.920 --> 0:13:59.679 the Republican Party somewhat more comfortable that we know immediate 0:13:59.720 --> 0:14:03.240 act and in terms of greater federal enforcement as it 0:14:03.360 --> 0:14:07.480 results as it relates to recreational cannabis. So in terms 0:14:07.520 --> 0:14:11.680 of the opportunity set for Kalx and the cannabis industry 0:14:11.679 --> 0:14:15.280 in general, I would say the opportunity set is is 0:14:15.400 --> 0:14:19.200 unimpacted at this stage. How big is the cannabis real 0:14:19.320 --> 0:14:25.120 estate market? Well, it's a difficult question because it's such 0:14:25.160 --> 0:14:29.240 a fractured industry and as you move from state to state, 0:14:30.400 --> 0:14:35.640 their local and regional jurisdictions that have very very high 0:14:35.680 --> 0:14:41.040 degree of differentiation between zoning laws and licensing practices, such 0:14:41.080 --> 0:14:45.200 at the actual building count on a per state basis, 0:14:45.520 --> 0:14:48.960 depending on how you want to divvy up those zoning 0:14:49.000 --> 0:14:53.080 requirements can vary quite substantially. Well, how big is Calex 0:14:53.680 --> 0:14:59.080 Calyx is currently nine properties, we manage over six fifty 0:14:59.160 --> 0:15:03.080 thousand square feet. Our buildings are spread across four states, 0:15:03.120 --> 0:15:09.160 primarily out West Colorado, Washington, Oregon, and Arizona, and we 0:15:09.400 --> 0:15:12.880 currently house twenty one tenants. So what's the difference between 0:15:12.880 --> 0:15:16.680 a cannabis related building and a regular building? So a 0:15:16.840 --> 0:15:21.880 cannabis building is subject to very strict guidelines with respect 0:15:21.880 --> 0:15:25.920 to zoning and sighting, as well as it has very 0:15:25.960 --> 0:15:33.760 specific infrastructure requirements power, water, lighting, UH. And it is 0:15:33.800 --> 0:15:37.880 exactly these types of unique characteristics, both from a regulatory 0:15:37.920 --> 0:15:42.640 perspective and a facilities perspective, that create what we like 0:15:42.760 --> 0:15:46.000 to call it Calyx, a new vertical within the commercial 0:15:46.040 --> 0:15:48.320 real estate space. Has it been harder for you to 0:15:48.400 --> 0:15:51.920 drum up interest with investors just because of UH, some 0:15:51.960 --> 0:15:55.880 of Jeff's Sessions comments and Sean Spicer's comments, even if 0:15:56.160 --> 0:15:59.120 in back room conversations they're sort of poo pooing any 0:15:59.160 --> 0:16:03.160 potential imminent and repeal of some of the local UH 0:16:03.440 --> 0:16:08.240 legalization legalization of marijuana. I think with certainty the new 0:16:08.280 --> 0:16:11.080 administration and the comments that we have had out of 0:16:11.120 --> 0:16:14.280 it as well as it comments from Jeff Sessions in particular, 0:16:14.520 --> 0:16:19.080 have given investors pause to a certain extent um but again, 0:16:19.600 --> 0:16:24.400 it is clear that the administration, whether it's tax reform, immigration, 0:16:24.800 --> 0:16:29.120 or healthcare, has much larger issues, UH it intends to 0:16:29.160 --> 0:16:32.920 deal with before I believe getting to cannabis. Well, I 0:16:32.920 --> 0:16:35.440 guess we'll see, right, Um, what about up north? Do 0:16:35.480 --> 0:16:38.280 you look in Canada at all? We do watch what's 0:16:38.280 --> 0:16:40.400 going on in the Canadian markets, for sure, we don't 0:16:40.400 --> 0:16:44.080 own any property there, but it's certainly tremendous growth and 0:16:44.120 --> 0:16:50.040 the capital markets there have really experienced some exponential growth 0:16:50.080 --> 0:16:52.560 with respect to cannabis companies of late. Well, yeah, and 0:16:52.560 --> 0:16:55.960 in the past couple of weeks, didn't Um, wasn't there 0:16:56.040 --> 