Latest / Bloomberg Intelligence / Amazon Bid Is Part of Toronto's Tech Investment Push, Mayor Tory Says

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Amazon Bid Is Part of Toronto's Tech Investment Push, Mayor Tory Says · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. We
• 0:31
  Speaker 1: are broadcasting from the Burden Real Estate Industry Executive form
• 0:36
  Speaker 1: here at Bloomberg World Headquarters and we are on the
• 0:40
  Speaker 1: floor Lisa, So we do have a wonderful view north
• 0:42
  Speaker 1: of Manhattan, and if we look very closely, you just
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  Speaker 1: might be able to see North America's fourth largest city,
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  Speaker 1: which happens to be Toronto. And we have the Mayor
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  Speaker 1: of Toronto, John Tory joining us. Now. Thank you very
• 0:54
  Speaker 1: much for being with us, Sir, thank you very much.
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  Speaker 1: From here, I think you could almost see it. I
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  Speaker 1: think I think it's on a clear day. Well, one
• 1:01
  Speaker 1: of the things that we would see if we go
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  Speaker 1: to Toronto, and I want to start there is um
• 1:06
  Speaker 1: the diversity of the city of Toronto may not be
• 1:10
  Speaker 1: very well known to those outside of Canada. I wonder
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  Speaker 1: if you could just speak to that and how that
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  Speaker 1: helps the economy of the city. Well, one of the
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  Speaker 1: reasons we're here is because there's a lot of things
• 1:20
  Speaker 1: people don't know about Toronto. I think a lot of people,
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  Speaker 1: especially even our American friends, who come to visit in
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  Speaker 1: large numbers, when they get there, they say they didn't
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  Speaker 1: realize it was so big, and in fact it is
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  Speaker 1: bigger now than Chicago and one of the biggest cities
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  Speaker 1: in North America. But what's more interesting about that population
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  Speaker 1: is of it are people who were not born in
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  Speaker 1: the country, and so the city and the region has
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  Speaker 1: been built by immigrants, and today we still have a
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  Speaker 1: very open immigration policy. It distinguishes us from lots of
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  Speaker 1: countries that are looking more inward. And we've done things
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  Speaker 1: to help the economy, like to create a special UH
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  Speaker 1: Talent visa that says, if there's somebody really talented you
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  Speaker 1: want to bring in, especially in tech, that we can
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  Speaker 1: bring those people in and have that visa issued in
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  Speaker 1: two weeks so that we're you know, we're really trying
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  Speaker 1: to make sure those kind of smart people can be
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  Speaker 1: admitted enthusiastically to Canada because we need them. Marritory that
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  Speaker 1: was incredibly diplomatic, especially given the US and sort of
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  Speaker 1: the uproar over immigration policy here. I'm just wondering, given
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  Speaker 1: sort of the shift in immigration policy, at least on
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  Speaker 1: a rhetoric level in the US, have you seen the
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  Speaker 1: immigration numbers increased substantially to Toronto. Well, truthfully, the number
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  Speaker 1: of people interested in coming and the number of people
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  Speaker 1: coming have increased, and the number of people, for example,
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  Speaker 1: like foreign students applying to our universities have have shot
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  Speaker 1: up so dramatically like that since November in the last
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  Speaker 1: year and a half or two years. So those are big,
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  Speaker 1: big increases. Uh. You know, I can't say that we've
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  Speaker 1: seen actual numbers of people who have immigrated to the
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  Speaker 1: country from the US or from elsewhere, but we have
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  Speaker 1: anecdotal examples to Like yesterday at we had a bunch
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  Speaker 1: of tech companies here in New York and Canadian Base,
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  Speaker 1: and they were talking about people who had applied for
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  Speaker 1: visas here from other countries were having some difficulty and
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  Speaker 1: just shifted their gaze to Canada and came to Canada
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  Speaker 1: instead because it was faster, so marriatory. How concerned are
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  Speaker 1: you about the high apartment prices and housing prices in Toronto.
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  Speaker 1: Given this influx, is that present a headwind to growth.
