Day Two Live from the Milken Institute Global Conference

Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Television and Radio broadcast live from the Milken Institute Global Conference featuring EY CEO Carmine Di Sibio, Byron Allen, Founder and CEO of Allen Media, Amherst Group Founder and CEO Sean Dobson, Seth Boro, Managing Partner at Thoma Bravo, David Steinbach, CIO at Hines and Lisa Donahue, Co-Head of Americas & Asia at AlixPartners.
Hosts: Carol Massar and Romaine Bostick. Producer: Paul Brennan. 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.

Speaker 2 (00:08):
This is Bloomberg business Week inside from the reporters and
editors who bring you America's most trusted business magazine, plus
global business, finance and tech news. The Bloomberg Business Week
Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

Speaker 3 (00:27):
All right, welcome back today too of our special converridge
from the twenty seventh Annual Milkin Institute Global Conference. Here,
you're very warm Beverly Hills, California. A mash up once
again of two of your favorite programs. I'm not going
to say which one is their favorite, but it is
a mash up both The Clothes and Bloomberg BusinessWeek.

Speaker 4 (00:43):
I'm remain bosting.

Speaker 5 (00:44):
I thought you're gonna say two of your favorite talents,
but I didn't want to go there.

Speaker 4 (00:47):
I'm Carol Messer. Everybody TI mana Alex sale Us.

Speaker 6 (00:50):
Don't tell them all right.

Speaker 5 (00:51):
We spent a lot of time yesterday talking to folks
from the world of private capital.

Speaker 6 (00:55):
Today we're going to expand things a.

Speaker 5 (00:56):
Bit with the broader cross section of finance, including sitting
right next to us, Carmen Decibia.

Speaker 6 (01:01):
He's e Y CEO we're.

Speaker 5 (01:02):
Gonna talk about some of the big changes in the
world of consulting. I'm curious though, what CEOs, what they
want to know for him from him right and his team.

Speaker 6 (01:09):
About what's top of mind for them.

Speaker 3 (01:10):
A lot going on in that space, a lot going
on in the media space as well. Buyer Now and
going to be stopping by to give us his thoughts
here on that long shot bid for Paramount.

Speaker 6 (01:19):
I'm really excited too. We're gonna talk a lot about
real estate today.

Speaker 5 (01:21):
David steinback at the real estate investment Giant tinds to
talk single family rental strategies. They have such a great
global perspective, so curious to.

Speaker 6 (01:29):
See what he has to say.

Speaker 3 (01:30):
Katie Cotch, CEO over at TCW, going to be stopping
by as is.

Speaker 6 (01:34):
Wait and they had some news yesterday.

Speaker 4 (01:35):
Oh yeah, that is right. We've got a lot to
talk about.

Speaker 6 (01:37):
In the private credit space also with us.

Speaker 5 (01:40):
We're going to check in with Ray McGuire, president of
the investment bank Lozella, So that's going to be pretty cool.

Speaker 3 (01:46):
And then a guess, I think I know that you've
been really excited to talk about You're really into this
bureau science stuff.

Speaker 5 (01:51):
Yeah, exactly doctor Ollie Rezaie he is over at West
Virginia University of Rockefeller Institute.

Speaker 6 (01:56):
Sixty minutes.

Speaker 5 (01:57):
Just did a piece with him, so fascinated to see
what he has to say. Doing this on a day
where we see the markets up again, S and P
popping up above fifty two hundred.

Speaker 4 (02:04):
There's a lot more optimism when we talk to people.

Speaker 3 (02:06):
There's a lot more optimism, whether it's some public markets,
private markets, deal making, consulting.

Speaker 7 (02:12):
Yeah, maybe, well that's what we're going to find out.

Speaker 5 (02:14):
But stay we often talk with disruption or about disruption
here at Milkin investing in business and technology. It is
also happening as more mainja sent in the world of consulting,
where firms have trend headcount, delayed start dates, and slow
the pace of hiring over the past year amid declining
demand from their clients.

Speaker 7 (02:30):
So we have a great voice to talk about.

Speaker 5 (02:32):
The industry and changes at his own firm and more broadly,
Carmen Decibio's global chairman and CEO of the consulting firm
Ey here with us at Milkin, thank you so much for.

Speaker 6 (02:40):
Being with us.

Speaker 8 (02:42):
Great being are goal through here.

