WEBVTT - Amazon Bid Is Part of Toronto's Tech Investment Push, Mayor Tory Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:31.720 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. We 0:00:31.800 --> 0:00:36.240 are broadcasting from the Burden Real Estate Industry Executive form 0:00:36.479 --> 0:00:39.839 here at Bloomberg World Headquarters and we are on the 0:00:40.320 --> 0:00:42.560 floor Lisa, So we do have a wonderful view north 0:00:42.600 --> 0:00:45.879 of Manhattan, and if we look very closely, you just 0:00:46.000 --> 0:00:48.520 might be able to see North America's fourth largest city, 0:00:48.560 --> 0:00:51.480 which happens to be Toronto. And we have the Mayor 0:00:51.520 --> 0:00:54.760 of Toronto, John Tory joining us. Now. Thank you very 0:00:54.800 --> 0:00:56.640 much for being with us, Sir, thank you very much. 0:00:56.760 --> 0:00:58.320 From here, I think you could almost see it. I 0:00:58.320 --> 0:01:01.640 think I think it's on a clear day. Well, one 0:01:01.680 --> 0:01:03.480 of the things that we would see if we go 0:01:03.600 --> 0:01:06.560 to Toronto, and I want to start there is um 0:01:06.600 --> 0:01:10.520 the diversity of the city of Toronto may not be 0:01:10.640 --> 0:01:14.080 very well known to those outside of Canada. I wonder 0:01:14.080 --> 0:01:15.840 if you could just speak to that and how that 0:01:15.920 --> 0:01:18.880 helps the economy of the city. Well, one of the 0:01:18.920 --> 0:01:20.800 reasons we're here is because there's a lot of things 0:01:20.800 --> 0:01:22.800 people don't know about Toronto. I think a lot of people, 0:01:22.920 --> 0:01:25.280 especially even our American friends, who come to visit in 0:01:25.360 --> 0:01:27.240 large numbers, when they get there, they say they didn't 0:01:27.240 --> 0:01:28.959 realize it was so big, and in fact it is 0:01:29.720 --> 0:01:32.199 bigger now than Chicago and one of the biggest cities 0:01:32.200 --> 0:01:35.440 in North America. But what's more interesting about that population 0:01:35.560 --> 0:01:39.240 is of it are people who were not born in 0:01:39.319 --> 0:01:42.039 the country, and so the city and the region has 0:01:42.080 --> 0:01:45.480 been built by immigrants, and today we still have a 0:01:45.560 --> 0:01:48.680 very open immigration policy. It distinguishes us from lots of 0:01:48.680 --> 0:01:51.280 countries that are looking more inward. And we've done things 0:01:51.280 --> 0:01:54.400 to help the economy, like to create a special UH 0:01:54.840 --> 0:01:57.640 Talent visa that says, if there's somebody really talented you 0:01:57.640 --> 0:02:00.120 want to bring in, especially in tech, that we can 0:02:00.160 --> 0:02:02.000 bring those people in and have that visa issued in 0:02:02.000 --> 0:02:04.680 two weeks so that we're you know, we're really trying 0:02:04.680 --> 0:02:06.800 to make sure those kind of smart people can be 0:02:06.920 --> 0:02:11.040 admitted enthusiastically to Canada because we need them. Marritory that 0:02:11.120 --> 0:02:14.800 was incredibly diplomatic, especially given the US and sort of 0:02:14.840 --> 0:02:19.200 the uproar over immigration policy here. I'm just wondering, given 0:02:19.440 --> 0:02:21.639 sort of the shift in immigration policy, at least on 0:02:21.680 --> 0:02:24.720 a rhetoric level in the US, have you seen the 0:02:24.760 --> 0:02:28.920 immigration numbers increased substantially to Toronto. Well, truthfully, the number 0:02:28.919 --> 0:02:31.000 of people interested in coming and the number of people 0:02:31.160 --> 0:02:34.480 coming have increased, and the number of people, for example, 0:02:34.560 --> 0:02:37.359 like foreign students applying to our universities have have shot 0:02:37.440 --> 0:02:42.200 up so dramatically like that since November in the last 0:02:42.280 --> 0:02:44.839 year and a half or two years. So those are big, 0:02:44.880 --> 0:02:47.720 big increases. Uh. You know, I can't say that we've 0:02:47.760 --> 0:02:49.680 seen actual numbers of people who have immigrated to the 0:02:49.680 --> 0:02:52.120 country from the US or from elsewhere, but we have 0:02:52.280 --> 0:02:55.399 anecdotal examples to Like yesterday at we had a bunch 0:02:55.440 --> 0:02:57.720 of tech companies here in New York and Canadian Base, 0:02:58.040 --> 0:03:00.120 and they were talking about people who had applied for 0:03:00.240 --> 0:03:02.840 visas here from other countries were having some difficulty and 0:03:02.880 --> 0:03:05.560 just shifted their gaze to Canada and came to Canada 0:03:05.560 --> 0:03:08.919 instead because it was faster, so marriatory. How concerned are 0:03:08.960 --> 0:03:14.160 you about the high apartment prices and housing prices in Toronto. 