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  Speaker 1: We are having to tackle as all big cities are,
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  Speaker 1: with the question of affordability of housing. But I can
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  Speaker 1: only say to you that when you talk about high prices,
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  Speaker 1: whether it's for um technology, technological talent, software engineers, AI
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  Speaker 1: people and so on, whether it's for rents in apartments
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  Speaker 1: or office rents, um, we are still in expensive relative
• 3:35
  Speaker 1: stay to New York. We were talking this morning about
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  Speaker 1: office space and and we were asking somebody in some
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  Speaker 1: really prime office space we were visiting how much they
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  Speaker 1: were paying, and they're saying seventy seventy five dollars a
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  Speaker 1: foot the same number in Toronto, and US dollars would
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  Speaker 1: be forty five dollars a foot. Wages, we have a
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  Speaker 1: study done to show that the wages are thirty percent
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  Speaker 1: lower for the same kind of talent. That's before you
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  Speaker 1: take the currency into account. So um, you know, Toronto
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  Speaker 1: is an expensive city relative too much smaller cities perhaps elsewhere,
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  Speaker 1: but it's not expensive relative to American cities say that
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  Speaker 1: are at the peak of the tech of the technology ecosystem,
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  Speaker 1: like New York City or Silicon Valley, and it's one
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  Speaker 1: of the advantages we have that we can say we
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  Speaker 1: have the talent and it actually is cheaper, and the
• 4:14
  Speaker 1: rent is cheaper, and the general cost of living, including
• 4:17
  Speaker 1: residential accommodation, is getting expensive and it's a challenge for
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  Speaker 1: the people who live there now. But but relative to
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  Speaker 1: some of these other cities were discussing, still not at
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  Speaker 1: the top by any means. We've been discussing taxes in
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  Speaker 1: the United States and one of the debates has to
• 4:32
  Speaker 1: do with the deductibility of mortgage interest. Doesn't exist in Canada. No,
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  Speaker 1: we don't have mortgage interest deductibility, never have. What we
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  Speaker 1: do have is a capital gains exemption on the sale
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  Speaker 1: of your principal residents. So it's it's kind of a
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  Speaker 1: trade off. It's kind of longer term gain for shorter
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  Speaker 1: term having to pay the tax on are having to
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  Speaker 1: use a non deductible funds to to fund your mortgage.
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  Speaker 1: So it's one of those things where there's a lot
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  Speaker 1: of trade offs. Again, I would say to you, overall,
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  Speaker 1: our personal coome tax rates are a bit higher, but
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  Speaker 1: they include healthcare. Our corporate tax rates are much lower,
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  Speaker 1: but they include healthcare. So when we were able to
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  Speaker 1: say so we're saying to Amazon, you know, when you
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  Speaker 1: come here. We didn't send them a check of any
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  Speaker 1: or any of our promise of a check for any
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  Speaker 1: kind of an incentive to them. We did say to them, however,
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  Speaker 1: you were going to save hundreds of millions of dollars
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  Speaker 1: hundreds of millions of dollars on your healthcare because you
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  Speaker 1: don't have to pay it separately. You will pay a
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  Speaker 1: lower rate of corporate income tax if you pay tax
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  Speaker 1: in Canada, and you will not have to pay for
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  Speaker 1: healthcare separately because it's included in UM. You know, the
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  Speaker 1: tax is paid by residents. So I think these things
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  Speaker 1: all kind of mix and match, But I think overall,
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  Speaker 1: I'm confident in being able to say it's a a
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  Speaker 1: jurisdiction where for businesses looking to invest, it's a lower
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  Speaker 1: tax jurisdiction, for individuals in some cases a bit higher.
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  Speaker 1: And the stuff on mortgage interest deductibility, I think trades
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  Speaker 1: off when you can sell your house for capital gains
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  Speaker 1: tax free, but you uh, you have to pay mortgage
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  Speaker 1: interest in non deductible dollars real quick. What percent chance
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  Speaker 1: do you think you have in getting the Amazon headquarters?
