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How E-Commerce Is Changing Commercial Real Estate · 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
• 0:15
  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
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. We
• 0:31
  Speaker 1: are broadcasting live from the Eisner Amper Global Leaders in
• 0:34
  Speaker 1: Real Estate Summit. It's in partnership with a Global form
• 0:39
  Speaker 1: and we are in the Latti New York Palace in
• 0:42
  Speaker 1: Midtown Manhattan. And who knows more about real estate in
• 0:46
  Speaker 1: New York and really around the world. I don't know
• 0:49
  Speaker 1: who except Larry Silverstein. He is the chairman of Silverstein
• 0:54
  Speaker 1: Properties and he joins us now. So seeing thanks very
• 0:57
  Speaker 1: much for being with us. You know, I was looking
• 1:01
  Speaker 1: at the background. I'm wondering if you know, when you
• 1:03
  Speaker 1: first started out in real estate from Brooklyn with your father,
• 1:07
  Speaker 1: did you never imagine that you'd be building four seasons
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  Speaker 1: properties and the World Trade Center and all these buildings
• 1:14
  Speaker 1: around the world. Did you ever imagine that this is
• 1:16
  Speaker 1: what real estate would become? Never in a million years,
• 1:20
  Speaker 1: it was beyond beyond, beyond visualization. What brought you into
• 1:25
  Speaker 1: the industry, what made what attracted you to it? Well,
• 1:29
  Speaker 1: I saw a I saw something that that seemed exciting,
• 1:33
  Speaker 1: and at the early stages I functioned as a real
• 1:39
  Speaker 1: estate broker. But it became obvious to me that the
• 1:43
  Speaker 1: money wasn't in brokerage at that time, it was much
• 1:46
  Speaker 1: more in ownership. And so with time I said, be
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  Speaker 1: decided somehow we had again moved moved towards owning real
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  Speaker 1: estate and ultimately developing real estate. And that's where we
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  Speaker 1: are today, Mr Self Furstein. I want to talk about
• 1:59
  Speaker 1: the World Trade Center site. I know that you had
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  Speaker 1: a lease in the World Trade Towers ninety year lease
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  Speaker 1: right ahead of September eleventh, and then after that you've
• 2:08
  Speaker 1: devoted yourself to really rebuilding the site. Um, and the
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  Speaker 1: tower that now has become really headquarters for media, for
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  Speaker 1: modern media in some ways. Um, where is that? How
• 2:19
  Speaker 1: how well occupied is that? And um? What do you
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  Speaker 1: envision for that whole region going forward? Well, first of all,
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  Speaker 1: we've least about six six plus million feet of space
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  Speaker 1: in the buildings down there, and there's more to go. Um.
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  Speaker 1: And certainly media is a very significant occupant of space
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  Speaker 1: in that part of the world. Media technology the tammy,
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  Speaker 1: the tammy areas um and so it's a finance is
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  Speaker 1: still there, but is not the dominant factor in Lower
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  Speaker 1: Manhattan today as it was not very long ago. I
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  Speaker 1: don't think of media though, is having the same degree
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  Speaker 1: of money as finance. Uh. We see media companies going
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  Speaker 1: at a business left and right, So I have to wonder, uh,
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  Speaker 1: you know, what the sustainability of this trend is, and uh,
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  Speaker 1: what your optimism is that there could be more businesses
• 3:12
  Speaker 1: that come either to New York, saying Amazon coming to
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  Speaker 1: the tower, which I'm sure you would be excited about,
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  Speaker 1: or others. Given the high cost and uh, some of
• 3:22
  Speaker 1: the challenges to the industry. You know, the high cost
• 3:25
  Speaker 1: is certainly there. But one of the things that you
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  Speaker 1: can do when you're building new buildings is building too
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  Speaker 1: those buildings the latest in technology and provide for tremendous
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  Speaker 1: dentification of real estate, so you could put more bodies,
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  Speaker 1: more people into the same square footage that then existed
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  Speaker 1: years ago. And so the the economics of new construction,
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  Speaker 1: while it may sound more expensive, is actually becoming much
• 3:52
  Speaker 1: more efficient and less expensive for square foot of occupied space.
