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Atalanta's Solomon on Real Estate Markets: Very Robust (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Bloomberg eleventh, Rio to Washington,
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  Speaker 1: d C, Bloomberg to Boston, Bloomberg to San Francisco, Bloomberg
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  Speaker 1: nine to the Countries Channel and around the globe the
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  Speaker 1: Bloomberg Radio plus DAB and Bloomberg Got Gone. This is
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  Speaker 1: taking Stock. I'm Kathleen Hayes along with Pim Fox. We're
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  Speaker 1: gonna take a look at the commercial real estate market.
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  Speaker 1: A lot of people are weary of stocks and kind
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  Speaker 1: of wondering about bonds, and they're looking for places to
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  Speaker 1: invest him that are liquid and alternative for many people.
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  Speaker 1: This is a good one. Yeah. We're also going to
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  Speaker 1: talk about the office, the office space, business retail of
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  Speaker 1: We'll take a look at malls as well as ground
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  Speaker 1: up construction. Also look at the condo market. Right now,
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  Speaker 1: let's take a look at business news. We've got Charlie
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  Speaker 1: Pellett at Bloomberg News from and thank you Pim, Thank
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  Speaker 1: you Kathleen. Let us begin with crude oil stocks are fluctuating,
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  Speaker 1: but crude now trading at fort Arrel. Talking about West
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  Speaker 1: Texas Intermediate down ten cents there a drop of two
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  Speaker 1: tents of one percent. We did see Brie of Brent
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  Speaker 1: crude briefly breach fifty of barrel right now forty nine
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  Speaker 1: seventy nine a barrel on brand up five cents again
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  Speaker 1: there of point one percent. Stocks are coming off of
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  Speaker 1: their strongest rally in almost three months, Mixed data offering
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  Speaker 1: little clarity on whether the economy is strengthening enough to
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  Speaker 1: withstand higher interest rates as early as next month. Diane
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  Speaker 1: Swonk is the founder of d S Economics. Clearly the
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  Speaker 1: Fed is attempting to make this smooth, although let's let
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  Speaker 1: let's face it, what's happened since December. The moved in
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  Speaker 1: December kind of a non issue, and then all of
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  Speaker 1: a sudden, we're dealing in this geopolitical and economic environment
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  Speaker 1: that's globally still fragile. And I think it's interesting that
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  Speaker 1: although we didn't hear a lot of economics from President
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  Speaker 1: Obama this morning, the real issue is geopolitics and policy
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  Speaker 1: are now economics. And I think that's very important as well,
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  Speaker 1: because those can affect the economy quite a bit. In
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  Speaker 1: equities struggling for direction today as investors step back to
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  Speaker 1: Assessa two day events that added nearly three with sixty
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  Speaker 1: points to the down. Jones Industrial average Costco wholesale shares
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  Speaker 1: gaining the most in more than six years after earnings topped.
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  Speaker 1: Analysts estimates assign the warehouse club is weathering a volatile
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  Speaker 1: retail climate. Costco shares are up now by three point
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  Speaker 1: nine percent. Sears Holdings considering options for its Ken, Moore,
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  Speaker 1: Craftsman and die Hard brands as what was its Sears
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  Speaker 1: Home Services repair business. Sears Holding shares up six point
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  Speaker 1: one percent. Abercrombie and Fitch plunging after first quarter sales trailed.
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  Speaker 1: Analysts estimates Abercrombie down sixteen point seven percent, Gold down
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  Speaker 1: to eight to the ounce, a drop of two tenths
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  Speaker 1: of one percent, to thirty two on Wall Street. Now
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  Speaker 1: we'll look at other news from around the world. Thank you,
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  Speaker 1: Charlie from the Bloomberg news room. I'm Alex Steel. Donald
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  Speaker 1: Trump has hit the magic number. According to the Associated Press,
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  Speaker 1: he now has a number of delegates needed to clinch
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  Speaker 1: the Republican presidential nomination. The AP count has Trump with
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  Speaker 1: one thousand, two hunder and thirty eight one more than
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  Speaker 1: is needed. A review of Democratic presidential primary results in
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  Speaker 1: Kentucky has found Hillary Clinton still ahead of Bernie Sanders.
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  Speaker 1: That's According to The Career Journal, Bernie Sanders and Hillary
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  Speaker 1: Clinton both picked up twenty seven delegates after the May
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  Speaker 1: seventeenth Kentucky primary, but one delegate was yet to be
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  Speaker 1: awarded from the sixth congressional district that goes to Secretary Clinton.
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  Speaker 1: At a press conference in Japan today with leaders of
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  Speaker 1: six other industrialized nations, President Obama commented on the Taliban's
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  Speaker 1: appointment of a new leader following the death of Mullah
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  Speaker 1: Mohammed Monsoor in a U S. Rohan strike last week.
