May 8, 2025 • 44 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Cardinal Robert Francis Prevost was elected as Roman Catholic pontiff, the first ever pope from the US and a possible bridge between the moderate and hardline sides of the Church. Prevost, 69, chose the name of Leo XIV for his pontificate and was greeted by thousands of cheering faithful as he stepped out onto a balcony overlooking St. Peter’s Square to be presented to the world.
“May peace be with you,” the new pope told a cheering crowd waving flags.
The new pope inherits from his predecessor Pope Francis a church that is facing internal strife between progressives and conservatives over matters such as divorce and LGBTQ+ issues, while trying to navigate geopolitical tensions.
On this episode, hear from:
- Professor Natalia Imperatori-Lee of Manhattan University on the selection of a new Pope
- Bloomberg News UK Government reporter Joe Mayes & Bloomberg Economics US Economist Stuart Paul on the US-UK trade deal framework
Plus, hear highlights from Carol Massar's live remote broadcast from the Principal Real Estate Conference & Advisory Committee in Arizona
- Rich Hill, Senior Managing Director, Global Head of Real Estate Research & Strategy Principal Asset Management
- Kamal Bhatia, President & CEO, Principal Asset Management
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
Week Daily reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy. Plus global business finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:33):
Well, we start today with the news out of Vatican City.
Cardinal Robert Francis Privos was elected to the head of
the Catholic Church. It was the second day of voting
in the Vatican. It was the first It is the
first US national ever to take the role. He's sixty
nine years old. He was born in Chicago. He spent
much of his life outside the US, mostly in Peru
and Rome. Leo the fourteenth is the name that he
(00:54):
has taken. He spoke for about ten minutes last hour
in Italian, Spanish and Latin as well. For more, we
bring in Natalia Imparatory Lee Professor and Chair of Religious
Studies at Manhattan College. Professor, good to have you with
us this afternoon. We are sort of slowly learning details
of the new pope. The big question I have is
(01:14):
what direction do you think he will take the church in?
Speaker 3 (01:18):
Thanks for having me. Yeah, I think this is a
really interesting choice. We can tell a lot from him
by the choice of name. In choosing Leo the fourteenth,
I think he's indicating that he wants to continue the
work of one of the most consequential popes on the
topic of social justice. So Leo the thirteenth wrote a
huge encyclical called Reream Navarum, and it basically set the
(01:41):
agenda for the social work of the church. And so
I think this American pope is signaling to us that
he will be on this sort of maybe a little
bit kind of on the progressive vein that you saw
Francis in.
Speaker 4 (01:57):
Yeah, it does look like that is an insane clicole
that was aimed at the working class. And of course
Pope Francis was first and foremost concerned with helping the poor.
What about immigration? This is obviously the divisive issue on
which the Catholic Church under Francis and the United States
government under President Trump have had the most disagreement.
Speaker 3 (02:20):
Yeah, I think it's going to be really interesting because
this is not a typical kind of US based Bishop
that we're getting as the pope right now. This is
a man who's lived all over Latin America. He's done
a lot of diplomacy, he's done a lot of church
building and bridge building in other places. You heard a
lot of that actually in his opening speech about building
(02:40):
bridges and walking together. And I think that he, with
his experience, especially in poor areas in Peru, he understands
what's going on with migrants and the sort of needs
of people who aren't in desperate situations. And so I
don't anticipate that he and the current president of this
country will be on the same page necessarily when it
(03:03):
comes to migration.
Speaker 2 (03:05):
What is the significance of a pope born in the
United States, the first American born pope, the first US
born pope, especially following the first South American pope.
Speaker 3 (03:17):
It is wild. None of us thought that this was
going to happen. No one that I know in the
Catholic universe thought that we would get an American, and
so it's pretty crazy to have two Americans, you know,
broadly understood, back to back. I think it signals a
kind of move away from a European centered church to
(03:40):
a more global reality and so you have this guy who, yes,
is from a global superpower, the United States and Chicago
a superpower city, but nevertheless is someone who was very
immersed in Latin American culture and then in the culture
of the Vatican. So you can see this sort of
global preference that the cardinals are starting to show that
(04:00):
they want to show that they have an openness to
not just a European Church, but really a more global reality.
Speaker 4 (04:07):
What's the likelihood that he can heal the rift between
the Vatican and American Catholics because it definitely had developed
and you mentioned this isn't the typical American cardinal, those
who had spoken out openly against Pope Francis. Can he
bring the kind of al Smith Catholics back to the church?
Speaker 3 (04:29):
I mean, it's my sincere hope that that is the case.
The question is can the al Smith Catholics get on
board with the papacy. I mean, the whole point of
a lot of this sort of disagreement is who is
really in charge, who should really set the agenda for
the Roman Catholic Church. And it's important for us, I mean,
(04:49):
as Americans, I know, we feel a lot of like
patriotism and everything right now, especially because he's an American pope,
but he's going to be the pope of the whole
global church, and so well, sometimes we can be a
little bit shortsighted and think, oh, well, he's not responding
to the things that we care about the most. But
he is trying to steer this ship that's kind of enormous.
Speaker 4 (05:10):
Four billion people. We should remind everyone one point four
billion people, right, the longest standing institution in the Western world.
And do Catholics believe that the pope, the leader of
the church is chosen by divine intervention, that essentially God
has picked this pope.
Speaker 3 (05:29):
I mean yes, but let me give you a caveat right.
God works through human beings. It's not that God whispered
the name Prevost in the ear of every cardinal elector,
and that's how it happened. Right, It's not Harry Potter.
It's very much real life. And so we believe that
the God doesn't let the church fall completely into error.
(05:51):
That we believe or we trust that God is somehow
in control of this church. And that is very much
what sort of is we see happening in a conclave.
Nobody knows what goes on inside you sort of really
have to trust, and even the men who are in
there are in a sense putting their trust in you know,
we don't really know how this is going to turn out.
(06:13):
We're going to sort of lay it at the feet
of God. And that's that's how Catholics think God works
in the world.
Speaker 2 (06:19):
I was pretty shocked to emerge from a meeting just
after noon here in New York and see white smoke
up on the Bloomberg television screen, given that the conclave
just started yesterday in Vatican City, and you know, yeah,
but looking into this a little more, that's not necessarily
that unusual, at least in modern times. They're not necessarily
going to be holed up for weeks historical context, for
(06:41):
just the duration of this conclave. Is it surprising to
you or is it pretty quick?
Speaker 3 (06:46):
I mean it felt quick, I feel like, because like you,
I feel like they just started yesterday and what's the deal.
But it's usually four to five ballots, right, That's pretty
much what it's taken the last three times, four or
five ballots they do. They're very efficient with their voting.
I wish I definitely didn't think it was going to
be prevost this quickly. So I was in a meeting
with a student and I had to sort of break
(07:07):
out and cancel it and move away from it. But yeah,
the white smoke came quickly, and it was a surprise
that it was prevous. Now I will say this, he
is the guy who was advising Pope Francis on who
to appoint as bishops, and it's really significant that he
is now the new Pope. It tells us that Francis's
vision for who should be in leadership in the church,
(07:29):
which is like people who were pastors, that's what Francis
really wanted. That this Leo the fourteenth is going to
continue that sort of vision.
Speaker 4 (07:38):
He actually started off quoting Pope Francis's Easter Sunday.
Speaker 2 (07:46):
Words.
Speaker 4 (07:47):
Do you expect him to carry on Francis's work not
only in terms of, you know, helping poverty, working class,
but also in terms of women in the church in leadership,
in terms of LGBTQ, bringing a sense of inclusiveness to
this Catholic church that traditionally, at least in leadership, only
relies on men.
Speaker 3 (08:09):
I mean, I hope. So, I don't know. I don't
know where he stands on the issue of women. I
can only rely on what he said from the balcony,
and a lot of that was echoing so much of
what Francis was saying. So you heard him hit all
the greatest hits. Right. He talked about peace one hundred times.
He talked about building bridges one hundred times. He talked
about walking together to the Promised Land. He kept saying
(08:32):
tutti tuti, which was like it means everyone, which was
a refrain of Francis's He talked about a church that
was open to all, that needed to dialogue, that needed
to do encounter, and that I think signals that he
wants to continue the legacy of Francis. Now as for
the specifics, right, will he continue to appoint women to
(08:53):
decision making positions in the Vatican? I hope. So that's
not some toothpaste. I think that I'll go back into
the tube very easily, but you won't know.
Speaker 5 (09:01):
Right.
Speaker 3 (09:01):
This is again where Catholics are like, come, Holy Spirit,
let's do this.
Speaker 2 (09:05):
Professor, really appreciate you joining us on Bloomberg Business Week
Daily this afternoon. Professor Natalia Imparatory, Professor and Chair of
Religious Studies at Manhattan College.
Speaker 6 (09:15):
You're listening to the Bloomberg Business Weekdaily podcast. Catch US
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch US live on YouTube.
Speaker 2 (09:30):
Well a hard pivot from Vatican City and from What's
going on with the Pope too. The other big story
of today, and that of course, has to do with trade.
President Trump announced a trade framework with the UK, hailing
it is a quote breakthrough that will bring down barriers
and expand market access for American imports. The President said
final details of the pact would still be negotiated in
(09:50):
the coming weeks, but under the agreement, the UK would
fast track American goods through their customs process and reduce
barriers on ag, chemical, energy, and industrial exports. Here's what
he said a little earlier today.
Speaker 5 (10:03):
Both countries have agreed that the economic security is national secured,
and we'll be working together as allies to ensure that
we have a strong industrial base, appropriate export controls and protections.
Were key technologies and industries like steel. Steel is a
big factor. Both countries will become stronger with steel.
Speaker 2 (10:21):
That was President Trump earlier in the day from the
Oval Office for more we bring in Bloomberg News, UK
Government porter Joe Mays and Bloomberg Economics and US economist
start Paul Joe's in London stored us here in the studio. Joe,
I do want to start with you and just can
textualize the framework or at least the details with what
we know in the framework between what was there before
(10:42):
Liberation Day so called Liberation Day, and what is the
status now after this framework was announced. What are the
big differences there?
Speaker 7 (10:50):
Yes, the context is that the US brought in these
quite putative tariffs, particularly on the car sector, steel's aluminium,
in excess of twenty five per sent for those industries
and that was very damaging to the UK economy. And
after the deal today there is relief for those industries.
So on cars the tariff going down from twenty seven
point five percent to ten percent for a quotch of
(11:12):
one hundred thousand vehicles, which the privacy case DALM was
hailing as a victory for companies like Jaguar Landrover. The
steel tariff has gone from twenty five percent to zero.