• 6:02
  Speaker 1: You know, it's like asking people ask me to grade
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  Speaker 1: myself in office, and I never do that. I don't
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  Speaker 1: kind of cartea exactly. I would that I think we
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  Speaker 1: have a formidable bid because we are talent rich, lower cost,
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  Speaker 1: a very livable city. And so it's going to depend
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  Speaker 1: a lot on the consideration that Amazon gives to whether
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  Speaker 1: they are prepared to locate outside of the United States.
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  Speaker 1: And uh, you know, we'll see. We're not you know,
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  Speaker 1: we're not popping any champagne corks yet. We're just putting
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  Speaker 1: our best bid forward and we'll see what happens. Mayor
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  Speaker 1: John Tory, thank you so much for joining us. Mayor
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  Speaker 1: John Tory of Toronto joining us here in our Bloomberg
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  Speaker 1: eleven three oh headquarters. This is Bloomberg. Well, we are
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  Speaker 1: broadcasting from the Burden Real Estate Industry Executive Forum. And
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  Speaker 1: one of the panelists on the panel that just can
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  Speaker 1: included with Kathleen McCarthy, senior Managing Director and global Chief
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  Speaker 1: Operating Officer for the Blackstone Real Estate Group, and she
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  Speaker 1: joins us. Now, Kathleen, your group overseas one hundred and
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  Speaker 1: eleven billion dollars of assets of real estate assets, and
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  Speaker 1: I'm wondering, Uh, you've expanded very quickly, and with such
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  Speaker 1: scale comes certain opportunities, but it also brings some challenges,
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  Speaker 1: and I want you to talk about what the challenges
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  Speaker 1: are that you've been facing as you've sort of expanded
• 7:29
  Speaker 1: this rapidly. Got it. Thank you, Lisa for having me
• 7:32
  Speaker 1: very excited to be here, and this was just an
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  Speaker 1: amazing panel. I would say we see really just benefits
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  Speaker 1: of the scale of our business and our glo global perspective.
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  Speaker 1: It allows us to have proprietary access to information to
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  Speaker 1: really remain I think, ahead of what other people can
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  Speaker 1: see in the marketplace, and allows us to be high
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  Speaker 1: conviction thematic investors globally. It's also been a great attractor
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  Speaker 1: for talent everywhere in the world. Can you speak a
• 7:58
  Speaker 1: little bit about your recent Well you did some of
• 8:01
  Speaker 1: them last year and some the acquisitions, but I want
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  Speaker 1: to start off with looking at this connection with e
• 8:05
  Speaker 1: commerce and everybody needs a warehouse in order to store
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  Speaker 1: all those wonderful brown boxes. And you've made some purchases
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  Speaker 1: I believe out in the West Coast in Irvine, for example.
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  Speaker 1: I wonder if you just tell us about that acquisition
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  Speaker 1: and then what that means in terms of your strategy. Sure,
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  Speaker 1: so e commerce is definitely impacting the way people shop.
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  Speaker 1: And since two thousand and ten, we've been the largest
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  Speaker 1: most active investor in logistic success. It's all around the world,
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  Speaker 1: something like four hundred million square feet over a hundred
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  Speaker 1: different transactions. This was just a very recent example. We
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  Speaker 1: see robust tenant demand like we've never seen before, unprecedented
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  Speaker 1: for logistics, and it's increasingly focused on that last mile
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  Speaker 1: or the urban locations so that consumers can get goods
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  Speaker 1: from retailers in a matter of hours, not days. I
• 8:57
  Speaker 1: just want to follow up, if I was to go
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  Speaker 1: into one of your logistics properties, Am I going to
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  Speaker 1: see more robots? Am I going to see more artificial
• 9:04
  Speaker 1: intelligence and technology at work inside those buildings? I think
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  Speaker 1: certainly the tenants and particularly the ones that have the
• 9:11
  Speaker 1: most capital and the most scale, like an Amazon or
• 9:14
  Speaker 1: in innovating and investing behind those ideas. But it really
• 9:17
  Speaker 1: is a combination of human capital as well as mechanical capital.
• 9:22
  Speaker 1: Where are you saying the biggest opportunities right now? We
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  Speaker 1: know that the biggest metropolitan areas have seen the bulk
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  Speaker 1: of the money kind of coming into the country from overseas.