Speaker 6 (02:43):
Let's start with the headlines. You know this industry.

Speaker 5 (02:45):
You started at the industry at EY out of college
back in eighty five.

Speaker 7 (02:51):
The headlines, you know, cutting workers.

Speaker 6 (02:53):
It feels like that there are pulling back in a
big way. What is going on in the consulting industry, Well.

Speaker 8 (02:59):
First of all, you got to step back a couple
of years ago.

Speaker 9 (03:02):
We were all growing at twenty above twenty percent.

Speaker 8 (03:05):
EY was going above twenty percent inconsulting because of.

Speaker 9 (03:09):
The pandemic, and that for all, there was some penned
up demand from the pandemic, but also there was confidence
low interest rates which I'll get into, and companies were spending. Hey,
now what's happened with rates going higher? And they're being
uncertainly in terms of where rates are going. Companies are holding.

Speaker 8 (03:27):
Back on spending, and it's a little.

Speaker 9 (03:29):
Bit more of an expectation versus where the rates actually are,
because historically speaking, the rates are not that high, but
the expectation was cut certain time period.

Speaker 8 (03:41):
So I think companies have been waiting and.

Speaker 9 (03:43):
Therefore not spending as much as they were, and that's
called to slow down.

Speaker 8 (03:47):
It's an industry slowed down.

Speaker 9 (03:49):
We were growing well into the twenty four to twenty
five now we're going the mid single digits.

Speaker 5 (03:54):
How much is a cutback on the private equity side
of things. Do you guys consult a lot of the
PE firms.

Speaker 6 (03:59):
We talked a lot of here.

Speaker 7 (04:01):
They are kind of finding their right forward.

Speaker 6 (04:03):
How much of the slowdown as a result of that, Well.

Speaker 8 (04:06):
It is. Some of the slowdown has to deal with.

Speaker 9 (04:08):
Transactions, whether it's PE or strategic transactions.

Speaker 8 (04:12):
There have been less of them.

Speaker 9 (04:13):
Obviously the overall economy and rates have impacted that. When
there's less transactions, A lot of our businesses are slower.
Our transactions, business are due diligence business, even our tax
business are certainly consulting transformations, integration.

Speaker 8 (04:29):
There's less out so volume with down.

Speaker 4 (04:31):
What about the thive deals that aren't getting done? Are
those also lower?

Speaker 9 (04:35):
They're also lower because obviously big spends, huge technology spends
that are in.

Speaker 8 (04:40):
The one hundreds of millions of dollars. They're expensive.

Speaker 9 (04:43):
Companies have held back in terms of really investing the
way they work.

Speaker 4 (04:47):
What sort of I provide the boosts to that space?

Speaker 3 (04:51):
Because we talk about interest rates, I mean interest rates
have been stable relatively speaking for the last year now,
I guess more or less year and most people pretty
much assume we're much going to stay here. Maybe some
twicks around the engine.

Speaker 8 (05:02):
Yeah, So a couple of things that will give it
will boost. One is AI. So companies right now are
looking at how do they deploy AI?

Speaker 9 (05:09):
And we're at the very beginning stages of genitor of AI.
So when people say, oh AI has been around for
twenty years and so forth, machine learning has been around
for twenty years, jenitor of AI at the scale that
it could be has not been around for twenty years.
So we look at AI in three different buckets. So
this is the way we really have our clients.

Speaker 8 (05:29):
Look at it as well. First of all, you have
to look at it at the strategic level.

Speaker 9 (05:32):
Your board, your CEO has to know what AI is
going to do your business.

Speaker 8 (05:37):
It can't be just your chief information as What.

Speaker 9 (05:40):
We look at Number one is how do we help
our clients with AIS? So that involves a lot of
use cases in different sectors around the world.

Speaker 8 (05:48):
If we have thousands of use cases that we're working.

Speaker 9 (05:50):
With our clients, but these projects are small, they're getting
used to them. The middle bucket is around how do
you make your business better us as well?

Speaker 8 (06:01):
And that's around productivity.

Speaker 5 (06:02):
You tried to make the business better of us spitting
off the consulting unit.

Speaker 6 (06:05):
It didn't happen.

Speaker 5 (06:06):
Are you disappointing and disappointed in that it didn't work out?