Similar for aluminium. So those are the real big tariff
wins that the UK wants to talk about But nevertheless
there are still these ten percent baseline tariffs on the
arrest of goods that the UK tries with the US.
(11:32):
So it's still a weaker position for the UK than
before Donald Trump became present, but it's better than things
were yesterday. That's how kiss Dalwin was framing it. So
it's a limited polisical win for the UK whilst still
suffering effectively from the remaining tariffs.
Speaker 4 (11:46):
What about US access to the UK market? And one
of the things Donald Trump has talked about for a
long time is that, you know, Europeans and I suppose
he includes the Brits in that don't buy American products,
and of course he's talking about cars. Is the UK
market going to be far more open to US goods
(12:08):
than it was before this agreements?
Speaker 7 (12:11):
There was included in this agreement provisions to liberalize access
to UK market for food products for example, for example,
beef exports can now come into the UK from the
US and why they couldn't before.
Speaker 8 (12:22):
So that was hell as.
Speaker 7 (12:23):
A victory by President Trump. A tariff on ethanol exports
in the UK they're also now being removed, So yes,
there was a liberalization here. It wasn't an enormous liberalization that,
for example, on food standards, the UK is still saying
that it won't, for example, accept hormone treated beef into Britain.
So that's a a kind of limitation on that liberalization,
but still extreme limitation.
Speaker 2 (12:44):
Thanks Start, Yeah, I want to bring Start Paul in
a Bloomberg Economics he joined us here in the Bloomberg
Business Week studio. Equity markets certainly cheering this, and we
should note that the fact that the President did make
comments about buying US equities earlier in the day as
well when he was in the Oval office earlier. Stuart,
what is the view from your per Bloomberg Economics of
what this means for the US and sort of how
(13:06):
it could illuminate maybe a framework moving forward for deals.
Speaker 9 (13:09):
Just we know that we're on a de escalatory path.
This concretizes some of it. It gives some sort of
shape to what we could expect from deals going forward.
It might be a piecemeal approach, and this can be
something that takes a long time to develop. As we
heard from Secretary Bessant, there are seventeen key trading partners
that the US is approaching deals with. If they all
take this shape, They're all going to have a relatively
(13:32):
dull sort of impact on US economic activity. What will
really shift most is sentiment around US engagement in the world. So,
just recognizing that we're on this sort of de escalatory
trend and that there's not going to be just a
full retreat from the global stage.
Speaker 4 (13:48):
What would be the best for US economic activity? I mean,
it doesn't seem like the President's going to lower at
least the baseline tariffs billow ten percent for any country,
won't do it for the UK.
Speaker 9 (14:01):
Yeah, So even if he doesn't lower the baseline tariff,
creating enough car vouds does open up, so it does
sort of generate additional economic activity, and it brings the
average effective tarif rate significantly below what that ten percent
baseline is. So if we think about what the average
effective tarif rate was on the UK, it was just
a touch above ten percent. Now with these carveouts, the
(14:23):
average effective tarifrate in the UK drops down to about
seven percent. So what does that means, Let's say for
the UK in terms of economic activity and growth, where
there was about about thirty basis points of drag on
real GDP growth for the UK, now it'll just be
about twenty basis points of drag, so that'll keep GDP
growth just a touch under one percent for the full year.
(14:46):
That's that's according to our UK forecast.
Speaker 2 (14:48):
Hey, Joe, on that point, based on your reporting and
what you've learned about this deal, does it seem like
it's a better deal for the US, it's a better
deal for the UK? Or are they kind of when's
the table here?
Speaker 4 (15:01):
Is it?
Speaker 8 (15:02):
When?
Speaker 10 (15:02):
When?
Speaker 8 (15:04):
Yeah?
Speaker 7 (15:04):
I mean it feels like a better deal for the
US if your reference point is the day Donal Trump
becomes president, because compared to that day, the US has
gained a fair amounts here agriculture access for many products,
the ethne thing I mentioned, and still has these ten
per cent tariffs on the UK, and the UK is
in damaged limitation mode with this deal, so better than yesterday,
(15:24):
but clearly not as good as it was when Don
Trump first became president. So yeah, I think it's the
US is I think coming out of this slightly stronger
or the UK also is trying to claim that the
wins are on their side.
Speaker 2 (15:36):
As we mentioned, Joe, this is a framework right now.
Some of the details continue the need to be hashed
out in the coming weeks. What questions do you have,
like what's the fine print here that we don't really
know yet.
Speaker 7 (15:48):
So the UK said that this for them is really
a starting point. If anything, there's still much more to
happen when it comes to negotiations. That are things like
the digital services tax, which the US wants to see
regime used. It's dislikes by the likes of Facebook, Google,
the evil musk Rey dislikes that tax. That could form
part of a digital agreement that's still to be negotiated.
(16:08):
The UK has said there's also other tariff lines which
the UK would like to see removed, but that subject
further negotiation. The pharmaceutical sector, for example, very important to
the UK. There wasn't explicit reference to that in the
agreement today, so what happens there on tariff So there's
still much more to come bent President Trump was trying
to say this is full comprehensive, We've maxed it out,
and the UK was saying, well, actually there's a lot
(16:29):
we still wanted to talk about here, but you know,
we'll play nicely for today.
Speaker 4 (16:33):
Joe, I wonder about the the importance of automotive to
the UK economy. It's been become clear. I think to
a lot of people over the past few weeks, certainly
since April second, that global trade is car trade?
Speaker 8 (16:47):
Really?
Speaker 4 (16:49):
How big is it in the UK, especially when you're
just looking at exports to the US, right, because I
only can think of very high end you know, Gordon
Murray Automobiles, McMurtry, McLaren, Range, Rover, Rolls, Royce Bentley. It's
not the mass production vehicles as Tim was mentioning, like
(17:09):
Toyota and Nissan. Even though you make them there, you
don't make them there for our market.
Speaker 7 (17:14):
Yeah, that's right. It's premium cars that the UK tends
to sell into the US, and exports of UK cars
the US were about one hundred thousand of the last counts,
which is basically covered by this quota that's been announced today,
one hundred thousand quota at ten percent. So you can
see why the UK is happy with that arrangement. I
think the UK carnistry has been broadly speaking, in decline
in recent decades, but nevertheless it has carved out this
(17:35):
niche in high end luxury vehicles and the US worst
important market. So there's a kind of symbolic win here
for the UK. It won't have massive impacts on the
UK comedy Ritt large. It's still a very small part
of the UK comedy. But nevertheless it's a kind of
nice symbolic political win for Kirstamer to say, look, I
have masage to reduce these tarers and he was saying
today this preserves jobs across the UK, so that's something
(17:57):
to be celebrated.
Speaker 2 (17:58):
We're having this conversation, Stuart, in context of a United
States that has essentially said now is the time to
come and negotiate. We know that the Treasury Secretary is
headed to Switzerland this weekend to meet with representatives from
the Chinese government. We're not talking about China here, though.
Does any of this matter without a deal with China?
Speaker 9 (18:18):
China, of course matters. Most accounts for about what fourteen
to fifteen percent of our total imports were running a
trade surplus with the UK. It really doesn't matter a
ton to the US if the average effective tariff rate
on UK goods is somewhat higher. Once you start creating
carve outs for things like pharmaceuticals and everything else under
the sun, we're gonna drop from probably a current effective
(18:40):
tarifrate of seven percent on UK imports to something closer
to three percent. Not really material. What I do think
is the most material is this idea that when Trump
took office, the outward expression was one of an interest
in withdrawing from the global stage. Now directionally we're moving
(19:00):
in the opposite direction. We have had public statements from
folks like Besant and everybody else saying that one hundred
and forty five percent effective rate on China is not
something that sustainable or that can stay, that can remain
in perpetuity. And so again the direction is towards de escalation,
and I think that that's what matters most. This is
(19:21):
not going to be just the complete crackup of the
global commercial order that was threatened. There will be a
turning of the tide, in a bit of a shifting.
But we knew that that was going to be the case,
with friend shoring and on shoring as opposed to you know,
retaliatory or reciprocal tariffs being the terminology of the day.
We knew this was going to be the direction under Trump.
Speaker 11 (19:41):
By the way, I forgot to.
Speaker 4 (19:44):
I forgot to tell everyone Happy v Day because it
is May eighth, right, It's victory in Europe Day. Joe,
Happy ve Day. Well, what do we know about the
European Union? I mean, the US UK agreement has been
the main headline, but we've got another flurry of trade
headlines with golf, sovereign wealth funds, with a critical minerals
(20:09):
deal in Ukraine, and the EU talking about tariffs on
ninety five billion dollars of US exports. What do we
know about the EU deal?
Speaker 7 (20:19):
And what we know is that clearly it's a big
priority for both sides to get some kind of agreement done.
And we're all kind of reading the tea leaves today
on the UK agreement to say, Okay, clearly the US
is willing to do this entree, so might they be
willing for the same on the EU. But clearly it's
different when it comes to the scope of those kinds
of deals. Obviously much larger economies, much more trade at stake.
It's really a watching brief at this point, trying to see,
(20:41):
you know, will there be movement in these coming weeks. Clearly,
as we've just been discussing, the direction of travel from
the US side is towards wanting that engagement. But the EU,
we know, strikes very hard bargains. These negotiations, and it
is unlikely to kind of concede too much in those
kinds of talks. So, yeah, it's still a watching brief, Joe.
Speaker 2 (20:59):
A lot of questions about this status of American beef
going to the UK. What can you tell us just
about American agriculture and access to the UK market and
how that could potentially change under this framework.
Speaker 7 (21:12):
Yeah, so this has been one of the biggest sticking
points in the UK US trade talks historically. It's one
of the reasons why it's been difficult to get a
kind of big, comprehensive free trade agreement in recent years.
And what's happened here is that the UK has said, yes,
we will allow for the import of US beef, but
on the condition that it reaches UK food standards. Now,
(21:33):
those food standards are standards that the US has long
criticized has been a scientific and unnecessary, but in the
UK they are seen as exceptionally politically important, and we're
talking here about things like hormone traded beef, hormone treated beef.
And indeed, for the UK it's for important to maintain
their standards if they want to deal with the EU,
because the EU is particularly hot on having those standards upheld.
(21:54):
So what the UK is done here is can walk
that tightrope and kept open the option for deals with
the EU by keeping that restriction in place. Benethless, given
the US a win by saying you can import some
beef into the UK now which tariffs and so on
under a quota, but just not hormone treated beef. So
you can see why it's kind of a halfway house.