0:03:14.560 --> 0:03:18.440 Given this influx, is that present a headwind to growth. 0:03:18.680 --> 0:03:20.760 We are having to tackle as all big cities are, 0:03:20.800 --> 0:03:22.760 with the question of affordability of housing. But I can 0:03:22.760 --> 0:03:24.720 only say to you that when you talk about high prices, 0:03:24.760 --> 0:03:29.800 whether it's for um technology, technological talent, software engineers, AI 0:03:29.880 --> 0:03:31.960 people and so on, whether it's for rents in apartments 0:03:32.040 --> 0:03:35.080 or office rents, um, we are still in expensive relative 0:03:35.120 --> 0:03:37.400 stay to New York. We were talking this morning about 0:03:37.440 --> 0:03:39.760 office space and and we were asking somebody in some 0:03:39.840 --> 0:03:42.160 really prime office space we were visiting how much they 0:03:42.200 --> 0:03:44.240 were paying, and they're saying seventy seventy five dollars a 0:03:44.280 --> 0:03:46.720 foot the same number in Toronto, and US dollars would 0:03:46.760 --> 0:03:49.280 be forty five dollars a foot. Wages, we have a 0:03:49.320 --> 0:03:51.760 study done to show that the wages are thirty percent 0:03:51.920 --> 0:03:54.080 lower for the same kind of talent. That's before you 0:03:54.120 --> 0:03:58.040 take the currency into account. So um, you know, Toronto 0:03:58.200 --> 0:04:01.360 is an expensive city relative too much smaller cities perhaps elsewhere, 0:04:01.680 --> 0:04:05.320 but it's not expensive relative to American cities say that 0:04:05.360 --> 0:04:08.680 are at the peak of the tech of the technology ecosystem, 0:04:08.720 --> 0:04:10.760 like New York City or Silicon Valley, and it's one 0:04:10.760 --> 0:04:12.520 of the advantages we have that we can say we 0:04:12.600 --> 0:04:14.800 have the talent and it actually is cheaper, and the 0:04:14.800 --> 0:04:17.840 rent is cheaper, and the general cost of living, including 0:04:17.880 --> 0:04:21.000 residential accommodation, is getting expensive and it's a challenge for 0:04:21.000 --> 0:04:24.400 the people who live there now. But but relative to 0:04:24.440 --> 0:04:27.240 some of these other cities were discussing, still not at 0:04:27.240 --> 0:04:30.279 the top by any means. We've been discussing taxes in 0:04:30.320 --> 0:04:32.440 the United States and one of the debates has to 0:04:32.480 --> 0:04:37.240 do with the deductibility of mortgage interest. Doesn't exist in Canada. No, 0:04:38.120 --> 0:04:40.960 we don't have mortgage interest deductibility, never have. What we 0:04:41.000 --> 0:04:44.159 do have is a capital gains exemption on the sale 0:04:44.160 --> 0:04:46.000 of your principal residents. So it's it's kind of a 0:04:46.000 --> 0:04:48.680 trade off. It's kind of longer term gain for shorter 0:04:48.839 --> 0:04:51.559 term having to pay the tax on are having to 0:04:51.680 --> 0:04:55.080 use a non deductible funds to to fund your mortgage. 0:04:55.320 --> 0:04:56.960 So it's one of those things where there's a lot 0:04:57.000 --> 0:04:58.839 of trade offs. Again, I would say to you, overall, 0:04:59.400 --> 0:05:01.400 our personal coome tax rates are a bit higher, but 0:05:01.440 --> 0:05:04.800 they include healthcare. Our corporate tax rates are much lower, 0:05:04.839 --> 0:05:06.440 but they include healthcare. So when we were able to 0:05:06.480 --> 0:05:10.839 say so we're saying to Amazon, you know, when you 0:05:10.920 --> 0:05:12.760 come here. We didn't send them a check of any 0:05:12.839 --> 0:05:14.320 or any of our promise of a check for any 0:05:14.360 --> 0:05:16.880 kind of an incentive to