• 9:32
  Speaker 1: UH do you think that it's overvalued in places like
• 9:34
  Speaker 1: San Francisco and New York at this point, and are
• 9:36
  Speaker 1: you moving to other places? Sure? So, I mentioned logistics
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  Speaker 1: as one of our most our highest conviction themes. I
• 9:44
  Speaker 1: think also innovation cities places where young, highly educated, creative
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  Speaker 1: and technology talent wants to live. So it is the
• 9:52
  Speaker 1: gateway markets markets like Seattle, West, Los Angeles, New York, Cambridge,
• 9:57
  Speaker 1: and outside of the US, places like Berlin or Stockholm,
• 10:01
  Speaker 1: Shortach in London, and Sydney in Asia. And we certainly,
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  Speaker 1: I think, are at a more mature point in the cycle.
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  Speaker 1: But we're really encouraged by the fact that fundamentals are
• 10:13
  Speaker 1: generally quick positive for real estate in most places. What
• 10:16
  Speaker 1: about rental properties. I know Blackstone was one of the
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  Speaker 1: biggest acquirers of home rental UH properties, and I know
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  Speaker 1: that there was some sort of right Peter Cooper Village. Yeah,
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  Speaker 1: I mean there was some there were some sales, And
• 10:30
  Speaker 1: I'm just wondering, are you at a sort of UH
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  Speaker 1: liquidation period or do you see that as sort of
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  Speaker 1: a long standing Sure. So, we are really bullished on
• 10:39
  Speaker 1: residential both rental housing in the form of single family
• 10:42
  Speaker 1: houses and rental housing and more traditional multi family and
• 10:45
  Speaker 1: as Pim noted, we are investors in Stytown. It applies
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  Speaker 1: in New York City as well as more broadly around
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  Speaker 1: the country. I think there are a lot of factors
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  Speaker 1: pushing people into rental housing and maybe remaining as renters longer.
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  Speaker 1: And so while you will see us sell assets, the
• 11:00
  Speaker 1: nature of our opportunistic capital to sell assets once our
• 11:03
  Speaker 1: fix it is done, we continue to have very high
• 11:08
  Speaker 1: conviction around residential investing. Saudi Arabia is in the news
• 11:12
  Speaker 1: for a variety of reasons. Back in May, it was
• 11:14
  Speaker 1: in the news because I believe you want a commitment
• 11:17
  Speaker 1: from the Kingdom of Saudi Arabia for what a twenty
• 11:19
  Speaker 1: billion dollar infrastructure investment fund? Can you give us any
• 11:24
  Speaker 1: details about that? Sure? So Blackstone is in a very
• 11:28
  Speaker 1: unique position because of our scale and our depth of
• 11:33
  Speaker 1: experience in the markets. And Saudi Arabia did make a
• 11:36
  Speaker 1: decade long, significant commitment to invest with us in infrastructure
• 11:41
  Speaker 1: and and can you tell us and I mean when
• 11:44
  Speaker 1: is this going to When are we going to see
• 11:45
  Speaker 1: maybe some deals or some specifics. Sure, I really can't
• 11:48
  Speaker 1: comment on that. UM one thing that has been sort
• 11:52
  Speaker 1: of a trend is should retail investors be able to
• 11:56
  Speaker 1: go into some of these real estate investments? Um, I
• 12:01
  Speaker 1: know the Blackstone has been trying to open up that opportunity.
• 12:04
  Speaker 1: How how should that be structured given the sort of
• 12:07
  Speaker 1: more permanent nature of real estate purchases? Sure so? Uh,
• 12:11
  Speaker 1: real estate I think presents a compelling investment opportunity for
• 12:15
  Speaker 1: many types of investors, and I think retail investors should
• 12:18
  Speaker 1: have access to that as well. When we're working with
• 12:22
  Speaker 1: retail investors, we're trying to just provide a product that
• 12:24
  Speaker 1: has the same institutional quality, transparency, and fee alignment that
• 12:28
  Speaker 1: we provide to institutional investors. What's your take on the
• 12:32
  Speaker 1: mall industry right now? We note the recent proposal by
• 12:36
  Speaker 1: Brookfield Property to acquire g g P General Growth Partners.