Speaker 2 (22:13):
I want to give Stewart the last word. One of
the reasons we love getting you on, Stuart is because
you're able to make these quick calculations about economic impact
of certain events. And I'm going to put you on
the spot here and just give us your view on
the pope and what it means for the US economy
that he is actually the first US born pope to
lead the Catholic Church. Do we have numbers here, sure?
Speaker 9 (22:35):
So what really matters is if he's going to come
and visit the United States. Right, famously, post Francis wouldn't
really return to Argentina. But if we were to see
now Pope Leo the fourteenth coming to the United States,
it could mean a material increase in spending. If we're
just extrapolating based on the economic activity boost from let's
say Francis's visit to Philadelphia or Soul in twenty fourteen
(22:59):
and fifty, and just adjusting for inflation and accounting for
what the impact to be. If the Pope visited, say Chicago,
his hometown, you could expect about a billion dollars an
additional economic activity. That's about five basis points of additional
spending growth in any given month. A four city tour
or five city tour like that is a pretty big
(23:20):
papal pop in economic activity from a tour coming from
the pope.
Speaker 2 (23:24):
Okay, so maybe not Taylor Swift, maybe not Beyonce, but
the Pope certainly a huge economic impact.
Speaker 4 (23:30):
If he does a whole tour, it would be a
different story, right. He wouldn't likely just go to Chicago.
He would bring over the his whole entourage, probably at
least one Pope mobile. So I imagine he would go
you know, New York, DC, Chicago.
Speaker 9 (23:45):
Yeah, I mean the travel expenses, the security expenses for
each city visit, that's probably close to about fifty million dollars.
But yeah, this is not quite Taylor Swift, but they're
still talking about filling Wrigley feel. Yeah, it's a a
good amount of economic activity that generated.
Speaker 2 (24:02):
All right, well, a big thank you to both of
you who covered a lot here. We went around the world.
Joe mays Our, Bloomberg News UK Government reporter, joining us
from London. Bloomberg Economics US economists store Paul.
Speaker 8 (24:11):
Here.
Speaker 1 (24:12):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five East. During
this listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 11 (24:28):
I'm Carol Massard. We're at the Principal Asset real Estate
conference here in Pleasant Valley, Arizona. We're going to continue
our coverage here. I want to throw out one little
stat as we continue. Nearly half of family offices say
they plan to increase allocations to real estate in the
coming months, with an emphasis on residential industrial sectors. This
is according to some research out from night Frank, So
let's get to it. I'm curious what rich Hill has
(24:48):
to say about it. He's Senior managing director, Global head
of real Estate Research and Strategy at Principal Asset Management.
Here at the conference in Arizona, rich. Good to have
you here with us. How are you.
Speaker 8 (24:58):
I'm great, Thanks for having me on today.
Speaker 11 (25:00):
It's great to have you here. I love folks who
have seen some different cycles. How do you make sense
of this cycle right now?
Speaker 3 (25:05):
Hey?
Speaker 8 (25:05):
Look, every cycle's different.
Speaker 12 (25:07):
I like to begin by saying commercial real estate valuations
are down more than twenty percent from their peak in
twenty twenty two. That's a generational decline in private real
estate valuations. We've only seen that two times before and
aftermath of the Great Financial Crisis and in the early
nineteen nineties post this SNEL crisis. So heading into this year,
commercial real estate valuations felt like they were on pretty
(25:30):
good footing. Then April came and tear us through a
little wrench in that equation, leading to some questions amongst investors.
Speaker 11 (25:36):
Well, it's interesting too when I think about miss priced assets,
So how mispriced are they then today in terms of
lower too low in terms of valuation, Which are some
assets that maybe still need a little bit of work here?
Speaker 12 (25:47):
Yeah? Great, that is a really interesting question because as
you think about what's miss priced, you can think about
that on absolute basis or a relative basis, where we
think about assets that are mispriced. It's that are actually
going to grow very strongly over the next three, five
or ten years. Those are, in many cases alternative sectors
that many people don't think are what could be considered
(26:11):
traditional commercial real estate asset classes, right, things like data centers, right,
or cell dours or seniors housing or single family rentals.
These were asset classes that didn't exist in the commercial
real estate sector twenty years ago, but are now a
big portion of the commercial real estate market.
Speaker 5 (26:26):
Yeah.
Speaker 11 (26:26):
I love that you go there. There's also variations I'm
assuming in terms of geography, right, when you look at
what's miss priced what's not for sure?
Speaker 12 (26:35):
As we think about what has done really well over
the past five years, it's been driven by population migrations, right,
So many of the Sun Belt markets boomed in valuations,
and you're beginning to see some actual growing pains in
the Sun Belt market.
Speaker 8 (26:50):
You know.
Speaker 11 (26:50):
One of the things I love that you said longevity.
Deborah Cafaro Aventis was on this panel I did at
Milkin and just you know, she's been you know, obviously
when it comes to senior living centers, obviously the healthcare
sign of it, but that longevity play, especially when it
comes to real estate. That's one that's going to stick
with us for a while.
Speaker 8 (27:09):
It is.
Speaker 12 (27:10):
What I don't think a lot of people may understand
is that the aging demographic has lived in their houses
for longer periods of time. That's actually created some structural
and balances in.
Speaker 8 (27:21):
The single family home market.
Speaker 12 (27:23):
But we think this aging demographic will ultimately move into
seniors housing, whether it be limited service senior housing, all
sorts of different seniors housing, and this is going to
be a long term structural shift that's here to stay.
Speaker 11 (27:35):
That's a global That is a global trend. It is,
it's not specific in terms of different markets. One of
the things I wanted to say, I mean, looking at
how US reads are performing as a group, they're up
about one percent year to date. They've bounced back along
with the rest of the US market. They're nearly up
twelve percent since early April. You look at European reads,
they've bounced nearly seventeen percents since then. What does the
(27:58):
trend tell you about investor sentiment and the willingness to
maybe go back into the market. Is it just the
overall okay bounce back or is it something more substantial.
Speaker 12 (28:07):
We think it's something much more substantial.
Speaker 8 (28:10):
Reads.
Speaker 12 (28:11):
While they've had good years in the past couple of years,
on an absolute basis, they haven't been a favorite sector
in the S and P five hundred or the global
stock market. But we think the listed public markets are
a leading indicator on both downturns and recoveries. So the
public markets are sending a signal that commercial real estate
might be a relative winner in this new backdrop of
(28:31):
higher interest rates and higher inflation. It's a really fascinating
topic that I don't think is getting enough attention. List
reads in the United States. Real estate in the United States,
that's the fourth best sector of the S and P
five hundred. Despite all the headlines you see about what's
happening with tariffs, what's happening with growth, what's happening with
interest rates, the public markets are telling you that you
should be focusing on the commercial real.
Speaker 11 (28:50):
Lill how do you make sense of that in terms
of a higher for maybe longer rate environment. Certainly in
the United States, it's not fair to say, I mean
the ECB we saw, you know, certainly has been cutting rates.
Was at the Bank of England cut it. It's not
all the same rate strategy when it comes to global
central banks, how do you make sense of that? Though
in the United States.
Speaker 12 (29:05):
I'm often asked, what do I think about this new
normal environment of higher inflation and higher interest rates? I
reject the premise of the question. What was abnormal was
the last ten years of low interest rates and low inflation.
Commercial real estate actually doesn't do that well in that environment,
at least on a relative basis. Where commercial real estate
actually does well is what happened prior to the GFC.
(29:27):
A higherst higher inflation regime exlicit for decades, and that's
actually fairly accommodative for commercial real estate because guess what,
it's a growth sector.
Speaker 11 (29:37):
What about office? I just want to go there. I
feel like we've been talking about it since the pandemic.
Here we are, what five years out, and I don't
know whether the big shoe has yet to drop expectations
in terms of that within the real estate sector.
Speaker 12 (29:53):
If you're going to ask me, is office going to
be an attractive sector over the next ten years or beyond, yeah,
I have to tell you yes, it's going to be. Why,
there's a couple different reasons. First of all, last cycles
winners are rarely next cycles winners. Office properties have been
beaten down so much and they're redlined by much of
the investor race right now, right that they're beginning to
(30:15):
screen at an attract evaluation, especially for the high quality,
well positioned properties. I would consider myself office curious right now.
I think it is an attractive asset class over the medium.
Speaker 8 (30:27):
To long term.
Speaker 12 (30:28):
The signal that you should be looking for is an
opening up of lending to the office sector, and I
think we're in the cusp of seeing that in twenty twenty.
Speaker 11 (30:34):
Five, coming from the private markets more so than the
big banks.
Speaker 12 (30:37):
That is correct, people like Prince Alassat Management. One of
the themes that we heard on our panel earlier today
is well, is there an opportunity to begin lending on
high quality office at a reset lower basis. I think
that might make a lot of sense.
Speaker 11 (30:49):
I am curious. You know, as you guys have conversations
here at the conference, You've got some really big clients,
big investors here, what is top of mind for them
when it comes to real estate? And I hate to
keep putting it all into one bucket, because it's, as
we know, there's different verticals, there's different geographies, and I
think it's an important distinction, but I am curious what
they're asking you.
Speaker 12 (31:05):
Yeah, what's happened over the past twenty thirty years is
that commercial real estate has benefited from a secular decline
in tenure treasure rates. Right, borrowers have been or investors
have been able to refinance and lower lower interest rates,
which has helped valuations. I think a really big theme
coming out of this conference is back to basics, what
property type and what market will drive long term growth.
(31:27):
That's really refreshing to me because financial engineering has driven
returns for the past decades, so rightkaid, Plus we're now
getting back to all right, fine, what property type do
I think I'm going to get three percent net operating
income growth revenue minus expenses?
Speaker 1 (31:40):
Right?
Speaker 11 (31:40):
Where can I.
Speaker 12 (31:41):
Actually generate the high attractive unlevered IRRs. You actually don't
need that much growth relative to history to get there.
So I think there's a lot of investors acutely focused
on what property types and what markets to buy.
Speaker 11 (31:53):
Which it's more like being back to normal, right. I mean, well,
I know everybody kind of forgets that what we saw
for such a long time where there was basically no
cost to money. Right, that was the unusual point.
Speaker 12 (32:03):
Called back to the future, call it back to normal,
whatever you want to. This is a really refreshing environment
where you can actually block and tackle if you will.
Speaker 11 (32:10):
I want to ask you variations US, Europe, Asian, Middle East,
you know, the supply chain as it moves around geographies
that maybe didn't get a lot of attention that are
now getting attention. Like I keep bringing up this idea
that Disney's not going to build a theme park in
the Middle East. You know, I talked to a lot
of folks at Milkin who were like, we opened up
in an office somewhere in the Middle East. So I am
(32:31):
curious when you look around the world, you know, where
is it all of a sudden getting a lot of
investor intention when it comes to the real estate play.