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  Speaker 1: What's the biggest mistake that people who want to get
• 3:59
  Speaker 1: into real estate make. I think they consistently underestimate the
• 4:06
  Speaker 1: amount of capital required to do more money than you
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  Speaker 1: think invariable. That like a story for life though, well
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  Speaker 1: certainly children, right indeed, But you know, one of the
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  Speaker 1: thing I wanted to mention is the negotiating prowers because
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  Speaker 1: you're you were not the you were not the selected
• 4:24
  Speaker 1: as the person to take on World Trade Center, Right,
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  Speaker 1: that was correct? How did that happen? Well, the winning
• 4:32
  Speaker 1: bidder UH was a public company and they ran into
• 4:36
  Speaker 1: all kinds of problems when it came to negotiating at
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  Speaker 1: lease with the Port authority. Port authority asked to do
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  Speaker 1: certain things, which is a public company that had difficulty doing. UH,
• 4:46
  Speaker 1: as a private entrepreneur, had no difficulty with at all,
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  Speaker 1: and so it just became a question of time until
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  Speaker 1: they realized it was not going to work. They dropped out,
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  Speaker 1: and then we came along and closed it. So right
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  Speaker 1: now we're broadcasting from midtown, but I know they you
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  Speaker 1: yourself are moving from midtown UH to downtown, and that
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  Speaker 1: makes me wonder, especially as I pass empty storefronts, do
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  Speaker 1: you think that the shot that that this sort of
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  Speaker 1: tide has shifted from midtown and that downtown will see
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  Speaker 1: an even bigger resurgence. You know, we're we're in an
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  Speaker 1: era where um e commerce is playing an increasingly important role,
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  Speaker 1: and so people are buying more today online than they
• 5:27
  Speaker 1: have had before. UM. I think it's I think what
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  Speaker 1: you're gonna see is a is a diminution in the
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  Speaker 1: number of branch stores UM than we've had in the past. UM.
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  Speaker 1: And so retail will adjust um to this reality just
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  Speaker 1: as they've always adjusted in the past. They're going through
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  Speaker 1: some more difficult times now they'll figure it out. Well.
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  Speaker 1: But what does that mean for all the commercial real estate?
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  Speaker 1: What does that mean for all the storefronts that have
• 5:56
  Speaker 1: been empty? I think with time rents and some of
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  Speaker 1: those shops will come down. Some of those locations will
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  Speaker 1: come down. I think that the locations might find themselves
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  Speaker 1: being used differently. We see food today uh far far
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  Speaker 1: greater dependability on a need for food, and so you
• 6:15
  Speaker 1: see you see restaurants popping up all over the place.
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  Speaker 1: And the truth of matter is younger people, for some reason,
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  Speaker 1: they don't like to cook any more. They like to
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  Speaker 1: eat it will give you a few reasons. And so
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  Speaker 1: uh you find we find restaurants uh increasing in frequency
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  Speaker 1: and presence, uh, and so many cases those shops will
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  Speaker 1: will be replaced by food of one type or another,
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  Speaker 1: and so fast food lots, so fast food, so forth,
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  Speaker 1: different types of foods. It's a it's a fascination. You'll
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  Speaker 1: have that uptown as well as downtown. They'll certainly seeing
• 6:46
  Speaker 1: it downtown. There's no question of that. Based on what
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  Speaker 1: you know or have heard about the President's efforts for
• 6:52
  Speaker 1: a tax reform, what can you tell us about your
• 6:56
  Speaker 1: views on tax reform and is it necessary? And what
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  Speaker 1: would it do if indeed we do get some kind
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  Speaker 1: of tax reform? Well, Uh, it's it's totally premature uh
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  Speaker 1: to be able to opine on the ramifications of this thing,
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  Speaker 1: because you don't know what state, what status it's going
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  Speaker 1: to have. Uh. You're needing far more definition of a
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  Speaker 1: most specificity uh than you can't than we have today
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  Speaker 1: to be able to give you a concrete answer to
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  Speaker 1: that question. So you don't you don't even pay attention
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  Speaker 1: to the noise. It's there's a lot of noise at
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  Speaker 1: this point. Uh. It will become more more less symbolic
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  Speaker 1: and more meaningful as the days go forward real quickly.