• 12:42
  Speaker 1: I think about a fifteen billion dollar attempt. Uh, you
• 12:45
  Speaker 1: think malls are too cheap? I think retail is certainly
• 12:50
  Speaker 1: under pressure. We talked about e commerce before. That's definitely
• 12:53
  Speaker 1: having an impact. And I can't comment on what g
• 12:56
  Speaker 1: GP is doing specifically. Uh, sorry, what what Brookfields do
• 13:00
  Speaker 1: specifically with g GP. We have been partners with with
• 13:03
  Speaker 1: Brookfield in g GP. In fact, Uh, they own a
• 13:06
  Speaker 1: significant portion of the company. I think it'll just be
• 13:08
  Speaker 1: interesting to see their vision for what to do with
• 13:10
  Speaker 1: the company as a private enterprise. All right, well, we're
• 13:12
  Speaker 1: gonna leave it there. I want to thank you very
• 13:14
  Speaker 1: much for being with us. Kathleen McCarthy is a senior
• 13:16
  Speaker 1: managing director and a global Chief operating Officer of the
• 13:20
  Speaker 1: Blackstone real Estate Group. Thank you very much for being
• 13:23
  Speaker 1: here and for your participation at the Burden Real Estate
• 13:27
  Speaker 1: Industry Executive Forum. We are broadcasting live here from Bloomberg
• 13:31
  Speaker 1: World Headquarters, and we are broadcasting at the Burden Seen
• 13:48
  Speaker 1: Real Estate Industry Executive Forum. And here with us we
• 13:52
  Speaker 1: have Seth Mo Laud, partner and chairman of Burden Real
• 13:55
  Speaker 1: Estate Services based in New York. Seth st thank you
• 13:58
  Speaker 1: so much for joining us. I want to talk taxes
• 14:01
  Speaker 1: with you. I want to talk about the GOP tax
• 14:04
  Speaker 1: plan and who stands to benefit and who stands to
• 14:07
  Speaker 1: lose in the real estate industry. UH. Com morning, Lisa.
• 14:12
  Speaker 1: Pleasure to be here. So uh yeah, obviously there's a
• 14:15
  Speaker 1: lot of UH talk out there the the UH. There's
• 14:18
  Speaker 1: been plans floated by both parties and the House and Senate.
• 14:23
  Speaker 1: The current plan as it exists would would really there's
• 14:28
  Speaker 1: certain key elements that are really going to hurt probably
• 14:31
  Speaker 1: the coastal states being New York, California, the high tax states.
• 14:36
  Speaker 1: The proposals include, amongst amongst other things, uh, the elimination
• 14:41
  Speaker 1: of the state income tax deductions, a limitation on mortgage
• 14:46
  Speaker 1: house uh, you know, mortgage interest, and those are really
• 14:49
  Speaker 1: going to affect the areas where housing costs are high
• 14:52
  Speaker 1: and state taxes are high. So there's a lot of
• 14:55
  Speaker 1: concern about the compression on probably the middle income and
• 14:59
  Speaker 1: up or middle income uh, you know population of the
• 15:04
  Speaker 1: coastal states. Uh. There's also a lot of proposals in
• 15:07
  Speaker 1: there about the tax rates themselves being reduced as well
• 15:12
  Speaker 1: as the you know, there's certain key things like, for example,
• 15:16
  Speaker 1: they're talking about limiting the the carried interest carried interest
• 15:20
  Speaker 1: treatment to uh where now it's capital gain. And they're
• 15:24
  Speaker 1: talking about making an ordinary income which is gonna dramatically
• 15:27
  Speaker 1: affect the real estate industry and other industries. UM. But
• 15:31
  Speaker 1: the current the current proposals now are really geared towards UH.
• 15:36
  Speaker 1: The people that are really going to feel it the
• 15:38
  Speaker 1: most are probably the people on the coasts and in
• 15:40
  Speaker 1: the high income and high tax states. New York, New Jersey, California.