them. We did say to them, however, 0:05:16.920 --> 0:05:19.240 you were going to save hundreds of millions of dollars 0:05:19.360 --> 0:05:21.760 hundreds of millions of dollars on your healthcare because you 0:05:21.760 --> 0:05:23.320 don't have to pay it separately. You will pay a 0:05:23.360 --> 0:05:25.880 lower rate of corporate income tax if you pay tax 0:05:25.880 --> 0:05:27.880 in Canada, and you will not have to pay for 0:05:27.920 --> 0:05:30.800 healthcare separately because it's included in UM. You know, the 0:05:30.839 --> 0:05:33.440 tax is paid by residents. So I think these things 0:05:33.480 --> 0:05:35.320 all kind of mix and match, But I think overall, 0:05:35.360 --> 0:05:38.839 I'm confident in being able to say it's a a 0:05:38.920 --> 0:05:41.960 jurisdiction where for businesses looking to invest, it's a lower 0:05:42.040 --> 0:05:46.240 tax jurisdiction, for individuals in some cases a bit higher. 0:05:46.480 --> 0:05:49.200 And the stuff on mortgage interest deductibility, I think trades 0:05:49.240 --> 0:05:52.520 off when you can sell your house for capital gains 0:05:52.560 --> 0:05:56.120 tax free, but you uh, you have to pay mortgage 0:05:56.200 --> 0:05:59.960 interest in non deductible dollars real quick. What percent chance 0:06:00.040 --> 0:06:01.880 do you think you have in getting the Amazon headquarters? 0:06:02.160 --> 0:06:03.960 You know, it's like asking people ask me to grade 0:06:03.960 --> 0:06:06.240 myself in office, and I never do that. I don't 0:06:06.440 --> 0:06:11.839 kind of cartea exactly. I would that I think we 0:06:11.920 --> 0:06:15.680 have a formidable bid because we are talent rich, lower cost, 0:06:16.279 --> 0:06:18.880 a very livable city. And so it's going to depend 0:06:18.920 --> 0:06:21.040 a lot on the consideration that Amazon gives to whether 0:06:21.080 --> 0:06:24.040 they are prepared to locate outside of the United States. 0:06:24.440 --> 0:06:26.719 And uh, you know, we'll see. We're not you know, 0:06:26.760 --> 0:06:29.359 we're not popping any champagne corks yet. We're just putting 0:06:29.360 --> 0:06:32.479 our best bid forward and we'll see what happens. Mayor 0:06:32.600 --> 0:06:35.120 John Tory, thank you so much for joining us. Mayor 0:06:35.200 --> 0:06:39.039 John Tory of Toronto joining us here in our Bloomberg 0:06:39.040 --> 0:06:53.000 eleven three oh headquarters. This is Bloomberg. Well, we are 0:06:53.040 --> 0:06:57.320 broadcasting from the Burden Real Estate Industry Executive Forum. And 0:06:57.560 --> 0:06:59.880 one of the panelists on the panel that just can 0:07:00.000 --> 0:07:03.960 included with Kathleen McCarthy, senior Managing Director and global Chief 0:07:04.040 --> 0:07:07.680 Operating Officer for the Blackstone Real Estate Group, and she 0:07:07.800 --> 0:07:11.760 joins us. Now, Kathleen, your group overseas one hundred and 0:07:11.800 --> 0:07:15.480 eleven billion dollars of assets of real estate assets, and 0:07:15.480 --> 0:07:19.400 I'm wondering, Uh, you've expanded very quickly, and with such 0:07:19.600 --> 0:07:23.520 scale comes certain opportunities, but it also brings some challenges, 0:07:23.560 --> 0:07:25.720 and I want you to talk about what the challenges 0:07:25.760 --> 0:07:29.120 are that you've been facing as you've sort of expanded 0:07:29.440 --> 0:07:31.960 this rapidly. Got it. Thank you, Lisa for having me 0:07:32.680 --> 0:07:34.160 very excited to be here, and this was just an 0:07:34.160 --> 0:07:38.600 amazing panel. I would say we see really just benefits 0:07:38.640 --> 0:07:41.680 of the scale of our business and our glo global perspective. 0:07:41.880 --> 0:07:45.280 It allows us to have proprietary access to information to 0:07:45.360 --> 0:07:47.400 really remain I think, ahead of what other people can 0:07:47.440 --> 0:07:50.560 see in the marketplace, and allows us to be high 0:07:50.560 --> 0:07:55.120 conviction thematic investors globally. It's also been a great attractor 0:07:55.160 --> 0:07:58.560 for talent everywhere in the world. Can you speak a 0:07:58.600 --> 0:08:01.520 little bit about your recent Well you did some of 0:08:01.520 --> 0:08:03.680 them last year and some the acquisitions, but I want 0:08:03.720 --> 0:08:05.640 to start off with looking at this connection with e 0:08:05.720 --> 0:08:09.240 commerce and everybody needs a warehouse in order to store 0:08:09.280 --> 0:08:13.600 all those wonderful brown boxes. And you've made some purchases 0:08:13.640 --> 0:08:16.720 I believe out in the West Coast in Irvine, for example. 