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  Speaker 1: I'm wondering, from a foreign investment standpoint, how concerned are
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  Speaker 1: you about curbs on China money leaving the country and
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  Speaker 1: what that would do to us real estate. Well, there's
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  Speaker 1: certainly a diminution on the amount of money that can
• 7:48
  Speaker 1: come out of China into America. But at the same time,
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  Speaker 1: there's such vast amounts of wealth has been created around
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  Speaker 1: the world, So much of that wealth is coming to
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  Speaker 1: America as a safe haven. And so the first place
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  Speaker 1: finds itself is usually New York and then it starts
• 8:06
  Speaker 1: fanning out to a Jamaica urban centers around the country.
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  Speaker 1: So I think we're gonna do just find here. Larry Silverstein,
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  Speaker 1: thank you so much for joining us. Larry Silverstein's chairman
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  Speaker 1: of Silverstein Properties, incorporated in New York City, and he
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  Speaker 1: is a lion of the real estate industry, certainly in
• 8:23
  Speaker 1: New York as well as around the world. I want
• 8:36
  Speaker 1: to turn our attention to uh real estate, in particular
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  Speaker 1: the security around that real estate in a place like
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  Speaker 1: New York City. And here to join us is Governor
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  Speaker 1: David Patterson, the former governor of New York. So I'd
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  Speaker 1: love to to get your sense on the cost of
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  Speaker 1: some of these anti terrorism measures that are being increasingly
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  Speaker 1: taken in New York City and from your perspective, whether
• 8:58
  Speaker 1: they have been uh ashiant to adequately protect us. Well,
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  Speaker 1: we were just talking about that in a session and
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  Speaker 1: my colleague Jeff Murdler, who was one of my appointees
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  Speaker 1: to the Port Authority, talked about the fact that the
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  Speaker 1: new one World Trade Center, the first seven floors don't
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  Speaker 1: have any people on it. They're concentric layers of concrete,
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  Speaker 1: and that um the reinforcements dwarf what existed on Towers
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  Speaker 1: one and two at the World Trade Center uh years ago.
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  Speaker 1: These are massive amounts of money and extra billion dollars
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  Speaker 1: was spent just on security alone at the World Trade
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  Speaker 1: Center and is now being replicated uh at you know
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  Speaker 1: other edifices that are being developed around the city. Can
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  Speaker 1: I just play Devil's Advocate for for just a moment,
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  Speaker 1: because all of this security, while at the macro level,
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  Speaker 1: we understand that it may be necessary, but it is
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  Speaker 1: in a sense non productive spending. In other words, it's
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  Speaker 1: concrete as you just describe, it's many layers of security
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  Speaker 1: at the same time that we have municipalities going bust.
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  Speaker 1: So is there a contrast between what we are securing,
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  Speaker 1: which seems to be deteriorating in some cases, and the
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  Speaker 1: amount of money that is being spent on security services. Uh,
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  Speaker 1: that is a brilliant question. It's a sacrifice in many
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  Speaker 1: respects what we're finding. Let's think about it. Two years
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  Speaker 1: ago in France there was an attack on a restaurant,
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  Speaker 1: and then, uh, one month after that, in December of
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  Speaker 1: twenty fifteen, there was an attack on a holiday party
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  Speaker 1: that was actually in a in a you know, regular
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  Speaker 1: office building, So terrorists could read a lot of havoc,
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  Speaker 1: but not even going near the World trades. And they
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  Speaker 1: can do it in the subway system. There's no way
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  Speaker 1: we could secure seven miles of track in the New
• 11:00
  Speaker 1: York City subway system. So your point is very well taken.