• 15:44
  Speaker 1: That's what we're talking about right now. Primarily, let's talk
• 15:47
  Speaker 1: about the industry and the commercial real estate industry, because
• 15:50
  Speaker 1: the thirty percent UH deduction right this is the limit
• 15:54
  Speaker 1: the limit on interest expense deduction. You have any thoughts
• 15:59
  Speaker 1: on this, and do you know anything in terms of
• 16:02
  Speaker 1: where they're leaning in in the in the tax negotiations
• 16:06
  Speaker 1: right now they're talking about you talk about the mortgage
• 16:08
  Speaker 1: interest deduction right now that the limit right now is
• 16:11
  Speaker 1: on a million dollars of indebtedness and they're talking about
• 16:14
  Speaker 1: having that to five hundred thousand dollars of indebtedness, and
• 16:18
  Speaker 1: that is this kind of the sweet spot for a
• 16:21
  Speaker 1: lot of like I said, probably middle income and upper
• 16:24
  Speaker 1: middle income UH families. So that is going to have
• 16:28
  Speaker 1: a dramatic impact on the markets, UH the condo markets
• 16:33
  Speaker 1: here in New York. And when you say going to
• 16:35
  Speaker 1: have an effect, this means negative, negative, negative news deductions
• 16:41
  Speaker 1: and it's gonna make it less affordable to buy condos
• 16:45
  Speaker 1: and houses and other types of real estate that would
• 16:48
  Speaker 1: normally be more affordable. How about lower property depreciation? Okay,
• 16:52
  Speaker 1: moving that from what thirty nine years to twenty five
• 16:57
  Speaker 1: years I mean this is good. This should be good
• 16:59
  Speaker 1: for the commercial real estate all that that accelerates things.
• 17:01
  Speaker 1: There's a lot of rules that are very specific to
• 17:03
  Speaker 1: the real estate industry now regarding depreciation where it's been accelerated. Uh.
• 17:09
  Speaker 1: Any acceleration and depreciation is a good thing for the
• 17:12
  Speaker 1: real estate industry and makes it easier to uh pencil
• 17:17
  Speaker 1: out deals and make sure that they're you know, the
• 17:19
  Speaker 1: the returns are working there properly. UH. So that that's
• 17:23
  Speaker 1: a good thing. Um, I don't know that that's going
• 17:26
  Speaker 1: to have a dramatic impact the There were regulations passed
• 17:30
  Speaker 1: previously whereby the deductions were much more aggressive than they
• 17:34
  Speaker 1: were historically. Anyway, what would you say is that to
• 17:37
  Speaker 1: people who say that the tax bills is currently crafted
• 17:41
  Speaker 1: seem to really benefit commercial real estate, both because of
• 17:45
  Speaker 1: the depreciation and also because there is a provision that
• 17:49
  Speaker 1: would allow property owners to avoid being taxed on profits
• 17:51
  Speaker 1: from property sales if they reinvest in other real estate,
• 17:54
  Speaker 1: while penalizing residential homeowners. Can you weigh in on that, well,
• 17:59
  Speaker 1: the I think you're referring to the like kind exchange
• 18:03
  Speaker 1: rules which are have been in place for many, many years,
• 18:06
  Speaker 1: and that fuels a lot of the activity at in
• 18:11
  Speaker 1: the in the commercial real estate market. So there is
• 18:14
  Speaker 1: some talk about repealing that. I don't know how how
• 18:17
  Speaker 1: much traction that really has in the market, that would
• 18:21
  Speaker 1: really dramatically impact the commercial real estate market in a
• 18:24
  Speaker 1: negative way, But they're not talking about that right now. Now, Well,
• 18:27
  Speaker 1: there is some talk about it. It's not actually in
• 18:29
  Speaker 1: the proposal right now, but there there is, there is
• 18:32
  Speaker 1: talk about it. Um, you know, on the on the
• 18:36
  Speaker 1: home market, you still have your you know, exemptions for
• 18:41
  Speaker 1: principal residence sales. Um, there's talk about limiting that as well,
• 18:46
  Speaker 1: so that would hurt um, you know, the residential markets.
• 18:49
  Speaker 1: But um, does that make sense to you? I mean,
• 18:52
  Speaker 1: I mean, if they want to get economic growth, how
• 18:54
  Speaker 1: does that square with the idea of more jobs, more
• 18:59
  Speaker 1: h aster economic growth, stronger economy. How does that reconcile?