Speaker 12 (32:38):
We think one of the most significant trends of the
next five to ten years might be the European continent
and specifically Europe. Yeah, and specifically building logistics on the
European continent. Why is that the case, Well, the European
countries might have to trade more with each other, and
most warehouse facilities on the European continent are actually relatively old,
(32:59):
call it ten fifteen, twenty years old, right, That does
not accommodate new modern trade.
Speaker 8 (33:04):
So to be able to build new.
Speaker 12 (33:07):
Logistics facilities on the continent could be a really interesting
theme that's coming out of the next evolution of where
we go post era?
Speaker 11 (33:14):
Does that also include ports like ports all of a sudden,
Like one of the things that came out of the
discussions at Milkin too is like that West coast port
one of you know that maybe it'll be busy, but
maybe not as busy as it used to be. So
I'm just curious when you think about that as well,
the infrastructure build for that.
Speaker 12 (33:29):
Absolutely you have to find these right ports on the
European continent and maybe even the UK that will change
the shipment of goods. Maybe in the US. One of
the ports that I think is most interesting in Savannah.
Just to sort of levey off of what you were talking.
Speaker 11 (33:44):
About, We've got a lot of family down in South Carolinina,
not Savannah, But nonetheless there's so much activity just to
wrap up here. Where do you think is the biggest
opportunity when you look out Again, real estate's a longer
term play, so I think it's either three, five, ten years,
where do you think will really present some really unique
opportunities for investors.
Speaker 12 (34:04):
Yeah, so I'd just conclude commercial real estate is actually
eighteen different sectors that fall under a broad umbrella. They
were always opportunities someplace in the world for some property type.
I do think European logistics is a really big opportunity.
We think senior's housing is a really big.
Speaker 11 (34:18):
Opportunity globally, right globally.
Speaker 12 (34:20):
One of the themes that I've been really surprised about
to hear because it's a relatively nichee sector, but levers
off of senior's housing is medical office buildings. I've been
hearing a lot of investors talk about medical office buildings.
So there's going to be some really interesting opportunities that
come out from the shakeup. And I'll come back to
the question you asked about office. I'd be remiss if
I said over the next ten or twenty years, it
(34:41):
sort of feels like it's ready for a rebound.
Speaker 11 (34:43):
At some point, people are actually going back to the office,
aren't they.
Speaker 12 (34:46):
My train into New York City is at ninety seven
percent of capacity.
Speaker 11 (34:49):
It's happening. It's happening, really great stuff. Thank you so much.
Speaker 8 (34:52):
It's great meeting you. Yeah. Same.
Speaker 11 (34:53):
Here. Rich Hill, Senior Managing Director, Global ahead of real
Estate Research and Strategy at Principal Asset Management. Here at
the Principal of Real Estate Conference.
Speaker 6 (35:01):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 11 (35:17):
Jim's back in New York. I'm here in Arizona, and
I'm here at the Principal real Estate conference that's been underway.
I want to jump right in and get to our
next guest's Kamal Bati's President CEO of Principal Asset Management. Kamal,
it's been really fun talking with your team because I think,
amid uncertainty volatility, you know, when you think about some
of these asset classes, like real estate, investors are in
(35:37):
it for the long term, so there is a sense
of calm and understanding that we're going to go through cycles.
Talk to us a little bit about, you know, your
check ins with your team on a regular basis, A
mid kind of the backdrop.
Speaker 10 (35:48):
That we've had absolutely First of all, Carol, thank you
for being here in Arizona. It's it's an honor. You know,
real estate is the heart of our business. We have
one of the biggest managers in the world, and it's
great to have Bloomberg join us at our premier conference,
So thank you for that.
Speaker 11 (36:02):
Adom Becaus been doing it for a quarter of a century.
Speaker 10 (36:04):
We have been we have some experience from market cycles,
which which probably matters more than ever before. So to
your question, I think, you know, sort of uncertainty seems
to be the most commonly used word these days, and
I would say probably the world I want to focus
on is clarity because as investors, I think that probably
is the more important word to focus on. What you
can get clarity on and what you can get clarity on,
(36:26):
In fact, one of the things when you really think
about long term trends, because there's a lot of short
term noise. The two things I think we can have
absolute clarity on is the world is aging and there
is money in motion in retirement. And I think if
you really think about the needs of those investors in retirement,
(36:47):
which we are a premier manager, almost three and twenty
billion of our assets in retirement. The needs for those
investors are like only getting more important. And if you
really bring that act to an investing landscape with what
we have noise in the trade, trade wars, de globalization,
(37:08):
the one thing that is clear to us is you
have to have local knowledge and footprint as you navigate
this environment. You can run portfolios just with a US mindset.
You've got to have intelligence on the ground, right if
you're trying to do something in Asia, you're trying to
do something in Europe. And that's been the key thing
that I would tell investors need to focus more and
(37:29):
more on local knowledge and clarity on what's happening in
the local geographies is going to be way more important
than it's.
Speaker 11 (37:36):
Been in the part. I think that is so smart
because I do think you know, we throw out global
real estate said this a couple of times in the
conversations today as a bucket, but there's just so many
different dices and slicing of it, if you will, in
terms of the different types that are out there. You know,
one of the things I am also curious, you know,
you guys have been doing this for a long time
and it just felt so uncomfortable, But you think of
(37:56):
something like the Great Financial Crisis. This is nothing like
what we start are the GFC right when it comes
to real estate and just in general market volatility.
Speaker 10 (38:05):
Correct, correct, And look, you know, I think we've had
such ultimate calm on what I would call political policy.
You know, we over post GFC, so much of our
attention went to fiscal and monetary policy. I would say
monetary policy more than anything else, right, And fysical policy
comes into work on and off, but it was really
(38:25):
monetary policy was the driver of what all investors thought about.
And now I think we are entering an era where
I would say political policy and fiscal policy are going
to be the driving forces of markets moving forward.
Speaker 8 (38:38):
And it's sort of you have to recalibrate your.
Speaker 11 (38:41):
Bettering your view.
Speaker 10 (38:43):
I think it's a different thing. Okay, I wouldn't call
it a better thing. I think we have gotten used to.
I go back to this word around clarity. Central bankers
became very very good at providing clarity. Yeah, if you
look at the history of how ins have reacted, such
attention gets paid to interest rates, what central bankers say,
(39:04):
and that sort of became the words they chose and
how they said. It allowed investors to build a framework
and invest around it. While we can rely on that,
it is you can get the same level of clarity
from the political policy today, not just in US but
across the world, and the fiscal policy is much more
in control of government organizations, and so you have to
(39:28):
do a lot of individual work and incremental work as
an investor if you want to see clarity. And I
think it's going to be good for markets. Why it
is going to be good for markets, in my mind
is we've had sort of a collective viewpoint where markets
are going, and I think there's a bigger dispersion in
investors who think where the world is going.
Speaker 11 (39:49):
It's interesting that dispersion. I feel like that is a
word I'm hearing more and more often in terms of
just the variations, and you've really got to kind of
do your homework. I want to go back to what
you talked a little bit about longevity, retirement, the democratization
especially the private market. Is that going to increasingly whether
it's exposure to real estate or other important for ultimately
(40:12):
folks really hitting their targets when it comes to retirement.
And what do you want to see in terms of policies.
Speaker 10 (40:18):
Absolutely great question. So I was just earlier this week
at Milkin and that was a big topic.
Speaker 8 (40:23):
Yeah, private markets.
Speaker 10 (40:25):
Before that, I'm on the ICI board, Carolyn, that has
become a topic there. So this notion of retirement and
private markets overall is a big topic.
Speaker 8 (40:35):
But I would say the three big.
Speaker 10 (40:36):
Trends in the retirement space are, in addition to private markets,
there is innovation, and innovation is not just investment innovation.
There is technological innovation that play a role for these
products to deliver their outcome. And then the last piece
is I go back to policy. These markets are highly
dependent on where regulatory policy evolves, and I would say
(41:00):
the retirement investor is absolutely not participating in private markets today.
They're almost like sitting on the sideline stuck because there's
no clarity on the regulatory policy front of how they
should access is and while there is innovation of how
to do it, it is not there yet. Going back to
real estate, I would say it is probably the first
(41:21):
door you have to enter if you want to allow
private markets, and as an investor, it should be really
easy to.
Speaker 8 (41:26):
Understand why why exactly?
Speaker 10 (41:28):
I would say of all the asset classes, real estate
is probably the most different from bonds and stocks. You know,
people talk about private equity, people talk about private credit.
They are different, but they're not that different. Real Estate
at the core is different, and so why are we
going to do this. It's all about outcomes, So you
want to add things that diversify you further. So real
(41:51):
estate a makes the first logical argument, and academic literature
even says that you've got to pick the most diversifying
asset first, So that one makes sense. Two, it is
deeply global, and it is wide and deep realistic exist
all across the world.
Speaker 8 (42:09):
You know, we have read markets.
Speaker 10 (42:11):
And so the second thing you want to have is
if you want to do it in retirement portfolios, you
want to have public and private proxies for doing something.
Speaker 8 (42:18):
Yeah, real estate is one of those asset classes.
Speaker 10 (42:20):
You could buy direct or you could do reads, you
could buy bonds, or you could do equity. It is
a complete three sixty asset class. And at the end
of the day, the saverer, which is really mom and
pops who are saving for retirement, want to have an
asset class that's deep and you can implement your views
across the world in.
Speaker 8 (42:38):
A good way. That's probably the best reason I would argue, you.
Speaker 11 (42:40):
Know, it's funny at Milkin and one of the guests,
I said, you know, it's going to be a period
where like we don't really care about the public markets anymore,
and like they looked at me like I was black.
You know, what are you saying? But it just increasingly
the shift private markets has certainly been a topic, as
you know it looking for a long time, whether it's
real estate like pick your thing, and I just wonder,
you know, how are the majority of investors for one
(43:00):
cage like your mom and pop, what they are missing
out on?
Speaker 10 (43:03):
Yeah, so I would say what they're really missing on
is having access to all asset classes. And as you said,
they're largely in publics. But public will have.
Speaker 8 (43:12):
To be the core of the portfolio.
Speaker 10 (43:14):
You know, you need to manage liquidity in these portfolios,
and it is by far the biggest component of market
access today is in public market.
Speaker 11 (43:21):
I just got about thirty seconds left here real quickly.
Secretary of Besent kicked off Milkin talking about American exceptionalism
basically best place for the US. How do you see it?
Because you look at real estate from a global perspective.