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  Speaker 1: But I guess psychologically, if there was another attack on
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  Speaker 1: one of the major buildings, the Empire State Building or
• 11:12
  Speaker 1: Madison Square Garden, on one of these places, the person
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  Speaker 1: everybody would say is why didn't someone do something about it?
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  Speaker 1: Governor Patterson, I wonder if you could enlighten us about
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  Speaker 1: whether it's underappreciated. How many potential threats have been thwarted
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  Speaker 1: to New York City and how many threats you're aware
• 11:29
  Speaker 1: of that were imminent that didn't happen. I'm aware of
• 11:33
  Speaker 1: about of UH for every one UH situation had happened. Friends,
• 11:40
  Speaker 1: when I was governor, there was a bombing um on Street. UH.
• 11:45
  Speaker 1: It didn't it wasn't effective. But what had occurred. But
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  Speaker 1: I told the group this morning that I was told
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  Speaker 1: there would be an attack on the New York subway
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  Speaker 1: system during the Thanksgiving holidays in two thousand and eight.
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  Speaker 1: And you know what. My staff came in my office
• 12:02
  Speaker 1: today before Thanksgiving and they were all looking down, they
• 12:04
  Speaker 1: were glum. I thought, oh my god, we've got another
• 12:07
  Speaker 1: September eleven situation. And it turned out they wanted to
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  Speaker 1: tell me about the attack in Mumbai when they blew
• 12:14
  Speaker 1: up the hotel and in India, and um, it was
• 12:19
  Speaker 1: a horrible situation, terrible tragedy. We sent supplies from New
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  Speaker 1: York State. I felt guilty of others, but I was
• 12:26
  Speaker 1: relieved that New York had been spared. They are all
• 12:30
  Speaker 1: types of threats that we never know about. We have
• 12:33
  Speaker 1: to thank our New York City Police Department, the state
• 12:35
  Speaker 1: police in our national government for their successes. Can you
• 12:39
  Speaker 1: just speak a little bit about the threat the fiscal
• 12:42
  Speaker 1: threat to states and municipalities. We've got a potential bankruptcy
• 12:46
  Speaker 1: right now at Hartford, Connecticut. Yeah, it's overwhelming. UM. There
• 12:52
  Speaker 1: was the little uh city Pritchard, Alabama. There was the
• 13:00
  Speaker 1: municipality in near Orange County in California. UM, we are going, uh,
• 13:06
  Speaker 1: We're uh. Governments are spending more and then they had
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  Speaker 1: to because of all types of myriad problems that exist
• 13:16
  Speaker 1: now that then existed before. There's no doubt about that.
• 13:20
  Speaker 1: And we're going hopelessly back into debt and I hope
• 13:22
  Speaker 1: that's not another prelude uh to a government crisis like
• 13:26
  Speaker 1: we sew in two thousand and eight. Do you think
• 13:29
  Speaker 1: that's possible? I mean, from leaving out finance, I think
• 13:35
  Speaker 1: just from a government perspective, the amount of debt that's
• 13:40
  Speaker 1: being run up by cities and states is incredible. Right
• 13:43
  Speaker 1: here in in in New York. At one time, about
• 13:46
  Speaker 1: ten years ago, the m T A was the fifth
• 13:49
  Speaker 1: largest debt or in the country. California was number one,
• 13:53
  Speaker 1: New York State, New York City with two and three,
• 13:55
  Speaker 1: Massachusetts number four and then the m t A. It's
• 13:58
  Speaker 1: as if they are a state, and so the point
• 14:00
  Speaker 1: is that, um um, we don't manage money right the
• 14:04
  Speaker 1: way we should. Well, I want to thank you for
• 14:06
  Speaker 1: your service to the state and to the country. Former
• 14:08
  Speaker 1: Governor of New York David Patterson joining us here at
• 14:12
  Speaker 1: the Global leaders in Real Estate Summit for Eisener Emper
• 14:15
  Speaker 1: and partnership with I Global Form. You're listening to Bloomberg.