• 19:04
  Speaker 1: It doesn't make sense. Uh, the the residential multi family
• 19:09
  Speaker 1: development is a key driver of the economies of New
• 19:13
  Speaker 1: York and many other major urban centers in the US,
• 19:17
  Speaker 1: and cretailing that through tax legislation it doesn't really make
• 19:22
  Speaker 1: much sense. So no, it doesn't make much sense. However,
• 19:26
  Speaker 1: you know, uh, they need to you know, generate revenues
• 19:30
  Speaker 1: for other things that are that they're looking to pay for.
• 19:33
  Speaker 1: So something has to give. Uh. Listen, we don't feel
• 19:37
  Speaker 1: that that's a place where it should be, but there
• 19:41
  Speaker 1: they have to generate revenues in some way. Well done. Alright, well,
• 19:45
  Speaker 1: thanks very much for being with us. Seth Malady is
• 19:47
  Speaker 1: the partner and chairman of Burden Real Estate Services. UH.
• 19:52
  Speaker 1: We are thankful for you hosting us here at the
• 19:55
  Speaker 1: Burden Real Estate Industry Executive Forum. Our pleasure. Thanks pimp Elesa,
• 20:00
  Speaker 1: thank you, thanks very much. We are broadcasting from Bloomberg
• 20:16
  Speaker 1: Headquarters at the Burden Real Estate Industry Executive Forum, and
• 20:21
  Speaker 1: we are very lucky to have with us. Norman Sterner,
• 20:24
  Speaker 1: founding principal and chief executive officer of MHP real Estate Services. UH. Norman,
• 20:30
  Speaker 1: thank you so much for joining us. So when we
• 20:32
  Speaker 1: talk about New York City commercial real estate right now,
• 20:36
  Speaker 1: there are two things that come to mind. One empty
• 20:39
  Speaker 1: storefronts as a lot of retailers struggle. And two Hudson
• 20:43
  Speaker 1: Yards and what that will do to midtown rent properties.
• 20:48
  Speaker 1: I want to start with a second. How concerned are
• 20:51
  Speaker 1: you about Hudson Yards the development there and how much
• 20:53
  Speaker 1: will lower commercial real estate values across New York. I'm
• 20:56
  Speaker 1: not only not concerned, I'm a fan, in a favorite
• 21:01
  Speaker 1: of what they're doing at Hudson Yards. Um, we have
• 21:05
  Speaker 1: four hundred million square feet. If we do not improve
• 21:10
  Speaker 1: three to four percent per year to modern, state of
• 21:14
  Speaker 1: the art office properties, that this city will simply dry up,
• 21:19
  Speaker 1: as most of the other cities have. So. But but
• 21:22
  Speaker 1: what happens to the rest of the existing properties that
• 21:25
  Speaker 1: are modern. You're you're making an assumption that the occupancy
• 21:29
  Speaker 1: of Hudson Yards will become only the movement from existing space.
• 21:36
  Speaker 1: We increase occupancy by people moving into the city. When
• 21:42
  Speaker 1: you look at Amazon right now, they're not moving out
• 21:45
  Speaker 1: of anywhere to move into eight million new feet. They're
• 21:50
  Speaker 1: looking for new feet. When you see companies moving from
• 21:58
  Speaker 1: one place to the other. UM, last month, we signed
• 22:04
  Speaker 1: a two hundred and seventies six thousand square foot lease
• 22:09
  Speaker 1: for the City of New York. Um, it's not necessarily
• 22:12
  Speaker 1: moving out of one place to the other, but rather
• 22:15
  Speaker 1: they need more space. Um. We replaced six smaller, older
• 22:24
  Speaker 1: properties with one brand new, much more efficient property. Uh.
• 22:31
  Speaker 1: But it's not only Hudson Yards. It's uh, it's Brookfield,
• 22:35
  Speaker 1: it's related. It's um L n L. It's sl green
• 22:40
  Speaker 1: building one point six million square feet on Grand Central. UM.