0:16:58.840 some legislation that was signed that would sort of expand 0:16:58.880 --> 0:17:01.520 the legalization of maria on a in Canada and it 0:17:01.600 --> 0:17:04.600 led to some kind of complete boom and share is 0:17:04.640 --> 0:17:10.040 tied to that industry. Right. There is expected legislation later 0:17:10.080 --> 0:17:13.760 this month to be brought to the floor whereby UH 0:17:13.920 --> 0:17:19.400 continued expansion of marijuana in Canada on a legalized basis 0:17:19.960 --> 0:17:24.080 could have a much more developed framework as early as 0:17:24.200 --> 0:17:26.800 July of next year. So what's the biggest opportunity for 0:17:26.840 --> 0:17:29.439 you going forward in the next year. So, the biggest 0:17:29.440 --> 0:17:33.840 opportunity for calxes to continue to build its real estate platform. 0:17:34.200 --> 0:17:38.080 We're looking quite aggressively at new opportunities more towards the 0:17:38.080 --> 0:17:44.280 East Coast. We're looking at acquisitions in Florida, Maryland, Massachusetts. 0:17:44.320 --> 0:17:47.439 To be to be clear, real quick, what are your 0:17:47.440 --> 0:17:50.280 conversations like with your colleagues, your former colleagues on Well Street. 0:17:52.320 --> 0:17:55.040 It's interesting. Everyone wants to know if the green rush 0:17:55.280 --> 0:17:58.720 is for real, and what I say is, uh, it's 0:17:58.720 --> 0:18:03.040 a nascent industry ripe with risk, but a lot of opportunity. 0:18:03.080 --> 0:18:04.920 If you're willing to spend the time and do the work, 0:18:05.000 --> 0:18:07.360 I'm sure you have a lot of fascinating conversations. Thank 0:18:07.400 --> 0:18:09.480 you so much for keeping us up to date and 0:18:09.520 --> 0:18:13.160 what's going on in the cannabis real estate industry. Don 0:18:13.280 --> 0:18:17.280 Sandoval's cheap chief operating officer, I can't speak today. It's Friday, 0:18:17.400 --> 0:18:21.120 chief operating officer at Klex Development Incorporated in New York City, 0:18:21.160 --> 0:18:37.560 talking about all the opportunities for cannabis related properties. I 0:18:37.560 --> 0:18:40.320 want to turn to energy, uh, and not just the 0:18:40.359 --> 0:18:45.359 production of energy, but using waste from energy production to 0:18:45.560 --> 0:18:48.800 create more energy. I want to bring in Steven Jones, 0:18:48.840 --> 0:18:52.640 President and Chief executive Officer of Covanta Holding Corporation, which 0:18:52.680 --> 0:18:55.679 is based in New Jersey. Uh, Steven, I want to 0:18:55.680 --> 0:18:59.600 start first with the business model here. What is waste 0:18:59.640 --> 0:19:02.240 to enter g Yeah, high Lisa, thanks for having me 0:19:02.280 --> 0:19:06.280 on for first starters. Uh. Waste energy is basically taking 0:19:06.840 --> 0:19:12.600 waste um from either people's homes or special waste from corporations, uh, 0:19:12.680 --> 0:19:15.720 and putting through a combustion process in order to reclaim 0:19:16.400 --> 0:19:19.560 or capture the b two us that are that are 0:19:19.560 --> 0:19:22.280 still contained in that waste and and based on that 0:19:22.440 --> 0:19:26.320 recapturing or combustion to produce energy. And you can produce 0:19:26.359 --> 0:19:30.600 steam um and or power um from the from the steam. 