• 14:31
  Speaker 1: We are broadcasting live from the Eisener Emper Global leaders
• 14:34
  Speaker 1: in Real Estate Summit. It's in partnership with I A
• 14:37
  Speaker 1: Global Forum, and we're broadcasting from the New York Palace
• 14:40
  Speaker 1: Hotel in Midtown Manhattan. Joining us now is really our
• 14:44
  Speaker 1: host for the whole morning. I want to appreciate it.
• 14:47
  Speaker 1: Thank you very much, Charlie Weinstein. He is the chief
• 14:50
  Speaker 1: executive of Eisener Emperor. Thank you for having us, Thank
• 14:53
  Speaker 1: you for having thank you for covering us this morning.
• 14:55
  Speaker 1: And good morning Lace and him. Great to be great
• 14:58
  Speaker 1: to be be here. You know. One of the time
• 15:00
  Speaker 1: I wonder if we could just jump right in. I
• 15:01
  Speaker 1: want to understand a little bit more about the Center
• 15:03
  Speaker 1: for Family Business Excellence, because I think that many people
• 15:07
  Speaker 1: who either own companies or are equity holders in either
• 15:11
  Speaker 1: private companies or in real estate deals. This is something
• 15:15
  Speaker 1: that you're trying to build for them. Center for Family
• 15:18
  Speaker 1: Business Excellence is um a new initiative that we've started
• 15:23
  Speaker 1: at the firm. Lisa Stewart is the executive and our
• 15:27
  Speaker 1: firm who's responsible for family uh, family businesses, and family business.
• 15:32
  Speaker 1: Center for Family Business Excellence really has its focus on
• 15:37
  Speaker 1: the challenges that family owned businesses and privately held companies
• 15:42
  Speaker 1: have on succession, planning and transition, and Lisa has been
• 15:47
  Speaker 1: doing this for twenty years. We're very excited to be
• 15:50
  Speaker 1: able to bring this initiative to our clients, and especially
• 15:53
  Speaker 1: in the real estate industry where family owned real estate
• 15:57
  Speaker 1: provides a challenge for leadership trains issue. You know, as
• 16:01
  Speaker 1: we were talking before this segment, one thing that struck
• 16:04
  Speaker 1: me was that the main topic of the day is
• 16:07
  Speaker 1: somewhat different than I thought it would be. I thought
• 16:08
  Speaker 1: it would be about taxes, frankly because of the tax
• 16:11
  Speaker 1: plan that was released by President Trump, but it sounds
• 16:13
  Speaker 1: like that's not the that's not the case. In fact,
• 16:15
  Speaker 1: it's actually the technological revolution that's kind of underpinning the
• 16:19
  Speaker 1: real estate market right now? Can you give us a
• 16:21
  Speaker 1: sense of what that is? Absolutely? And so it's very
• 16:24
  Speaker 1: interesting because we are a leading accounting and advisory firm,
• 16:30
  Speaker 1: but even eisener Amper has morphed into a technology focused
• 16:34
  Speaker 1: term and that's impacting real estate in so many ways.