Speaker 10 (43:33):
So here's what I would say, I think just quickly, yes,
just quickly, America will remain exceptional in technology. Not sure
about every sector of the economy.
Speaker 11 (43:43):
All right, you are quick, you know how to take cues.
Really really appreciate it. And it feels like a lot
more optimism, a lot more open than some of the
uncertainty and concerns come out. Perfect way for us to
wrap up.
Speaker 8 (43:54):
Our coverage today.
Speaker 11 (43:55):
Thank you so much for inviting us. Really enjoy the conversations.
Speaker 6 (43:58):
This is the Bloomberg Busy This Week daily podcast, available
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(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:33):
Well, we start today with the news out of Vatican City.
Cardinal Robert Francis Privos was elected to the head of
the Catholic Church. It was the second day of voting
in the Vatican. It was the first It is the
first US national ever to take the role. He's sixty
nine years old. He was born in Chicago. He spent
much of his life outside the US, mostly in Peru
and Rome. Leo the fourteenth is the name that he
(00:54):
has taken. He spoke for about ten minutes last hour
in Italian, Spanish and Latin as well. For more, we
bring in Natalia Imparatory Lee Professor and Chair of Religious
Studies at Manhattan College. Professor, good to have you with
us this afternoon. We are sort of slowly learning details
of the new pope. The big question I have is
(01:14):
what direction do you think he will take the church in?
Speaker 3 (01:18):
Thanks for having me. Yeah, I think this is a
really interesting choice. We can tell a lot from him
by the choice of name. In choosing Leo the fourteenth,
I think he's indicating that he wants to continue the
work of one of the most consequential popes on the
topic of social justice. So Leo the thirteenth wrote a
huge encyclical called Reream Navarum, and it basically set the
(01:41):
agenda for the social work of the church. And so
I think this American pope is signaling to us that
he will be on this sort of maybe a little
bit kind of on the progressive vein that you saw
Francis in.
Speaker 4 (01:57):
Yeah, it does look like that is an insane clicole
that was aimed at the working class. And of course
Pope Francis was first and foremost concerned with helping the poor.
What about immigration? This is obviously the divisive issue on
which the Catholic Church under Francis and the United States
government under President Trump have had the most disagreement.
Speaker 3 (02:20):
Yeah, I think it's going to be really interesting because
this is not a typical kind of US based Bishop
that we're getting as the pope right now. This is
a man who's lived all over Latin America. He's done
a lot of diplomacy, he's done a lot of church
building and bridge building in other places. You heard a
lot of that actually in his opening speech about building
(02:40):
bridges and walking together. And I think that he, with
his experience, especially in poor areas in Peru, he understands
what's going on with migrants and the sort of needs
of people who aren't in desperate situations. And so I
don't anticipate that he and the current president of this
country will be on the same page necessarily when it
(03:03):
comes to migration.
Speaker 2 (03:05):
What is the significance of a pope born in the
United States, the first American born pope, the first US
born pope, especially following the first South American pope.
Speaker 3 (03:17):
It is wild. None of us thought that this was
going to happen. No one that I know in the
Catholic universe thought that we would get an American, and
so it's pretty crazy to have two Americans, you know,
broadly understood, back to back. I think it signals a
kind of move away from a European centered church to
(03:40):
a more global reality and so you have this guy who, yes,
is from a global superpower, the United States and Chicago
a superpower city, but nevertheless is someone who was very
immersed in Latin American culture and then in the culture
of the Vatican. So you can see this sort of
global preference that the cardinals are starting to show that
(04:00):
they want to show that they have an openness to
not just a European Church, but really a more global reality.
Speaker 4 (04:07):
What's the likelihood that he can heal the rift between
the Vatican and American Catholics because it definitely had developed
and you mentioned this isn't the typical American cardinal, those
who had spoken out openly against Pope Francis. Can he
bring the kind of al Smith Catholics back to the church?
Speaker 3 (04:29):
I mean, it's my sincere hope that that is the case.
The question is can the al Smith Catholics get on
board with the papacy. I mean, the whole point of
a lot of this sort of disagreement is who is
really in charge, who should really set the agenda for
the Roman Catholic Church. And it's important for us, I mean,
(04:49):
as Americans, I know, we feel a lot of like
patriotism and everything right now, especially because he's an American pope,
but he's going to be the pope of the whole
global church, and so well, sometimes we can be a
little bit shortsighted and think, oh, well, he's not responding
to the things that we care about the most. But
he is trying to steer this ship that's kind of enormous.
Speaker 4 (05:10):
Four billion people. We should remind everyone one point four
billion people, right, the longest standing institution in the Western world.
And do Catholics believe that the pope, the leader of
the church is chosen by divine intervention, that essentially God
has picked this pope.
Speaker 3 (05:29):
I mean yes, but let me give you a caveat right.
God works through human beings. It's not that God whispered
the name Prevost in the ear of every cardinal elector,
and that's how it happened. Right, It's not Harry Potter.
It's very much real life. And so we believe that
the God doesn't let the church fall completely into error.
(05:51):
That we believe or we trust that God is somehow
in control of this church. And that is very much
what sort of is we see happening in a conclave.
Nobody knows what goes on inside you sort of really
have to trust, and even the men who are in
there are in a sense putting their trust in you know,
we don't really know how this is going to turn out.
(06:13):
We're going to sort of lay it at the feet
of God. And that's that's how Catholics think God works
in the world.
Speaker 2 (06:19):
I was pretty shocked to emerge from a meeting just
after noon here in New York and see white smoke
up on the Bloomberg television screen, given that the conclave
just started yesterday in Vatican City, and you know, yeah,
but looking into this a little more, that's not necessarily
that unusual, at least in modern times. They're not necessarily
going to be holed up for weeks historical context, for
(06:41):
just the duration of this conclave. Is it surprising to
you or is it pretty quick?
Speaker 3 (06:46):
I mean it felt quick, I feel like, because like you,
I feel like they just started yesterday and what's the deal.
But it's usually four to five ballots, right, That's pretty
much what it's taken the last three times, four or
five ballots they do. They're very efficient with their voting.
I wish I definitely didn't think it was going to
be prevost this quickly. So I was in a meeting
with a student and I had to sort of break
(07:07):
out and cancel it and move away from it. But yeah,
the white smoke came quickly, and it was a surprise
that it was prevous. Now I will say this, he
is the guy who was advising Pope Francis on who
to appoint as bishops, and it's really significant that he
is now the new Pope. It tells us that Francis's
vision for who should be in leadership in the church,
(07:29):
which is like people who were pastors, that's what Francis
really wanted. That this Leo the fourteenth is going to
continue that sort of vision.
Speaker 4 (07:38):
He actually started off quoting Pope Francis's Easter Sunday.
Speaker 2 (07:46):
Words.
Speaker 4 (07:47):
Do you expect him to carry on Francis's work not
only in terms of, you know, helping poverty, working class,
but also in terms of women in the church in leadership,
in terms of LGBTQ, bringing a sense of inclusiveness to
this Catholic church that traditionally, at least in leadership, only
relies on men.
Speaker 3 (08:09):
I mean, I hope. So, I don't know. I don't
know where he stands on the issue of women. I
can only rely on what he said from the balcony,
and a lot of that was echoing so much of
what Francis was saying. So you heard him hit all
the greatest hits. Right. He talked about peace one hundred times.
He talked about building bridges one hundred times. He talked
about walking together to the Promised Land. He kept saying
(08:32):
tutti tuti, which was like it means everyone, which was
a refrain of Francis's He talked about a church that
was open to all, that needed to dialogue, that needed
to do encounter, and that I think signals that he
wants to continue the legacy of Francis. Now as for
the specifics, right, will he continue to appoint women to
(08:53):
decision making positions in the Vatican? I hope. So that's
not some toothpaste. I think that I'll go back into
the tube very easily, but you won't know.
Speaker 5 (09:01):
Right.
Speaker 3 (09:01):
This is again where Catholics are like, come, Holy Spirit,
let's do this.
Speaker 2 (09:05):
Professor, really appreciate you joining us on Bloomberg Business Week
Daily this afternoon. Professor Natalia Imparatory, Professor and Chair of
Religious Studies at Manhattan College.
Speaker 6 (09:15):
You're listening to the Bloomberg Business Weekdaily podcast. Catch US
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch US live on YouTube.
Speaker 2 (09:30):
Well a hard pivot from Vatican City and from What's
going on with the Pope too. The other big story
of today, and that of course, has to do with trade.
President Trump announced a trade framework with the UK, hailing
it is a quote breakthrough that will bring down barriers
and expand market access for American imports. The President said
final details of the pact would still be negotiated in
(09:50):
the coming weeks, but under the agreement, the UK would
fast track American goods through their customs process and reduce
barriers on ag, chemical, energy, and industrial exports. Here's what
he said a little earlier today.
Speaker 5 (10:03):
Both countries have agreed that the economic security is national secured,
and we'll be working together as allies to ensure that
we have a strong industrial base, appropriate export controls and protections.
Were key technologies and industries like steel. Steel is a
big factor. Both countries will become stronger with steel.
Speaker 2 (10:21):
That was President Trump earlier in the day from the
Oval Office for more we bring in Bloomberg News, UK
Government porter Joe Mays and Bloomberg Economics and US economist
start Paul Joe's in London stored us here in the studio. Joe,
I do want to start with you and just can
textualize the framework or at least the details with what
we know in the framework between what was there before
(10:42):
Liberation Day so called Liberation Day, and what is the
status now after this framework was announced. What are the
big differences there?
Speaker 7 (10:50):
Yes, the context is that the US brought in these
quite putative tariffs, particularly on the car sector, steel's aluminium,
in excess of twenty five per sent for those industries
and that was very damaging to the UK economy. And
after the deal today there is relief for those industries.
So on cars the tariff going down from twenty seven
point five percent to ten percent for a quotch of
(11:12):
one hundred thousand vehicles, which the privacy case DALM was
hailing as a victory for companies like Jaguar Landrover. The
steel tariff has gone from twenty five percent to zero.
Similar for aluminium. So those are the real big tariff
wins that the UK wants to talk about But nevertheless
there are still these ten percent baseline tariffs on the
arrest of goods that the UK tries with the US.
(11:32):
So it's still a weaker position for the UK than
before Donald Trump became present, but it's better than things
were yesterday. That's how kiss Dalwin was framing it. So
it's a limited polisical win for the UK whilst still
suffering effectively from the remaining tariffs.
Speaker 4 (11:46):
What about US access to the UK market? And one
of the things Donald Trump has talked about for a
long time is that, you know, Europeans and I suppose
he includes the Brits in that don't buy American products,
and of course he's talking about cars. Is the UK
market going to be far more open to US goods
(12:08):
than it was before this agreements?