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  Speaker 1: What they need to enter into serious that are led
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  Speaker 1: by Afghans. On Friday, President Obama becomes the first sitting
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  Speaker 1: president to visit Hiroshima. The battle over gay and transgender
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  Speaker 1: rights is spilling over into other issues in Congress. A
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  Speaker 1: thirty seven billion dollar measure to fund the Energy Department
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  Speaker 1: and water projects has been killed in the House. It
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  Speaker 1: was opposed by many Republicans because of a provision designed
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  Speaker 1: to bar discrimination against AIDS and transgenders by federal contractors.
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  Speaker 1: The head of New Jersey States Senate wants to move
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  Speaker 1: quickly on drumming up support for two new casinos near
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  Speaker 1: New York. Steve Sweeney says extra time is needed to
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  Speaker 1: get voter approval in a November referendum. Governor Christie says
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  Speaker 1: plans for the casinos are on life support because of
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  Speaker 1: financial turmoil. In Atlantic City Global News twenty four hours
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  Speaker 1: a day, power by journalists in more than a hundred
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  Speaker 1: and fifty news bureaus around the world. From the Bloomberg
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  Speaker 1: News Room, I'm Alex Steele, Charlie, and we thank you
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  Speaker 1: and again recaving a mixed picture for stocks. The Dow
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  Speaker 1: is lower by point one percent. The SMP five hundred
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  Speaker 1: index little change that is up by less than point
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  Speaker 1: one percent. I'm Charlie Pellett and that's a Bloomberg Business
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  Speaker 1: flash this he is taking stock with Kathleen Hayes and
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  Speaker 1: Pim Fox on Bloomberg Radio. Stocks are fully valued. That's
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  Speaker 1: what many guests are saying. Bond yields are low, the
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  Speaker 1: prices are high. If you want to get a positive return,
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  Speaker 1: if you want to find yield on an investment that
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  Speaker 1: you think is solid, where do you go. More and
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  Speaker 1: more people are turning to commercial real estate. Speaking now
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  Speaker 1: to an expert in the field, Rachel Gilbert Solomon, co
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  Speaker 1: founder managing partner at Atlanta Advisors based here, in New York,
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  Speaker 1: recently opening a West Coast office and joining us in
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  Speaker 1: our New York studio. So, Rachel, welcome, Thank you for
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  Speaker 1: having me. So, uh, what would you say right now?
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  Speaker 1: Is hottest in the commercial real estate market? Where are
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  Speaker 1: you seeing the most demand? Was it? Is it multi family?
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  Speaker 1: We know a lot of people are renting instead of buying.
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  Speaker 1: Is it? Is it retail? Where do you see a
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  Speaker 1: lot of demand right now? We see, uh, Well, multi
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  Speaker 1: family has historically been the asset class that has performed
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  Speaker 1: the best, and we see that continuing in this market,
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  Speaker 1: although I will say in a lot of the Class
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  Speaker 1: A prime markets there's been a tremendous amount of new
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  Speaker 1: product that's come online, so for the first time we're
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  Speaker 1: seeing a little push back in rent increases until that
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  Speaker 1: new instruction gets absorbed. We see that continuing, But on
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  Speaker 1: the whole, as an asset class, we think multi family
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  Speaker 1: is still the best bet. Are you talking about markets
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  Speaker 1: like San Francisco, New York those kinds of places, Yes,
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  Speaker 1: San Francisco, New York, Chicago, Miami, um major gateway cities.
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  Speaker 1: It seems as though the competition for properties means that
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  Speaker 1: buyers or investors are maybe not bending the rules, but
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  Speaker 1: at least expanding their horizons. Right. So, for example, I
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  Speaker 1: know that you've been looking at things like what reats
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  Speaker 1: do and they necessarily say, all right, a certain vintage
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  Speaker 1: of apartment house or a certain vintage of building they're
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  Speaker 1: not going to touch. That's changed, hasn't it, Yes, Pen
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  Speaker 1: that the boundaries and where institutional investors, reats and and
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  Speaker 1: even private investors are moving very quickly. Used to be
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  Speaker 1: there was a line in the sand where investors, for
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  Speaker 1: for example, wouldn't invest in something that was built before
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  Speaker 1: nineteen nine because prior to that you had eight foot
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  Speaker 1: ceilings and that is not a desirable for a renter.
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  Speaker 1: But because it's been so challenging to find deals, we
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  Speaker 1: find that across the board, investors are pushing their boundaries.
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  Speaker 1: They're willing to go to uh earlier vintages. They're willing
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  Speaker 1: to look at things that require a little more work
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  Speaker 1: to get that return. Rachel. How important is cheap credit? Now?