0:08:16.720 --> 0:08:18.880 I wonder if you just tell us about that acquisition 0:08:19.160 --> 0:08:21.840 and then what that means in terms of your strategy. Sure, 0:08:21.960 --> 0:08:25.920 so e commerce is definitely impacting the way people shop. 0:08:26.160 --> 0:08:29.000 And since two thousand and ten, we've been the largest 0:08:29.320 --> 0:08:32.480 most active investor in logistic success. It's all around the world, 0:08:32.559 --> 0:08:35.920 something like four hundred million square feet over a hundred 0:08:35.920 --> 0:08:39.960 different transactions. This was just a very recent example. We 0:08:40.080 --> 0:08:44.480 see robust tenant demand like we've never seen before, unprecedented 0:08:44.720 --> 0:08:49.920 for logistics, and it's increasingly focused on that last mile 0:08:50.080 --> 0:08:53.400 or the urban locations so that consumers can get goods 0:08:53.400 --> 0:08:57.000 from retailers in a matter of hours, not days. I 0:08:57.040 --> 0:08:58.360 just want to follow up, if I was to go 0:08:58.400 --> 0:09:01.679 into one of your logistics properties, Am I going to 0:09:01.800 --> 0:09:04.600 see more robots? Am I going to see more artificial 0:09:04.679 --> 0:09:08.839 intelligence and technology at work inside those buildings? I think 0:09:08.920 --> 0:09:11.520 certainly the tenants and particularly the ones that have the 0:09:11.520 --> 0:09:14.160 most capital and the most scale, like an Amazon or 0:09:14.320 --> 0:09:17.480 in innovating and investing behind those ideas. But it really 0:09:17.559 --> 0:09:22.480 is a combination of human capital as well as mechanical capital. 0:09:22.679 --> 0:09:25.440 Where are you saying the biggest opportunities right now? We 0:09:25.520 --> 0:09:29.280 know that the biggest metropolitan areas have seen the bulk 0:09:29.320 --> 0:09:31.880 of the money kind of coming into the country from overseas. 0:09:32.280 --> 0:09:34.839 UH do you think that it's overvalued in places like 0:09:34.920 --> 0:09:36.760 San Francisco and New York at this point, and are 0:09:36.760 --> 0:09:40.319 you moving to other places? Sure? So, I mentioned logistics 0:09:40.360 --> 0:09:43.960 as one of our most our highest conviction themes. I 0:09:44.000 --> 0:09:49.240 think also innovation cities places where young, highly educated, creative 0:09:49.280 --> 0:09:52.280 and technology talent wants to live. So it is the 0:09:52.280 --> 0:09:57.000 gateway markets markets like Seattle, West, Los Angeles, New York, Cambridge, 0:09:57.040 --> 0:10:01.319 and outside of the US, places like Berlin or Stockholm, 0:10:01.600 --> 0:10:06.400 Shortach in London, and Sydney in Asia. And we certainly, 0:10:06.400 --> 0:10:08.680 I think, are at a more mature point in the cycle. 0:10:08.920 --> 0:10:12.840 But we're really encouraged by the fact that fundamentals are 0:10:13.240 --> 0:10:16.080 generally quick positive for real estate in most places. What 0:10:16.120 --> 0:10:18.320 about rental properties. I know Blackstone was one of the 0:10:18.320 --> 0:10:23.400 biggest acquirers of home rental UH properties, and I know 0:10:23.440 --> 0:10:27.880 that there was some sort of right Peter Cooper Village. Yeah, 0:10:27.960 --> 0:10:30.120 I mean there was some there were some sales, And 0:10:30.120 --> 0:10:32.640 I'm just wondering, are you at a sort of UH 0:10:32.800 --> 0:10:35.720 liquidation period or do you see that as sort of 0:10:35.720 --> 0:10:39.199 a long standing Sure. So, we are really bullished on 0:10:39.320 --> 0:10:42.319 residential both rental housing in the form of single family 0:10:42.360 --> 0:10:45.600 houses and rental housing and more traditional multi family and 0:10:45.679 --> 0:10:49.040 as Pim noted, we are investors in Stytown. It applies 0:10:49.040 --> 0:10:51.079 in New York City as well as more broadly around 0:10:51.120 --> 0:10:53.240 the country. I think there are a lot of factors 0:10:53.280 --> 0:10:57.240 pushing people into rental housing and maybe remaining as renters longer. 