Speaker 7 (12:11):
There was included in this agreement provisions to liberalize access
to UK market for food products for example, for example,
beef exports can now come into the UK from the
US and why they couldn't before.
Speaker 8 (12:22):
So that was hell as.
Speaker 7 (12:23):
A victory by President Trump. A tariff on ethanol exports
in the UK they're also now being removed, So yes,
there was a liberalization here. It wasn't an enormous liberalization that,
for example, on food standards, the UK is still saying
that it won't, for example, accept hormone treated beef into Britain.
So that's a a kind of limitation on that liberalization,
but still extreme limitation.
Speaker 2 (12:44):
Thanks Start, Yeah, I want to bring Start Paul in
a Bloomberg Economics he joined us here in the Bloomberg
Business Week studio. Equity markets certainly cheering this, and we
should note that the fact that the President did make
comments about buying US equities earlier in the day as
well when he was in the Oval office earlier. Stuart,
what is the view from your per Bloomberg Economics of
what this means for the US and sort of how
(13:06):
it could illuminate maybe a framework moving forward for deals.
Speaker 9 (13:09):
Just we know that we're on a de escalatory path.
This concretizes some of it. It gives some sort of
shape to what we could expect from deals going forward.
It might be a piecemeal approach, and this can be
something that takes a long time to develop. As we
heard from Secretary Bessant, there are seventeen key trading partners
that the US is approaching deals with. If they all
take this shape, They're all going to have a relatively
(13:32):
dull sort of impact on US economic activity. What will
really shift most is sentiment around US engagement in the world. So,
just recognizing that we're on this sort of de escalatory
trend and that there's not going to be just a
full retreat from the global stage.
Speaker 4 (13:48):
What would be the best for US economic activity? I mean,
it doesn't seem like the President's going to lower at
least the baseline tariffs billow ten percent for any country,
won't do it for the UK.
Speaker 9 (14:01):
Yeah, So even if he doesn't lower the baseline tariff,
creating enough car vouds does open up, so it does
sort of generate additional economic activity, and it brings the
average effective tarif rate significantly below what that ten percent
baseline is. So if we think about what the average
effective tarif rate was on the UK, it was just
a touch above ten percent. Now with these carveouts, the
(14:23):
average effective tarifrate in the UK drops down to about
seven percent. So what does that means, Let's say for
the UK in terms of economic activity and growth, where
there was about about thirty basis points of drag on
real GDP growth for the UK, now it'll just be
about twenty basis points of drag, so that'll keep GDP
growth just a touch under one percent for the full year.
(14:46):
That's that's according to our UK forecast.
Speaker 2 (14:48):
Hey, Joe, on that point, based on your reporting and
what you've learned about this deal, does it seem like
it's a better deal for the US, it's a better
deal for the UK? Or are they kind of when's
the table here?
Speaker 4 (15:01):
Is it?
Speaker 8 (15:02):
When?
Speaker 10 (15:02):
When?
Speaker 8 (15:04):
Yeah?
Speaker 7 (15:04):
I mean it feels like a better deal for the
US if your reference point is the day Donal Trump
becomes president, because compared to that day, the US has
gained a fair amounts here agriculture access for many products,
the ethne thing I mentioned, and still has these ten
per cent tariffs on the UK, and the UK is
in damaged limitation mode with this deal, so better than yesterday,
(15:24):
but clearly not as good as it was when Don
Trump first became president. So yeah, I think it's the
US is I think coming out of this slightly stronger
or the UK also is trying to claim that the
wins are on their side.
Speaker 2 (15:36):
As we mentioned, Joe, this is a framework right now.
Some of the details continue the need to be hashed
out in the coming weeks. What questions do you have,
like what's the fine print here that we don't really
know yet.
Speaker 7 (15:48):
So the UK said that this for them is really
a starting point. If anything, there's still much more to
happen when it comes to negotiations. That are things like
the digital services tax, which the US wants to see
regime used. It's dislikes by the likes of Facebook, Google,
the evil musk Rey dislikes that tax. That could form
part of a digital agreement that's still to be negotiated.
(16:08):
The UK has said there's also other tariff lines which
the UK would like to see removed, but that subject
further negotiation. The pharmaceutical sector, for example, very important to
the UK. There wasn't explicit reference to that in the
agreement today, so what happens there on tariff So there's
still much more to come bent President Trump was trying
to say this is full comprehensive, We've maxed it out,
and the UK was saying, well, actually there's a lot
(16:29):
we still wanted to talk about here, but you know,
we'll play nicely for today.
Speaker 4 (16:33):
Joe, I wonder about the the importance of automotive to
the UK economy. It's been become clear. I think to
a lot of people over the past few weeks, certainly
since April second, that global trade is car trade?
Speaker 8 (16:47):
Really?
Speaker 4 (16:49):
How big is it in the UK, especially when you're
just looking at exports to the US, right, because I
only can think of very high end you know, Gordon
Murray Automobiles, McMurtry, McLaren, Range, Rover, Rolls, Royce Bentley. It's
not the mass production vehicles as Tim was mentioning, like
(17:09):
Toyota and Nissan. Even though you make them there, you
don't make them there for our market.
Speaker 7 (17:14):
Yeah, that's right. It's premium cars that the UK tends
to sell into the US, and exports of UK cars
the US were about one hundred thousand of the last counts,
which is basically covered by this quota that's been announced today,
one hundred thousand quota at ten percent. So you can
see why the UK is happy with that arrangement. I
think the UK carnistry has been broadly speaking, in decline
in recent decades, but nevertheless it has carved out this
(17:35):
niche in high end luxury vehicles and the US worst
important market. So there's a kind of symbolic win here
for the UK. It won't have massive impacts on the
UK comedy Ritt large. It's still a very small part
of the UK comedy. But nevertheless it's a kind of
nice symbolic political win for Kirstamer to say, look, I
have masage to reduce these tarers and he was saying
today this preserves jobs across the UK, so that's something
(17:57):
to be celebrated.
Speaker 2 (17:58):
We're having this conversation, Stuart, in context of a United
States that has essentially said now is the time to
come and negotiate. We know that the Treasury Secretary is
headed to Switzerland this weekend to meet with representatives from
the Chinese government. We're not talking about China here, though.
Does any of this matter without a deal with China?
Speaker 9 (18:18):
China, of course matters. Most accounts for about what fourteen
to fifteen percent of our total imports were running a
trade surplus with the UK. It really doesn't matter a
ton to the US if the average effective tariff rate
on UK goods is somewhat higher. Once you start creating
carve outs for things like pharmaceuticals and everything else under
the sun, we're gonna drop from probably a current effective
(18:40):
tarifrate of seven percent on UK imports to something closer
to three percent. Not really material. What I do think
is the most material is this idea that when Trump
took office, the outward expression was one of an interest
in withdrawing from the global stage. Now directionally we're moving
(19:00):
in the opposite direction. We have had public statements from
folks like Besant and everybody else saying that one hundred
and forty five percent effective rate on China is not
something that sustainable or that can stay, that can remain
in perpetuity. And so again the direction is towards de escalation,
and I think that that's what matters most. This is
(19:21):
not going to be just the complete crackup of the
global commercial order that was threatened. There will be a
turning of the tide, in a bit of a shifting.
But we knew that that was going to be the case,
with friend shoring and on shoring as opposed to you know,
retaliatory or reciprocal tariffs being the terminology of the day.
We knew this was going to be the direction under Trump.
Speaker 11 (19:41):
By the way, I forgot to.
Speaker 4 (19:44):
I forgot to tell everyone Happy v Day because it
is May eighth, right, It's victory in Europe Day. Joe,
Happy ve Day. Well, what do we know about the
European Union? I mean, the US UK agreement has been
the main headline, but we've got another flurry of trade
headlines with golf, sovereign wealth funds, with a critical minerals
(20:09):
deal in Ukraine, and the EU talking about tariffs on
ninety five billion dollars of US exports. What do we
know about the EU deal?
Speaker 7 (20:19):
And what we know is that clearly it's a big
priority for both sides to get some kind of agreement done.
And we're all kind of reading the tea leaves today
on the UK agreement to say, Okay, clearly the US
is willing to do this entree, so might they be
willing for the same on the EU. But clearly it's
different when it comes to the scope of those kinds
of deals. Obviously much larger economies, much more trade at stake.
It's really a watching brief at this point, trying to see,
(20:41):
you know, will there be movement in these coming weeks. Clearly,
as we've just been discussing, the direction of travel from
the US side is towards wanting that engagement. But the EU,
we know, strikes very hard bargains. These negotiations, and it
is unlikely to kind of concede too much in those
kinds of talks. So, yeah, it's still a watching brief, Joe.
Speaker 2 (20:59):
A lot of questions about this status of American beef
going to the UK. What can you tell us just
about American agriculture and access to the UK market and
how that could potentially change under this framework.
Speaker 7 (21:12):
Yeah, so this has been one of the biggest sticking
points in the UK US trade talks historically. It's one
of the reasons why it's been difficult to get a
kind of big, comprehensive free trade agreement in recent years.
And what's happened here is that the UK has said, yes,
we will allow for the import of US beef, but
on the condition that it reaches UK food standards. Now,
(21:33):
those food standards are standards that the US has long
criticized has been a scientific and unnecessary, but in the
UK they are seen as exceptionally politically important, and we're
talking here about things like hormone traded beef, hormone treated beef.
And indeed, for the UK it's for important to maintain
their standards if they want to deal with the EU,
because the EU is particularly hot on having those standards upheld.
(21:54):
So what the UK is done here is can walk
that tightrope and kept open the option for deals with
the EU by keeping that restriction in place. Benethless, given
the US a win by saying you can import some
beef into the UK now which tariffs and so on
under a quota, but just not hormone treated beef. So
you can see why it's kind of a halfway house.
Speaker 2 (22:13):
I want to give Stewart the last word. One of
the reasons we love getting you on, Stuart is because
you're able to make these quick calculations about economic impact
of certain events. And I'm going to put you on
the spot here and just give us your view on
the pope and what it means for the US economy
that he is actually the first US born pope to
lead the Catholic Church. Do we have numbers here, sure?