0:19:30.720 --> 0:19:33.639 So is this a no waste process or is this 0:19:33.760 --> 0:19:37.240 just sort of trying to strip out anything that's left 0:19:37.359 --> 0:19:41.679 over in a less efficient energy production process, uh, and 0:19:41.840 --> 0:19:44.639 using it again. Yeah, so it's it's the latter. So effectively, 0:19:44.720 --> 0:19:47.399 what you want to do, and we're certainly in favor 0:19:47.400 --> 0:19:49.880 of this, is go through the recycling process. And after 0:19:49.920 --> 0:19:53.280 the recycling process, there's still waste that's left over and 0:19:53.320 --> 0:19:55.400 it has be to you value to it. And so 0:19:55.520 --> 0:19:58.399 rather than uh putting it in the your surface, so 0:19:58.480 --> 0:20:01.400 putting it into a landfill, the alternative is to put 0:20:01.440 --> 0:20:04.680 it through a combustion process and reclaim that energy. Can 0:20:04.760 --> 0:20:06.879 you just give me a visual here, I mean, do 0:20:06.920 --> 0:20:10.520 you go to landfills and just uh pick up big 0:20:10.600 --> 0:20:13.879 portions of garbage and feed it through a machine. I 0:20:13.920 --> 0:20:16.560 feel like it's like a Doctor Seuss book where you 0:20:16.600 --> 0:20:17.960 sort of put it in a machine and it comes 0:20:18.000 --> 0:20:20.600 out in a box and you have some more energy. Yeah. 0:20:20.680 --> 0:20:23.560 We actually we actually run forty two energy from waste 0:20:23.600 --> 0:20:27.320 facilities around the US and also internationally. So we have 0:20:27.320 --> 0:20:30.440 a big project we're building in downtown Dublin right now. 0:20:31.000 --> 0:20:34.359 So these facilities actually are in and around population centers, 0:20:34.359 --> 0:20:38.360 so their critical infrastructure to population centers. And actually, um, 0:20:38.359 --> 0:20:41.200 we don't pick up waste. Uh. There's companies out there 0:20:41.280 --> 0:20:43.399 that that you know, that go and pick the waste 0:20:43.440 --> 0:20:45.760 up from the curb from from your house. Uh. And 0:20:45.760 --> 0:20:48.520 then they're alternatives are either take it to a landfill 0:20:48.600 --> 0:20:52.040 to uh to dump it or tip it or take 0:20:52.080 --> 0:20:54.520 it to one of our facilities. And again, um, when 0:20:54.560 --> 0:20:57.800 they take it to a landfill, uh, it decomposes over 0:20:57.840 --> 0:21:01.280 about a fifty year period and produces methane and methanes 0:21:01.480 --> 0:21:04.520 um about eighty times worse than than C O two 0:21:04.640 --> 0:21:07.080 is a greenhouse gas. So UM, there's a lot of 0:21:07.080 --> 0:21:08.919 people and then particularly a lot of companies in the 0:21:09.000 --> 0:21:11.080 US who don't really want to take their waste to 0:21:11.119 --> 0:21:12.960 landfills any longer, and we would rather have to go 0:21:13.040 --> 0:21:15.879 through what's a more sustainable process, which is an energy 0:21:15.880 --> 0:21:19.640 from waste plant. So how many waste energy facilities does 0:21:19.720 --> 0:21:22.840 Covanta have, So we own or operate forty two. So 0:21:22.880 --> 0:21:26.160 we're the largest in the world. Our next closest competitors 0:21:26.160 --> 0:21:30.560 about half the size of US UH and UH. Generally 0:21:30.720 --> 0:21:34.200 we UH we process about twenty million tons a year 0:21:34.280 --> 0:21:37.000 of waste and that's about five percent of the waste 0:21:37.000 --> 0:21:38.720 in the US. The US still has a lot of 0:21:38.800 --> 0:21:42.320 landfills that that we that that are utilized for waste disposal. 0:21:42.680 --> 0:21:46.280 It's enough we produce enough electricity to power one million homes. 0:21:46.359 --> 0:21:49.360 And the other interesting thing is that we also reclaim 0:21:49.440 --> 0:21:51.840 metal from the waste. There's an enormous amount of metal 0:21:51.920 --> 0:21:54.639 that goes through the through the waste stream, and so 0:21:54.680 --> 0:21:59.200 we reclaim or recycle approximately five thousand tons of metal 0:21:59.440 --> 0:22:02.760 metal annually and that's enough to build five Golden Gate 0:22:02.800 --> 0:22:05.320 bridges a year, which a lot of people find UH 0:22:05.400 --> 0:22:08.520 find interesting. A lot of metal in there. I'm just 0:22:08.720 --> 0:22:11.080 sitting here, sitting here trying to think about the economics 0:22:11.080 --> 0:22:13.399