• 16:38
  Speaker 1: And so if you think one way in particular would
• 16:41
  Speaker 1: be blockchain. And so what's coming in blockchain is going
• 16:44
  Speaker 1: to have a tremendous impact on title and ownership, mortgage recording, um,
• 16:51
  Speaker 1: all of these things that perhaps were impacted in the
• 16:55
  Speaker 1: meltdown in two thousand and eight, those are going to
• 16:58
  Speaker 1: be impacted in a big way by blockchains. So when
• 17:02
  Speaker 1: you say impacted, does this mean that there's going to
• 17:05
  Speaker 1: be more profits or sort of a fewer costs attached
• 17:09
  Speaker 1: to purchasing a home with a mortgage or does that
• 17:13
  Speaker 1: mean that it's just going other places? I mean, what's
• 17:16
  Speaker 1: the significance of this for buyers of real estate? To me,
• 17:19
  Speaker 1: the significance is transparency. And when you have transparency, you
• 17:23
  Speaker 1: have more effective and efficient markets, and we will see
• 17:28
  Speaker 1: the lowering of risk and we will see more investment
• 17:31
  Speaker 1: dollars come into this sector as risk gets lowered. All right, now,
• 17:36
  Speaker 1: I know you wanted to move away from taxes, but
• 17:38
  Speaker 1: I'm sorry, I'm just gonna have to focus you there
• 17:40
  Speaker 1: because I know, for example, that you are one of
• 17:42
  Speaker 1: the attendees at the White House at a Business Council
• 17:46
  Speaker 1: meeting with President Donald Trump, and of course taxes is
• 17:49
  Speaker 1: in the headlines right now. What if you could speak
• 17:52
  Speaker 1: about this idea of succession planning and the estate tax
• 17:56
  Speaker 1: for businesses and then maybe just segue if you can
• 17:59
  Speaker 1: into the whole then thirty one exchange uh business, because
• 18:03
  Speaker 1: that may be on the chopping block at least that's
• 18:05
  Speaker 1: according to some people in Washington. Well, so a state
• 18:09
  Speaker 1: tax if and there are very few details out yet
• 18:13
  Speaker 1: in terms of tax reform and what impact it's going
• 18:17
  Speaker 1: to have, Uh, the state tax will go away, and
• 18:21
  Speaker 1: so that will change, um if if the proposals are
• 18:26
  Speaker 1: filled in the way that that they're spoken about now,
• 18:30
  Speaker 1: a state tax will go away. That will have a
• 18:32
  Speaker 1: significant significant impact on succession planning for families especially, And
• 18:39
  Speaker 1: so we're looking forward to more details coming out and
• 18:42
  Speaker 1: hopefully we will see some changes in the estate tax.
• 18:47
  Speaker 1: Um In terms of specifics, ten thirty one exchanges limitations
• 18:52
  Speaker 1: on business interest deductions, all of these things are going
• 18:56
  Speaker 1: to have a major impact. It's a little bit uncertain
• 19:01
  Speaker 1: at this point if they're actually going to go through.
• 19:03
  Speaker 1: So let's here, what's your expectation. You look skeptical. Um,
• 19:08
  Speaker 1: I believe that will have tax reform, but uh, interest
• 19:13
  Speaker 1: groups are lobbying already. I think the plan is to
• 19:17
  Speaker 1: keep details light until the proposal is ready to be
• 19:20
  Speaker 1: voted on interest groups so hard at work. Well, I'm
• 19:23
  Speaker 1: wondering from the mortgage interest deduction standpoint, whether you think
• 19:28
  Speaker 1: that could potentially be on the chopping block. Certainly sounds
• 19:33
  Speaker 1: as though they're going to keep it for individuals, but
• 19:36
  Speaker 1: business interest deductions sound like they're going to be limited.
• 19:42
  Speaker 1: And if that's the case, that will have an impact
• 19:44
  Speaker 1: on corporate real estate and real estate investment. In other words,
• 19:47
  Speaker 1: commercial property values could deteriorate pretty rapidly. Absolutely. Is there
• 19:52
  Speaker 1: a misnomer about the industry that people do deals for
• 19:57
  Speaker 1: tax reasons? I mean, is taxes a secondary issue or
• 20:01
  Speaker 1: the primary? I'd like to think tax planning is your friend,
• 20:07
  Speaker 1: and so it's a component of every aspect of deal
• 20:11
  Speaker 1: making in real estate, and savvy real estate investors take
• 20:16
  Speaker 1: advantage of the opportunities in the tax code as it
• 20:19
  Speaker 1: stands today. UM, it'll be interesting to see with tax reform,
• 20:23
  Speaker 1: if we have tax reform, what those opportunities will be
• 20:27
  Speaker 1: going forward. That's our business. Charlie Weinstein, thank you so
• 20:30
  Speaker 1: much for joining us and for having us here today.