Speaker 9 (22:35):
So what really matters is if he's going to come
and visit the United States. Right, famously, post Francis wouldn't
really return to Argentina. But if we were to see
now Pope Leo the fourteenth coming to the United States,
it could mean a material increase in spending. If we're
just extrapolating based on the economic activity boost from let's
say Francis's visit to Philadelphia or Soul in twenty fourteen
(22:59):
and fifty, and just adjusting for inflation and accounting for
what the impact to be. If the Pope visited, say Chicago,
his hometown, you could expect about a billion dollars an
additional economic activity. That's about five basis points of additional
spending growth in any given month. A four city tour
or five city tour like that is a pretty big
(23:20):
papal pop in economic activity from a tour coming from
the pope.
Speaker 2 (23:24):
Okay, so maybe not Taylor Swift, maybe not Beyonce, but
the Pope certainly a huge economic impact.
Speaker 4 (23:30):
If he does a whole tour, it would be a
different story, right. He wouldn't likely just go to Chicago.
He would bring over the his whole entourage, probably at
least one Pope mobile. So I imagine he would go
you know, New York, DC, Chicago.
Speaker 9 (23:45):
Yeah, I mean the travel expenses, the security expenses for
each city visit, that's probably close to about fifty million dollars.
But yeah, this is not quite Taylor Swift, but they're
still talking about filling Wrigley feel. Yeah, it's a a
good amount of economic activity that generated.
Speaker 2 (24:02):
All right, well, a big thank you to both of
you who covered a lot here. We went around the world.
Joe mays Our, Bloomberg News UK Government reporter, joining us
from London. Bloomberg Economics US economists store Paul.
Speaker 8 (24:11):
Here.
Speaker 1 (24:12):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five East. During
this listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 11 (24:28):
I'm Carol Massard. We're at the Principal Asset real Estate
conference here in Pleasant Valley, Arizona. We're going to continue
our coverage here. I want to throw out one little
stat as we continue. Nearly half of family offices say
they plan to increase allocations to real estate in the
coming months, with an emphasis on residential industrial sectors. This
is according to some research out from night Frank, So
let's get to it. I'm curious what rich Hill has
(24:48):
to say about it. He's Senior managing director, Global head
of real Estate Research and Strategy at Principal Asset Management.
Here at the conference in Arizona, rich. Good to have
you here with us. How are you.
Speaker 8 (24:58):
I'm great, Thanks for having me on today.
Speaker 11 (25:00):
It's great to have you here. I love folks who
have seen some different cycles. How do you make sense
of this cycle right now?
Speaker 3 (25:05):
Hey?
Speaker 8 (25:05):
Look, every cycle's different.
Speaker 12 (25:07):
I like to begin by saying commercial real estate valuations
are down more than twenty percent from their peak in
twenty twenty two. That's a generational decline in private real
estate valuations. We've only seen that two times before and
aftermath of the Great Financial Crisis and in the early
nineteen nineties post this SNEL crisis. So heading into this year,
commercial real estate valuations felt like they were on pretty
(25:30):
good footing. Then April came and tear us through a
little wrench in that equation, leading to some questions amongst investors.
Speaker 11 (25:36):
Well, it's interesting too when I think about miss priced assets,
So how mispriced are they then today in terms of
lower too low in terms of valuation, Which are some
assets that maybe still need a little bit of work here?
Speaker 12 (25:47):
Yeah? Great, that is a really interesting question because as
you think about what's miss priced, you can think about
that on absolute basis or a relative basis, where we
think about assets that are mispriced. It's that are actually
going to grow very strongly over the next three, five
or ten years. Those are, in many cases alternative sectors
that many people don't think are what could be considered
(26:11):
traditional commercial real estate asset classes, right, things like data centers, right,
or cell dours or seniors housing or single family rentals.
These were asset classes that didn't exist in the commercial
real estate sector twenty years ago, but are now a
big portion of the commercial real estate market.
Speaker 5 (26:26):
Yeah.
Speaker 11 (26:26):
I love that you go there. There's also variations I'm
assuming in terms of geography, right, when you look at
what's miss priced what's not for sure?
Speaker 12 (26:35):
As we think about what has done really well over
the past five years, it's been driven by population migrations, right,
So many of the Sun Belt markets boomed in valuations,
and you're beginning to see some actual growing pains in
the Sun Belt market.
Speaker 8 (26:50):
You know.
Speaker 11 (26:50):
One of the things I love that you said longevity.
Deborah Cafaro Aventis was on this panel I did at
Milkin and just you know, she's been you know, obviously
when it comes to senior living centers, obviously the healthcare
sign of it, but that longevity play, especially when it
comes to real estate. That's one that's going to stick
with us for a while.
Speaker 8 (27:09):
It is.
Speaker 12 (27:10):
What I don't think a lot of people may understand
is that the aging demographic has lived in their houses
for longer periods of time. That's actually created some structural
and balances in.
Speaker 8 (27:21):
The single family home market.
Speaker 12 (27:23):
But we think this aging demographic will ultimately move into
seniors housing, whether it be limited service senior housing, all
sorts of different seniors housing, and this is going to
be a long term structural shift that's here to stay.
Speaker 11 (27:35):
That's a global That is a global trend. It is,
it's not specific in terms of different markets. One of
the things I wanted to say, I mean, looking at
how US reads are performing as a group, they're up
about one percent year to date. They've bounced back along
with the rest of the US market. They're nearly up
twelve percent since early April. You look at European reads,
they've bounced nearly seventeen percents since then. What does the
(27:58):
trend tell you about investor sentiment and the willingness to
maybe go back into the market. Is it just the
overall okay bounce back or is it something more substantial.
Speaker 12 (28:07):
We think it's something much more substantial.
Speaker 8 (28:10):
Reads.
Speaker 12 (28:11):
While they've had good years in the past couple of years,
on an absolute basis, they haven't been a favorite sector
in the S and P five hundred or the global
stock market. But we think the listed public markets are
a leading indicator on both downturns and recoveries. So the
public markets are sending a signal that commercial real estate
might be a relative winner in this new backdrop of
(28:31):
higher interest rates and higher inflation. It's a really fascinating
topic that I don't think is getting enough attention. List
reads in the United States. Real estate in the United States,
that's the fourth best sector of the S and P
five hundred. Despite all the headlines you see about what's
happening with tariffs, what's happening with growth, what's happening with
interest rates, the public markets are telling you that you
should be focusing on the commercial real.
Speaker 11 (28:50):
Lill how do you make sense of that in terms
of a higher for maybe longer rate environment. Certainly in
the United States, it's not fair to say, I mean
the ECB we saw, you know, certainly has been cutting rates.
Was at the Bank of England cut it. It's not
all the same rate strategy when it comes to global
central banks, how do you make sense of that? Though
in the United States.
Speaker 12 (29:05):
I'm often asked, what do I think about this new
normal environment of higher inflation and higher interest rates? I
reject the premise of the question. What was abnormal was
the last ten years of low interest rates and low inflation.
Commercial real estate actually doesn't do that well in that environment,
at least on a relative basis. Where commercial real estate
actually does well is what happened prior to the GFC.
(29:27):
A higherst higher inflation regime exlicit for decades, and that's
actually fairly accommodative for commercial real estate because guess what,
it's a growth sector.
Speaker 11 (29:37):
What about office? I just want to go there. I
feel like we've been talking about it since the pandemic.
Here we are, what five years out, and I don't
know whether the big shoe has yet to drop expectations
in terms of that within the real estate sector.
Speaker 12 (29:53):
If you're going to ask me, is office going to
be an attractive sector over the next ten years or beyond, yeah,
I have to tell you yes, it's going to be. Why,
there's a couple different reasons. First of all, last cycles
winners are rarely next cycles winners. Office properties have been
beaten down so much and they're redlined by much of
the investor race right now, right that they're beginning to
(30:15):
screen at an attract evaluation, especially for the high quality,
well positioned properties. I would consider myself office curious right now.
I think it is an attractive asset class over the medium.
Speaker 8 (30:27):
To long term.
Speaker 12 (30:28):
The signal that you should be looking for is an
opening up of lending to the office sector, and I
think we're in the cusp of seeing that in twenty twenty.
Speaker 11 (30:34):
Five, coming from the private markets more so than the
big banks.
Speaker 12 (30:37):
That is correct, people like Prince Alassat Management. One of
the themes that we heard on our panel earlier today
is well, is there an opportunity to begin lending on
high quality office at a reset lower basis. I think
that might make a lot of sense.
Speaker 11 (30:49):
I am curious. You know, as you guys have conversations
here at the conference, You've got some really big clients,
big investors here, what is top of mind for them
when it comes to real estate? And I hate to
keep putting it all into one bucket, because it's, as
we know, there's different verticals, there's different geographies, and I
think it's an important distinction, but I am curious what
they're asking you.
Speaker 12 (31:05):
Yeah, what's happened over the past twenty thirty years is
that commercial real estate has benefited from a secular decline
in tenure treasure rates. Right, borrowers have been or investors
have been able to refinance and lower lower interest rates,
which has helped valuations. I think a really big theme
coming out of this conference is back to basics, what
property type and what market will drive long term growth.
(31:27):
That's really refreshing to me because financial engineering has driven
returns for the past decades, so rightkaid, Plus we're now
getting back to all right, fine, what property type do
I think I'm going to get three percent net operating
income growth revenue minus expenses?
Speaker 1 (31:40):
Right?
Speaker 11 (31:40):
Where can I.
Speaker 12 (31:41):
Actually generate the high attractive unlevered IRRs. You actually don't
need that much growth relative to history to get there.
So I think there's a lot of investors acutely focused
on what property types and what markets to buy.
Speaker 11 (31:53):
Which it's more like being back to normal, right. I mean, well,
I know everybody kind of forgets that what we saw
for such a long time where there was basically no
cost to money. Right, that was the unusual point.
Speaker 12 (32:03):
Called back to the future, call it back to normal,
whatever you want to. This is a really refreshing environment
where you can actually block and tackle if you will.
Speaker 11 (32:10):
I want to ask you variations US, Europe, Asian, Middle East,
you know, the supply chain as it moves around geographies
that maybe didn't get a lot of attention that are
now getting attention. Like I keep bringing up this idea
that Disney's not going to build a theme park in
the Middle East. You know, I talked to a lot
of folks at Milkin who were like, we opened up
in an office somewhere in the Middle East. So I am
(32:31):
curious when you look around the world, you know, where
is it all of a sudden getting a lot of
investor intention when it comes to the real estate play.
Speaker 12 (32:38):
We think one of the most significant trends of the
next five to ten years might be the European continent
and specifically Europe. Yeah, and specifically building logistics on the
European continent. Why is that the case, Well, the European
countries might have to trade more with each other, and
most warehouse facilities on the European continent are actually relatively old,
(32:59):
call it ten fifteen, twenty years old, right, That does
not accommodate new modern trade.
Speaker 8 (33:04):
So to be able to build new.