0:10:57.679 --> 0:11:00.280 And so while you will see us sell assets, the 0:11:00.360 --> 0:11:03.640 nature of our opportunistic capital to sell assets once our 0:11:03.880 --> 0:11:08.079 fix it is done, we continue to have very high 0:11:08.120 --> 0:11:11.959 conviction around residential investing. Saudi Arabia is in the news 0:11:12.000 --> 0:11:14.400 for a variety of reasons. Back in May, it was 0:11:14.440 --> 0:11:17.119 in the news because I believe you want a commitment 0:11:17.240 --> 0:11:19.760 from the Kingdom of Saudi Arabia for what a twenty 0:11:19.760 --> 0:11:24.640 billion dollar infrastructure investment fund? Can you give us any 0:11:24.640 --> 0:11:28.480 details about that? Sure? So Blackstone is in a very 0:11:28.600 --> 0:11:33.080 unique position because of our scale and our depth of 0:11:33.120 --> 0:11:36.520 experience in the markets. And Saudi Arabia did make a 0:11:36.520 --> 0:11:40.160 decade long, significant commitment to invest with us in infrastructure 0:11:41.320 --> 0:11:44.040 and and can you tell us and I mean when 0:11:44.160 --> 0:11:45.680 is this going to When are we going to see 0:11:45.720 --> 0:11:48.920 maybe some deals or some specifics. Sure, I really can't 0:11:48.960 --> 0:11:52.280 comment on that. UM one thing that has been sort 0:11:52.320 --> 0:11:56.679 of a trend is should retail investors be able to 0:11:56.760 --> 0:12:01.080 go into some of these real estate investments? Um, I 0:12:01.120 --> 0:12:03.839 know the Blackstone has been trying to open up that opportunity. 0:12:04.920 --> 0:12:07.160 How how should that be structured given the sort of 0:12:07.160 --> 0:12:11.760 more permanent nature of real estate purchases? Sure so? Uh, 0:12:11.920 --> 0:12:15.480 real estate I think presents a compelling investment opportunity for 0:12:15.559 --> 0:12:18.240 many types of investors, and I think retail investors should 0:12:18.280 --> 0:12:22.200 have access to that as well. When we're working with 0:12:22.240 --> 0:12:24.880 retail investors, we're trying to just provide a product that 0:12:24.960 --> 0:12:28.880 has the same institutional quality, transparency, and fee alignment that 0:12:28.920 --> 0:12:31.960 we provide to institutional investors. What's your take on the 0:12:32.040 --> 0:12:36.920 mall industry right now? We note the recent proposal by 0:12:36.920 --> 0:12:42.319 Brookfield Property to acquire g g P General Growth Partners. 0:12:42.400 --> 0:12:45.920 I think about a fifteen billion dollar attempt. Uh, you 0:12:45.960 --> 0:12:49.880 think malls are too cheap? I think retail is certainly 0:12:50.000 --> 0:12:53.120 under pressure. We talked about e commerce before. That's definitely 0:12:53.120 --> 0:12:56.920 having an impact. And I can't comment on what g 0:12:56.920 --> 0:12:59.920 GP is doing specifically. Uh, sorry, what what Brookfields do 0:13:00.040 --> 0:13:03.080 specifically with g GP. We have been partners with with 0:13:03.200 --> 0:13:06.040 Brookfield in g GP. In fact, Uh, they own a 0:13:06.080 --> 0:13:08.040 significant portion of the company. I think it'll just be 0:13:08.080 --> 0:13:10.200 interesting to see their vision for what to do with 0:13:10.200 --> 0:13:12.880 the company as a private enterprise. All right, well, we're 0:13:12.920 --> 0:13:14.400 gonna leave it there. I want to thank you very 0:13:14.440 --> 0:13:16.880 much for being with us. Kathleen McCarthy is a senior 0:13:16.880 --> 0:13:20.280 managing director and a global Chief operating Officer of the 0:13:20.280 --> 0:13:23.240 Blackstone real Estate Group. Thank you very much for being 0:13:23.280 --> 0:13:27.360 here and for your participation at the Burden Real Estate 0:13:27.400 --> 0:13:30.959 Industry Executive Forum. We are broadcasting live here from Bloomberg 0:13:31.120 --> 0:13:48.760 World Headquarters, and we are broadcasting at the Burden Seen 0:13:48.960 --> 0:13:52.560 Real Estate Industry Executive Forum. And