• 20:33
  Speaker 1: Charlie Weinstein's chief executive officer of Eisner Amper, which is
• 20:36
  Speaker 1: based in New York and facing a pretty rapidly changing
• 20:40
  Speaker 1: landscape for at least the underbelly of the real estate industry.
• 20:43
  Speaker 1: As so many industries are facing disruption from technological advances.
• 21:00
  Speaker 1: The bond market is experiencing a bit of a sell off,
• 21:02
  Speaker 1: at least the US government bond market. You are seeing, uh,
• 21:06
  Speaker 1: some of the risk your markets rally a little bit.
• 21:08
  Speaker 1: I want to bring in Mark Branch, chief strategist at
• 21:10
  Speaker 1: Hilltop Securities in Bloomberg Profit for our Bloomberg view site
• 21:15
  Speaker 1: up Mark, thank you so much for joining us, and
• 21:16
  Speaker 1: I want to start with should we care about this
• 21:19
  Speaker 1: selloff in the bond market or will this just be
• 21:22
  Speaker 1: a buying opportunity like all of the other small blips
• 21:25
  Speaker 1: upward in bond yields. I think it's a buying opportunity. Lisa.
• 21:30
  Speaker 1: The technically the lines in the sand or to sixteen
• 21:35
  Speaker 1: and two thirty two were right at the high level
• 21:39
  Speaker 1: of the support resistance line at two point three to
• 21:42
  Speaker 1: eight as we speak. And I think the our yields
• 21:48
  Speaker 1: of the United States, even though we're the largest economy,
• 21:51
  Speaker 1: the strongest economy, or so much higher than European yields,
• 21:55
  Speaker 1: as long as the central banks keep printing money, which
• 21:59
  Speaker 1: they are way more than the fetters talking about cutting back,
• 22:03
  Speaker 1: I think you'll stay low. Well, Mark ran if you
• 22:06
  Speaker 1: if you'd stay low, what happens in December if the
• 22:09
  Speaker 1: Federal Reserve raises interest rates, I think the yield curve
• 22:13
  Speaker 1: just flattens further. We've seen a huge flattening over the
• 22:18
  Speaker 1: last year. As you know, phim better than anybody, and
• 22:22
  Speaker 1: and Lisa, you both know that how many people have
• 22:25
  Speaker 1: come into the media we're going to have three to
• 22:28
  Speaker 1: yield on the tenure and it just has not taken place,
• 22:32
  Speaker 1: and I don't expect it to anytime soon. Well, you know,
• 22:35
  Speaker 1: I think that one change in the equation could be
• 22:39
  Speaker 1: a tax plan, and President Trump did unveil his proposal yesterday,
• 22:44
  Speaker 1: at least the outline um and there's some speculation that
• 22:47
  Speaker 1: the sell off that we're seeing is an expectation that
• 22:50
  Speaker 1: the federal deficit will deepen. Therefore, even if we don't
• 22:54
  Speaker 1: see the growth, we will see uh, some inflationary pressures,
• 22:57
  Speaker 1: or at least we'll see that the US is becoming
• 22:59
  Speaker 1: less credit worthy. How much do you buy into that argument? Um,
• 23:03
  Speaker 1: there's no question so that the cause of the markets
• 23:06
  Speaker 1: to sell off the last few days has been the
• 23:09
  Speaker 1: president's tax plan. I do not think the country's going
• 23:14
  Speaker 1: to become less credit worthy. It just depends on how
• 23:17
  Speaker 1: much growth you think we're going to see from lower
• 23:20
  Speaker 1: taxes to upset this and uh, I think the growth
• 23:24
  Speaker 1: will there will be growth, and you know what the
• 23:27
  Speaker 1: number is is very difficult to tell, but I think
• 23:30
  Speaker 1: that's the offset for the tax cuts. And also, of
• 23:33
  Speaker 1: course people will have more money to spend, which should
• 23:38
  Speaker 1: be a positive for the economy. Mark, can you tell
• 23:41
  Speaker 1: us a little bit about demand from institutional clients right now?