• 22:48
  Speaker 1: So no, I I'm i'm I'm a proponent of taking
• 22:54
  Speaker 1: out some part of the old inventory and building. No.
• 23:00
  Speaker 1: The east side reasoning is exactly why that's being done. Uh.
• 23:05
  Speaker 1: Most of the smaller older buildings or fifty to a
• 23:10
  Speaker 1: hundred years old, UM, it's hard to convert them to
• 23:15
  Speaker 1: modern norfics. Most of them are being converted when they're
• 23:19
  Speaker 1: not being knocked down into residential or hotels. UM. No,
• 23:23
  Speaker 1: I I don't think it will hurt. Also, it's a
• 23:25
  Speaker 1: different marketplace. Hudson Yards to build today is somewhere between
• 23:33
  Speaker 1: a thousand and twelve hundred dollars of square foot UM.
• 23:38
  Speaker 1: There's plenty of competition uh to to that marketplace. UH
• 23:44
  Speaker 1: still in New York. So I'm a proponent. Could you
• 23:47
  Speaker 1: share with us just a little bit of your own history,
• 23:50
  Speaker 1: because I understand that you did not start in the
• 23:53
  Speaker 1: real estate business. You started with a seat on the
• 23:56
  Speaker 1: on an exchange, not the New York Stock Exchange, in
• 24:00
  Speaker 1: the mutual fund brokerage industry. But also you ended up
• 24:03
  Speaker 1: I believe, owning the building of the New York Stock
• 24:07
  Speaker 1: Exchange on nine eleven. So you've kind of been through
• 24:10
  Speaker 1: it all, haven't you. You have done your homework. I
• 24:14
  Speaker 1: started out as an accountant. UM. I was very young.
• 24:18
  Speaker 1: I got into college I was only sixteen. So became
• 24:23
  Speaker 1: an accountant because that was one of the things to do.
• 24:27
  Speaker 1: And it was by accident that we got into the
• 24:29
  Speaker 1: real estate business. UM. Somebody walked into our office in
• 24:33
  Speaker 1: nineteen seventy when the city was on its back and
• 24:39
  Speaker 1: contemplating bankruptcy, UM, and asked if we would take him
• 24:44
  Speaker 1: out of a contract on West fifty seventh Street. UM,
• 24:48
  Speaker 1: talking about thirty one apartments for seventy dollars. That's not
• 24:53
  Speaker 1: seventy each, that's seventy thousand dollars for thirty one apartments. UM.
• 24:58
  Speaker 1: So the city changed when at Saint Goodness for Mayor
• 25:03
  Speaker 1: Coach and big Mac. Um. But we've been in the
• 25:10
  Speaker 1: office building business now for forty eight years, and you're right.
• 25:14
  Speaker 1: On nine eleven, we owned thirty Broad Street, which was
• 25:19
  Speaker 1: the home of the adjunct to the new Kak Exchange. UM.
• 25:25
  Speaker 1: Some hard times, some difficult times, some really stupid times.
• 25:33
  Speaker 1: We got a call, Uh, okay, we got a call
• 25:37
  Speaker 1: whether if the Empire State Building fell sideways, it would
• 25:43
  Speaker 1: hit our property at fifty eight Streets. You know glad
• 25:48
  Speaker 1: it didn't happen, and we look forward to having you
• 25:50
  Speaker 1: back again because we want to learn much more from you.
• 25:53
  Speaker 1: We do appreciate your time. Norman Stirner is the president
• 25:56
  Speaker 1: and the chief executive of Murray Hill Property Really State Services.
• 26:00
  Speaker 1: Thank you very much, sir, and great to have you
• 26:03
  Speaker 1: with us. Looking forward to having you again in the future.
• 26:05
  Speaker 1: Thank you for having me. Thanks for listening to the
• 26:09
  Speaker 1: Bloomberg P and L podcast. You can subscribe and listen
• 26:12
  Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform
• 26:16
  Speaker 1: you prefer. I'm Pim Fox. I'm on Twitter at pim Fox.
• 26:20
  Speaker 1: I'm on Twitter at Lisa Abramo wits one. Before the podcast,
• 26:24
  Speaker 1: you can always catch us worldwide on Bloomberg Radio.