here with us we 0:13:52.600 --> 0:13:55.640 have Seth Mo Laud, partner and chairman of Burden Real 0:13:55.720 --> 0:13:58.640 Estate Services based in New York. Seth st thank you 0:13:58.679 --> 0:14:01.040 so much for joining us. I want to talk taxes 0:14:01.080 --> 0:14:04.040 with you. I want to talk about the GOP tax 0:14:04.120 --> 0:14:07.640 plan and who stands to benefit and who stands to 0:14:07.720 --> 0:14:11.920 lose in the real estate industry. UH. Com morning, Lisa. 0:14:12.280 --> 0:14:15.280 Pleasure to be here. So uh yeah, obviously there's a 0:14:15.280 --> 0:14:18.760 lot of UH talk out there the the UH. There's 0:14:18.840 --> 0:14:22.520 been plans floated by both parties and the House and Senate. 0:14:23.480 --> 0:14:28.320 The current plan as it exists would would really there's 0:14:28.360 --> 0:14:31.320 certain key elements that are really going to hurt probably 0:14:31.360 --> 0:14:35.480 the coastal states being New York, California, the high tax states. 0:14:36.200 --> 0:14:41.320 The proposals include, amongst amongst other things, uh, the elimination 0:14:41.360 --> 0:14:46.160 of the state income tax deductions, a limitation on mortgage 0:14:46.240 --> 0:14:49.920 house uh, you know, mortgage interest, and those are really 0:14:49.920 --> 0:14:52.600 going to affect the areas where housing costs are high 0:14:52.680 --> 0:14:55.200 and state taxes are high. So there's a lot of 0:14:55.240 --> 0:14:59.640 concern about the compression on probably the middle income and 0:14:59.840 --> 0:15:04.160 up or middle income uh, you know population of the 0:15:04.200 --> 0:15:07.400 coastal states. Uh. There's also a lot of proposals in 0:15:07.440 --> 0:15:12.040 there about the tax rates themselves being reduced as well 0:15:12.080 --> 0:15:15.960 as the you know, there's certain key things like, for example, 0:15:16.040 --> 0:15:20.920 they're talking about limiting the the carried interest carried interest 0:15:20.960 --> 0:15:24.160 treatment to uh where now it's capital gain. And they're 0:15:24.160 --> 0:15:27.080 talking about making an ordinary income which is gonna dramatically 0:15:27.080 --> 0:15:31.120 affect the real estate industry and other industries. UM. But 0:15:31.280 --> 0:15:36.440 the current the current proposals now are really geared towards UH. 0:15:36.960 --> 0:15:38.360 The people that are really going to feel it the 0:15:38.400 --> 0:15:40.440 most are probably the people on the coasts and in 0:15:40.480 --> 0:15:44.120 the high income and high tax states. New York, New Jersey, California. 0:15:44.320 --> 0:15:47.200 That's what we're talking about right now. Primarily, let's talk 0:15:47.200 --> 0:15:50.800 about the industry and the commercial real estate industry, because 0:15:50.840 --> 0:15:54.360 the thirty percent UH deduction right this is the limit 0:15:54.400 --> 0:15:59.880 the limit on interest expense deduction. You have any thoughts 0:15:59.880 --> 0:16:02.200 on this, and do you know anything in terms of 0:16:02.240 --> 0:16:05.920 where they're leaning in in the in the tax negotiations 0:16:06.080 --> 0:16:08.600 right now they're talking about you talk about the mortgage 0:16:08.600 --> 0:16:11.280 interest deduction right now that the limit right now is 0:16:11.320 --> 0:16:14.840 on a million dollars of indebtedness and they're talking about 0:16:14.960 --> 0:16:18.680 having that to five hundred thousand dollars of indebtedness, and 0:16:18.760 --> 0:16:21.120 that is this kind of the sweet spot for a 0:16:21.240 --> 0:16:24.480 lot of like I said, probably middle income and upper 0:16:24.520 --> 0:16:28.200 middle income UH families. So that is going to have 0:16:28.240 --> 0:16:32.920 a dramatic impact on the markets, UH the condo markets 0:16:33.000 --> 0:16:35.120 here in New York. And when you say going to 0:16:35.200 --> 0:16:40.760 have an effect, this means negative, negative, negative news deductions 0:16:41.120 --> 0:16:44.960 and it's gonna make it less affordable to buy condos 0:16:45.000 --> 0:16:48.160 and houses and other types of real estate that would 0:16:48.200 --> 0:16:52.800 normally be more affordable. How about lower property depreciation? Okay, 0:16:52.800 --> 0:16:57.160 moving that from what thirty nine years to twenty five 0:16:57.240 --> 0:16:59.080 years I mean this is good. This should be good 0:16:59.080 --> 0:17:01.640 for the commercial real estate all that that accelerates things. 