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  Speaker 1: The Feds may be going to raise rates a couple
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  Speaker 1: of times. Is here we've and and that is pushing
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  Speaker 1: up the short end a little bit. But in terms
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  Speaker 1: of longer term financing costs, you still have very low yields.
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  Speaker 1: Is that How much of a driver is that for
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  Speaker 1: commercial real estate broadly? Is it going to be effective
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  Speaker 1: if the Fed moves a couple more times this year?
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  Speaker 1: The cheap credit is really instrumental in driving real estate,
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  Speaker 1: and we don't see that changing anytime soon. I know
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  Speaker 1: that there's been a lot of talk about the Fed
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  Speaker 1: potentially raising rates in June. The credit markets have priced
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  Speaker 1: that in a little bit, and we're still at historically
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  Speaker 1: low interest rates. So as long as credit is as
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  Speaker 1: plentiful as it has been, we don't see that affecting
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  Speaker 1: the market. Rachel, that you've done what at the LANDA
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  Speaker 1: Part Advisors, what six hundred million dollars worth of deals
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  Speaker 1: markets like New York, San Francisco, Denver, Baltimore, Fort Flord
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  Speaker 1: of the northern New Jersey. But you also say that
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  Speaker 1: people are looking at I don't want to call him
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  Speaker 1: second tier, but alternatives. For example, rather than go to
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  Speaker 1: the east coast of Florida, you go to the west
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  Speaker 1: coast of Florida. It's sort of like, rather than go
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  Speaker 1: to Williamsburg, you kind of go to Bay Ridge. At
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  Speaker 1: least for those who understand Brooklyn, what is that just
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  Speaker 1: because it's just you know, the competition or what what
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  Speaker 1: is causing this trend. Well, um, it's just very challenging
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  Speaker 1: to be able to find a return and so um
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  Speaker 1: again it's an experience. Is that because the seller is
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  Speaker 1: the seller not realistic, the seller wants too much and
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  Speaker 1: the and the buyer won't come through. I mean, is
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  Speaker 1: the bid ask spread closing or what's happening. Yes, we're
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  Speaker 1: seeing a change in the marketing process as well. Because
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  Speaker 1: the market is so competitive, there is a tighter a
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  Speaker 1: tighter span in the bid ask spread. We're seeing the
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  Speaker 1: marketing process being condensed, less time for diligence, less time
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  Speaker 1: to close. Um. And because sellers know that while the
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  Speaker 1: market is like this, they have to kind of let's
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  Speaker 1: say make hey. Um. But it's all signs of a
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  Speaker 1: very strong market. Because deals are closing a contract price,
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  Speaker 1: they're not being retraded, So that's a sign that there
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  Speaker 1: is a market clearing price and and the market's very
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  Speaker 1: robust malls. Rachel, We talked to Tom McGee this week.
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  Speaker 1: He's CEO of the International Council of Shopping Centers. He
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  Speaker 1: was at the recon convention on in Las Vegas. To me,
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  Speaker 1: he was surprising the upbeat on on on retail, on
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  Speaker 1: the demand for these mall spaces. I thought, you know,
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  Speaker 1: brick and mortar was dying. What are you seeing in
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  Speaker 1: the market. Well, there's been a transition in the way
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  Speaker 1: people shop. Obviously a lot of shoppers move online, but
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  Speaker 1: regional malls are still integral as social meeting centers, and
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  Speaker 1: so what malls have used to be are very different
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  Speaker 1: from what they are today, and they're transitioning to become
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  Speaker 1: lifestyle centers. Maybe they're an indoor amusement park, maybe they're
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  Speaker 1: they're an indoor golf center or a fitness center. So
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  Speaker 1: they still are vital, but what they sell and how
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  Speaker 1: they sell is definitely changing. Quick question, what's a transit village.
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  Speaker 1: A transit village is um apartment complex or a lifestyle
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  Speaker 1: center that is attached to maybe it's a commuter hub,
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  Speaker 1: a main station. And that is significant because it follows
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  Speaker 1: the trend that younger buyers and the next generation really
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  Speaker 1: want to be closer to urban centers. So they don't
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  Speaker 1: want to live in a suburban life. And if they
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  Speaker 1: are living in the suburbs, they want to be someplace
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  Speaker 1: that gets them very quick access into the urban Centers.
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  Speaker 1: Thank you very much for joining us. Rachel Gilbert Solomon,
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  Speaker 1: co founder, managing partner ahead of the New York office
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  Speaker 1: of Atlanta Advisers, many thanks. You're listening to taking Stock.
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  Speaker 1: I'm pim Fox my co host Kathleen Hayes, and you're
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  Speaker 1: listening to Bloomberg Radio Bloomber. Taking Stock is brought to
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