• 23:44
  Speaker 1: What are they looking for? Yeah, the institution, the big
• 23:48
  Speaker 1: institutional clients and Ideal with quite a number of them
• 23:50
  Speaker 1: directly are outside of the box, if you will, out
• 23:55
  Speaker 1: of the box. But what they're looking for, they're they're
• 23:58
  Speaker 1: not getting enough yield and traditional public investments, and most
• 24:02
  Speaker 1: of them were doing privates in the debt market, or
• 24:06
  Speaker 1: private equity or real estate. They're doing all kinds of
• 24:10
  Speaker 1: things to try to lock in yield because they cannot
• 24:15
  Speaker 1: get it in the public debt markets. Well, you talk
• 24:18
  Speaker 1: about locking in yield, does that lock in their money
• 24:20
  Speaker 1: because of limited liquidity in many of these investments. Well,
• 24:24
  Speaker 1: a lot of these big institutions, especially the life insurance companies,
• 24:28
  Speaker 1: don't need much liquidity. There. You have a longer time
• 24:31
  Speaker 1: horizon and the yield that they're getting the cash flow
• 24:36
  Speaker 1: is much more important to them than uh liquidity. So Mark,
• 24:41
  Speaker 1: you are saying that, Um, there sort of seems to
• 24:43
  Speaker 1: be this tense balance here between a commentative monetary policy
• 24:47
  Speaker 1: globally as well as your expectation that the tax proposal
• 24:52
  Speaker 1: would potentially increase growth in thus inflation and thus potentially
• 24:57
  Speaker 1: longer term yield being higher. I'm just wondering what's the
• 25:01
  Speaker 1: range here, what's the lowest that the tenure treasury could
• 25:04
  Speaker 1: go in your opinion in this environment, and what's the
• 25:06
  Speaker 1: highest that the yield could go. Well, you know, it
• 25:11
  Speaker 1: depends on external factors such as North Korea blowing some
• 25:15
  Speaker 1: jetting in America out of the sky. You'd see it
• 25:19
  Speaker 1: two yielding about three minutes uh. Short of something going
• 25:26
  Speaker 1: very wrong, you're probably looking at a two oh six
• 25:30
  Speaker 1: on the low side and two fifty two or so
• 25:34
  Speaker 1: to fifty three on the high side. I do not
• 25:38
  Speaker 1: think that there's any way given the amount of money
• 25:41
  Speaker 1: that the central banks are printing. The issue here, Lee says,
• 25:45
  Speaker 1: you have to follow the money. The fat is talking
• 25:48
  Speaker 1: about a very minor cutback uh in their balance sheet,
• 25:54
  Speaker 1: while at the same time, the eleven central banks of
• 25:58
  Speaker 1: the world, according to Bloomberg Dad or now about twenty
• 26:01
  Speaker 1: one point four trillion in assets and it's growing at
• 26:04
  Speaker 1: about three million a month. So as long as the
• 26:08
  Speaker 1: central banks globally or adding keep adding money to the system,
• 26:13
  Speaker 1: you're not going to see any big reversal and yields.
• 26:17
  Speaker 1: In my opinion, just quickly mark Grant once again. December
• 26:21
  Speaker 1: rate increase from the Federal Reserve. Yes, I don't think so.
• 26:24
  Speaker 1: I think that they're gonna look at the economy and
• 26:28
  Speaker 1: stand pad though I'm certainly in the minority opinion. We'll
• 26:31
  Speaker 1: have to see what happens. Thank you very much more,
• 26:34
  Speaker 1: Our chief a strategist from Hilltop Securities He's based in
• 26:38
  Speaker 1: for La Florida. Thanks for listening to the Bloomberg P
• 26:44
  Speaker 1: and L podcast. You can subscribe and listen to interviews
• 26:47
  Speaker 1: at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 26:52
  Speaker 1: I'm Pim Fox. I'm on Twitter at pim Fox. I'm
• 26:55
  Speaker 1: on Twitter at Lisa Abramowits one before the podcast. You
• 26:59
  Speaker 1: can always catch up worldwide on Bloomberg radioh