0:17:01.640 --> 0:17:03.840 There's a lot of rules that are very specific to 0:17:03.840 --> 0:17:09.520 the real estate industry now regarding depreciation where it's been accelerated. Uh. 0:17:09.960 --> 0:17:12.800 Any acceleration and depreciation is a good thing for the 0:17:12.840 --> 0:17:17.360 real estate industry and makes it easier to uh pencil 0:17:17.400 --> 0:17:19.359 out deals and make sure that they're you know, the 0:17:19.600 --> 0:17:23.440 the returns are working there properly. UH. So that that's 0:17:23.440 --> 0:17:26.320 a good thing. Um, I don't know that that's going 0:17:26.359 --> 0:17:30.080 to have a dramatic impact the There were regulations passed 0:17:30.080 --> 0:17:34.159 previously whereby the deductions were much more aggressive than they 0:17:34.160 --> 0:17:36.879 were historically. Anyway, what would you say is that to 0:17:37.080 --> 0:17:40.840 people who say that the tax bills is currently crafted 0:17:41.160 --> 0:17:44.920 seem to really benefit commercial real estate, both because of 0:17:45.000 --> 0:17:48.959 the depreciation and also because there is a provision that 0:17:49.000 --> 0:17:51.720 would allow property owners to avoid being taxed on profits 0:17:51.720 --> 0:17:54.560 from property sales if they reinvest in other real estate, 0:17:54.720 --> 0:17:59.000 while penalizing residential homeowners. Can you weigh in on that, well, 0:17:59.440 --> 0:18:03.280 the I think you're referring to the like kind exchange 0:18:03.359 --> 0:18:06.399 rules which are have been in place for many, many years, 0:18:06.480 --> 0:18:11.119 and that fuels a lot of the activity at in 0:18:11.160 --> 0:18:14.359 the in the commercial real estate market. So there is 0:18:14.440 --> 0:18:17.840 some talk about repealing that. I don't know how how 0:18:17.920 --> 0:18:20.960 much traction that really has in the market, that would 0:18:21.040 --> 0:18:24.280 really dramatically impact the commercial real estate market in a 0:18:24.320 --> 0:18:27.040 negative way, But they're not talking about that right now. Now, Well, 0:18:27.280 --> 0:18:29.800 there is some talk about it. It's not actually in 0:18:29.840 --> 0:18:32.280 the proposal right now, but there there is, there is 0:18:32.320 --> 0:18:36.320 talk about it. Um, you know, on the on the 0:18:36.400 --> 0:18:40.480 home market, you still have your you know, exemptions for 0:18:41.280 --> 0:18:46.240 principal residence sales. Um, there's talk about limiting that as well, 0:18:46.280 --> 0:18:49.760 so that would hurt um, you know, the residential markets. 0:18:49.840 --> 0:18:52.119 But um, does that make sense to you? I mean, 0:18:52.200 --> 0:18:54.880 I mean, if they want to get economic growth, how 0:18:54.920 --> 0:19:00.000 does that square with the idea of more jobs, more 0:18:59.480 --> 0:19:04.000 h aster economic growth, stronger economy. How does that reconcile? 0:19:04.680 --> 0:19:09.040 It doesn't make sense. Uh, the the residential multi family 0:19:09.080 --> 0:19:13.520 development is a key driver of the economies of New 0:19:13.600 --> 0:19:17.360 York and many other major urban centers in the US, 0:19:17.560 --> 0:19:22.719 and cretailing that through tax legislation it doesn't really make 0:19:22.800 --> 0:19:26.240 much sense. So no, it doesn't make much sense. However, 0:19:26.800 --> 0:19:30.000 you know, uh, they need to you know, generate revenues 0:19:30.359 --> 0:19:33.359 for other things that are that they're looking to pay for. 0:19:33.600 --> 0:19:37.679 So something has to give. Uh. Listen, we don't feel 0:19:37.680 --> 0:19:41.000 that that's a place where it should be, but there 0:19:41.119 --> 0:19:45.120 they have to generate revenues in some way. Well done. Alright, well, 0:19:45.119 --> 0:19:47.800 thanks very much for being with us. Seth Malady is 0:19:47.840 --> 0:19:51.919 the partner and chairman of Burden Real