Speaker 12 (33:07):
Logistics facilities on the continent could be a really interesting
theme that's coming out of the next evolution of where
we go post era?
Speaker 11 (33:14):
Does that also include ports like ports all of a sudden,
Like one of the things that came out of the
discussions at Milkin too is like that West coast port
one of you know that maybe it'll be busy, but
maybe not as busy as it used to be. So
I'm just curious when you think about that as well,
the infrastructure build for that.
Speaker 12 (33:29):
Absolutely you have to find these right ports on the
European continent and maybe even the UK that will change
the shipment of goods. Maybe in the US. One of
the ports that I think is most interesting in Savannah.
Just to sort of levey off of what you were talking.
Speaker 11 (33:44):
About, We've got a lot of family down in South Carolinina,
not Savannah, But nonetheless there's so much activity just to
wrap up here. Where do you think is the biggest
opportunity when you look out Again, real estate's a longer
term play, so I think it's either three, five, ten years,
where do you think will really present some really unique
opportunities for investors.
Speaker 12 (34:04):
Yeah, so I'd just conclude commercial real estate is actually
eighteen different sectors that fall under a broad umbrella. They
were always opportunities someplace in the world for some property type.
I do think European logistics is a really big opportunity.
We think senior's housing is a really big.
Speaker 11 (34:18):
Opportunity globally, right globally.
Speaker 12 (34:20):
One of the themes that I've been really surprised about
to hear because it's a relatively nichee sector, but levers
off of senior's housing is medical office buildings. I've been
hearing a lot of investors talk about medical office buildings.
So there's going to be some really interesting opportunities that
come out from the shakeup. And I'll come back to
the question you asked about office. I'd be remiss if
I said over the next ten or twenty years, it
(34:41):
sort of feels like it's ready for a rebound.
Speaker 11 (34:43):
At some point, people are actually going back to the office,
aren't they.
Speaker 12 (34:46):
My train into New York City is at ninety seven
percent of capacity.
Speaker 11 (34:49):
It's happening. It's happening, really great stuff. Thank you so much.
Speaker 8 (34:52):
It's great meeting you. Yeah. Same.
Speaker 11 (34:53):
Here. Rich Hill, Senior Managing Director, Global ahead of real
Estate Research and Strategy at Principal Asset Management. Here at
the Principal of Real Estate Conference.
Speaker 6 (35:01):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
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Speaker 11 (35:17):
Jim's back in New York. I'm here in Arizona, and
I'm here at the Principal real Estate conference that's been underway.
I want to jump right in and get to our
next guest's Kamal Bati's President CEO of Principal Asset Management. Kamal,
it's been really fun talking with your team because I think,
amid uncertainty volatility, you know, when you think about some
of these asset classes, like real estate, investors are in
(35:37):
it for the long term, so there is a sense
of calm and understanding that we're going to go through cycles.
Talk to us a little bit about, you know, your
check ins with your team on a regular basis, A
mid kind of the backdrop.
Speaker 10 (35:48):
That we've had absolutely First of all, Carol, thank you
for being here in Arizona. It's it's an honor. You know,
real estate is the heart of our business. We have
one of the biggest managers in the world, and it's
great to have Bloomberg join us at our premier conference,
So thank you for that.
Speaker 11 (36:02):
Adom Becaus been doing it for a quarter of a century.
Speaker 10 (36:04):
We have been we have some experience from market cycles,
which which probably matters more than ever before. So to
your question, I think, you know, sort of uncertainty seems
to be the most commonly used word these days, and
I would say probably the world I want to focus
on is clarity because as investors, I think that probably
is the more important word to focus on. What you
can get clarity on and what you can get clarity on,
(36:26):
In fact, one of the things when you really think
about long term trends, because there's a lot of short
term noise. The two things I think we can have
absolute clarity on is the world is aging and there
is money in motion in retirement. And I think if
you really think about the needs of those investors in retirement,
(36:47):
which we are a premier manager, almost three and twenty
billion of our assets in retirement. The needs for those
investors are like only getting more important. And if you
really bring that act to an investing landscape with what
we have noise in the trade, trade wars, de globalization,
(37:08):
the one thing that is clear to us is you
have to have local knowledge and footprint as you navigate
this environment. You can run portfolios just with a US mindset.
You've got to have intelligence on the ground, right if
you're trying to do something in Asia, you're trying to
do something in Europe. And that's been the key thing
that I would tell investors need to focus more and
(37:29):
more on local knowledge and clarity on what's happening in
the local geographies is going to be way more important
than it's.
Speaker 11 (37:36):
Been in the part. I think that is so smart
because I do think you know, we throw out global
real estate said this a couple of times in the
conversations today as a bucket, but there's just so many
different dices and slicing of it, if you will, in
terms of the different types that are out there. You know,
one of the things I am also curious, you know,
you guys have been doing this for a long time
and it just felt so uncomfortable, But you think of
(37:56):
something like the Great Financial Crisis. This is nothing like
what we start are the GFC right when it comes
to real estate and just in general market volatility.
Speaker 10 (38:05):
Correct, correct, And look, you know, I think we've had
such ultimate calm on what I would call political policy.
You know, we over post GFC, so much of our
attention went to fiscal and monetary policy. I would say
monetary policy more than anything else, right, And fysical policy
comes into work on and off, but it was really
(38:25):
monetary policy was the driver of what all investors thought about.
And now I think we are entering an era where
I would say political policy and fiscal policy are going
to be the driving forces of markets moving forward.
Speaker 8 (38:38):
And it's sort of you have to recalibrate your.
Speaker 11 (38:41):
Bettering your view.
Speaker 10 (38:43):
I think it's a different thing. Okay, I wouldn't call
it a better thing. I think we have gotten used to.
I go back to this word around clarity. Central bankers
became very very good at providing clarity. Yeah, if you
look at the history of how ins have reacted, such
attention gets paid to interest rates, what central bankers say,
(39:04):
and that sort of became the words they chose and
how they said. It allowed investors to build a framework
and invest around it. While we can rely on that,
it is you can get the same level of clarity
from the political policy today, not just in US but
across the world, and the fiscal policy is much more
in control of government organizations, and so you have to
(39:28):
do a lot of individual work and incremental work as
an investor if you want to see clarity. And I
think it's going to be good for markets. Why it
is going to be good for markets, in my mind
is we've had sort of a collective viewpoint where markets
are going, and I think there's a bigger dispersion in
investors who think where the world is going.
Speaker 11 (39:49):
It's interesting that dispersion. I feel like that is a
word I'm hearing more and more often in terms of
just the variations, and you've really got to kind of
do your homework. I want to go back to what
you talked a little bit about longevity, retirement, the democratization
especially the private market. Is that going to increasingly whether
it's exposure to real estate or other important for ultimately
(40:12):
folks really hitting their targets when it comes to retirement.
And what do you want to see in terms of policies.
Speaker 10 (40:18):
Absolutely great question. So I was just earlier this week
at Milkin and that was a big topic.
Speaker 8 (40:23):
Yeah, private markets.
Speaker 10 (40:25):
Before that, I'm on the ICI board, Carolyn, that has
become a topic there. So this notion of retirement and
private markets overall is a big topic.
Speaker 8 (40:35):
But I would say the three big.
Speaker 10 (40:36):
Trends in the retirement space are, in addition to private markets,
there is innovation, and innovation is not just investment innovation.
There is technological innovation that play a role for these
products to deliver their outcome. And then the last piece
is I go back to policy. These markets are highly
dependent on where regulatory policy evolves, and I would say
(41:00):
the retirement investor is absolutely not participating in private markets today.
They're almost like sitting on the sideline stuck because there's
no clarity on the regulatory policy front of how they
should access is and while there is innovation of how
to do it, it is not there yet. Going back to
real estate, I would say it is probably the first
(41:21):
door you have to enter if you want to allow
private markets, and as an investor, it should be really
easy to.
Speaker 8 (41:26):
Understand why why exactly?
Speaker 10 (41:28):
I would say of all the asset classes, real estate
is probably the most different from bonds and stocks. You know,
people talk about private equity, people talk about private credit.
They are different, but they're not that different. Real Estate
at the core is different, and so why are we
going to do this. It's all about outcomes, So you
want to add things that diversify you further. So real
(41:51):
estate a makes the first logical argument, and academic literature
even says that you've got to pick the most diversifying
asset first, So that one makes sense. Two, it is
deeply global, and it is wide and deep realistic exist
all across the world.
Speaker 8 (42:09):
You know, we have read markets.
Speaker 10 (42:11):
And so the second thing you want to have is
if you want to do it in retirement portfolios, you
want to have public and private proxies for doing something.
Speaker 8 (42:18):
Yeah, real estate is one of those asset classes.
Speaker 10 (42:20):
You could buy direct or you could do reads, you
could buy bonds, or you could do equity. It is
a complete three sixty asset class. And at the end
of the day, the saverer, which is really mom and
pops who are saving for retirement, want to have an
asset class that's deep and you can implement your views
across the world in.
Speaker 8 (42:38):
A good way. That's probably the best reason I would argue, you.
Speaker 11 (42:40):
Know, it's funny at Milkin and one of the guests,
I said, you know, it's going to be a period
where like we don't really care about the public markets anymore,
and like they looked at me like I was black.
You know, what are you saying? But it just increasingly
the shift private markets has certainly been a topic, as
you know it looking for a long time, whether it's
real estate like pick your thing, and I just wonder,
you know, how are the majority of investors for one
(43:00):
cage like your mom and pop, what they are missing
out on?
Speaker 10 (43:03):
Yeah, so I would say what they're really missing on
is having access to all asset classes. And as you said,
they're largely in publics. But public will have.
Speaker 8 (43:12):
To be the core of the portfolio.
Speaker 10 (43:14):
You know, you need to manage liquidity in these portfolios,
and it is by far the biggest component of market
access today is in public market.
Speaker 11 (43:21):
I just got about thirty seconds left here real quickly.
Secretary of Besent kicked off Milkin talking about American exceptionalism
basically best place for the US. How do you see it?
Because you look at real estate from a global perspective.
Speaker 10 (43:33):
So here's what I would say, I think just quickly, yes,
just quickly, America will remain exceptional in technology. Not sure
about every sector of the economy.
Speaker 11 (43:43):
All right, you are quick, you know how to take cues.
Really really appreciate it. And it feels like a lot
more optimism, a lot more open than some of the
uncertainty and concerns come out. Perfect way for us to
wrap up.
Speaker 8 (43:54):
Our coverage today.
Speaker 11 (43:55):
Thank you so much for inviting us. Really enjoy the conversations.
Speaker 6 (43:58):
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