Estate Services. UH. 0:19:52.119 --> 0:19:54.800 We are thankful for you hosting us here at the 0:19:55.080 --> 0:20:00.440 Burden Real Estate Industry Executive Forum. Our pleasure. Thanks pimp Elesa, 0:20:00.600 --> 0:20:16.160 thank you, thanks very much. We are broadcasting from Bloomberg 0:20:16.200 --> 0:20:21.560 Headquarters at the Burden Real Estate Industry Executive Forum, and 0:20:21.680 --> 0:20:24.080 we are very lucky to have with us. Norman Sterner, 0:20:24.320 --> 0:20:30.200 founding principal and chief executive officer of MHP real Estate Services. UH. Norman, 0:20:30.240 --> 0:20:32.919 thank you so much for joining us. So when we 0:20:32.960 --> 0:20:35.640 talk about New York City commercial real estate right now, 0:20:36.160 --> 0:20:39.080 there are two things that come to mind. One empty 0:20:39.080 --> 0:20:43.600 storefronts as a lot of retailers struggle. And two Hudson 0:20:43.680 --> 0:20:47.679 Yards and what that will do to midtown rent properties. 0:20:48.520 --> 0:20:51.000 I want to start with a second. How concerned are 0:20:51.040 --> 0:20:53.399 you about Hudson Yards the development there and how much 0:20:53.480 --> 0:20:56.560 will lower commercial real estate values across New York. I'm 0:20:56.600 --> 0:21:01.560 not only not concerned, I'm a fan, in a favorite 0:21:01.560 --> 0:21:04.960 of what they're doing at Hudson Yards. Um, we have 0:21:05.040 --> 0:21:09.440 four hundred million square feet. If we do not improve 0:21:10.200 --> 0:21:14.240 three to four percent per year to modern, state of 0:21:14.240 --> 0:21:19.080 the art office properties, that this city will simply dry up, 0:21:19.640 --> 0:21:22.560 as most of the other cities have. So. But but 0:21:22.640 --> 0:21:24.720 what happens to the rest of the existing properties that 0:21:25.200 --> 0:21:29.800 are modern. You're you're making an assumption that the occupancy 0:21:29.920 --> 0:21:34.840 of Hudson Yards will become only the movement from existing space. 0:21:36.119 --> 0:21:42.040 We increase occupancy by people moving into the city. When 0:21:42.040 --> 0:21:45.840 you look at Amazon right now, they're not moving out 0:21:45.840 --> 0:21:50.400 of anywhere to move into eight million new feet. They're 0:21:50.440 --> 0:21:58.639 looking for new feet. When you see companies moving from 0:21:58.800 --> 0:22:04.120 one place to the other. UM, last month, we signed 0:22:04.359 --> 0:22:08.720 a two hundred and seventies six thousand square foot lease 0:22:09.320 --> 0:22:12.920 for the City of New York. Um, it's not necessarily 0:22:12.960 --> 0:22:15.800 moving out of one place to the other, but rather 0:22:15.920 --> 0:22:23.480 they need more space. Um. We replaced six smaller, older 0:22:24.480 --> 0:22:31.080 properties with one brand new, much more efficient property. Uh. 0:22:31.119 --> 0:22:35.320 But it's not only Hudson Yards. It's uh, it's Brookfield, 0:22:35.359 --> 0:22:40.560 it's related. It's um L n L. It's sl green 0:22:40.680 --> 0:22:48.080 building one point six million square feet on Grand Central. UM. 0:22:48.119 --> 0:22:54.240 So no, I I'm i'm I'm a proponent of taking 0:22:54.320 --> 0:22:59.800 out some part of the old inventory and building. No. 0:23:00.320 --> 0:23:05.080 The east side reasoning is exactly why that's being done. Uh. 0:23:05.720 --> 0:23:10.280 Most of the smaller older buildings or fifty to a 0:23:10.359 --> 0:23:14.919 hundred years old, UM, it's hard to convert them to 0:23:15.160 --> 0:23:19.320 modern norfics. Most of them are being converted when they're 0:23:19.359 --> 0:23:23.639 not being knocked down into residential or hotels. UM. No, 0:23:23.840 --> 0:23:25.960 I I don't think it will hurt. Also, it's a 0:23:25.960 --> 0:23:33.359 different marketplace. Hudson Yards to build today is somewhere between 0:23:33.359 --> 0:23:38.480 a thousand and twelve hundred dollars of square foot UM. 0:23:38.520 --> 0:23:43.960 There's plenty of competition uh to to that marketplace. UH 0:23:44.320 --> 0:23:47.720 still in New York. So I'm a proponent. Could you 0:23:47.800 --> 0:23:50.080 share with us just a little bit of your own history, 0:23:50.160 --> 0:23:53.119