Speaker 9 (06:11):
I am disappointed, But the reason why we're doing it,
the conflicts in terms of really unlocking value, is still there.

Speaker 8 (06:19):
So I truly believe we've learned.

Speaker 9 (06:21):
A lot from that process. The profession overall has learned
a lot. We've seen private equity now investing in accounting
firms and consulting firms they weren't before because they're seeing
a cash flow and the value, and.

Speaker 8 (06:34):
You're also going to see that going forward.

Speaker 5 (06:36):
Carmen, I wonder, like going through your own restructuring and issues,
if you will let me, why does that help you
in terms of working with clients or does it make
them say, well, wait, you guys sound like you've got
some stuff going on.

Speaker 6 (06:49):
I'm curious.

Speaker 8 (06:50):
It was incredibly helpful.

Speaker 9 (06:51):
We were going through this transformation, and we learned a lot,
and we've changed a lot, even though we haven't done
the actual transaction. But I was talking to CEOs that
we're going transactions, transformations, comparing notes, helping each other during
the entire process.

Speaker 3 (07:06):
I do want to go back to AI because obviously
that's been the talk of a lot and specifically how
companies build those AI strategies, the idea of do you
build it yourself or do you just find another company
that's doing it and buy them. What type of questions
are you getting from clients about the best approach to
take well?

Speaker 9 (07:24):
I think companies right now certainly are looking at companies
like Microsoft.

Speaker 8 (07:29):
Microsoft has this concept called Copilot.

Speaker 9 (07:32):
Which helps in a lot of different areas, but it
helps an individual in terms of their work.

Speaker 8 (07:37):
Every day and so forth.

Speaker 9 (07:39):
And so you know, Microsoft's doing this set scale, others
are doing at scale.

Speaker 8 (07:44):
We have an alliance with Microsoft, so it's.

Speaker 9 (07:46):
Really helpful to help to use others that have invested
in this for those kinds of tools.

Speaker 8 (07:52):
A lot of companies are asking about developing their own
large language model for their company using their data.

Speaker 9 (07:59):
We have one of those that ey It's called EYQ.
It's fantastic, are.

Speaker 8 (08:03):
People love it and so forth? But you have to
have cleansed data to be able to do that.

Speaker 2 (08:09):
Yeah.

Speaker 4 (08:09):
Absolutely.

Speaker 3 (08:09):
And to start off, Carol gave away your age by
saying when you started out there, but it was actually
kind of fitting because.

Speaker 4 (08:15):
We talk about these ciga He did finish.

Speaker 3 (08:17):
Yeah, he was the overachiever. But it gets to this
idea of these big structural changes. Right, you're on your.

Speaker 4 (08:22):
Way out as a CEO.

Speaker 3 (08:24):
You're handing over the reins in a couple of months,
I believe right at the in July here, what are
you leaving your successor? I mean, what are the big
issues that you think she's going to have to deal
with that are going to be most important for EAT
to build? Y, So.

Speaker 8 (08:37):
Let me just go back for a second.

Speaker 9 (08:39):
When I became global Managing Partner, which is the number
two Rolly, why it was twenty thirteen.

Speaker 8 (08:45):
We were twenty five billion dollars in revenue per year
and we were about two hundred thousand people.

Speaker 9 (08:51):
We're fifteen billion dollars now you're almost four hundred thousand people.
So there's been tremendous growth in the organization. My successor, Janitorum,
she's an absolutely fantastic leader. Yeah, first woman global chairman
and CEO of a big four firm, and she will
have a huge scale of a firm to run, and

(09:11):
she will have to wrestle with what's the strategy going forward?
Are the conflicts too great. Do we have to re
look at transactions? Do we have to look at how
do we cry value private capital being invested in the business.
These are all things that not only her, but all
our competitors have been building.

Speaker 3 (09:28):
Now.

Speaker 5 (09:28):
It's interesting to talk about the growth of the of EY,
but does it need to be a leaner.

Speaker 7 (09:33):
In some ways going forward?

Speaker 9 (09:35):
It absolutely does and it will be leaner because of AI,
and you know, technology will help it be leaner. We're
looking at twenty thirty percent of productivity help as soon
as we get all the technology in and so it
will be leaner. People, our partners are asking for that technology.

Speaker 3 (09:53):
Of your big is that technology though that's primarily doing
a lot of the sort of more rode task. There's
been a lot of discussion about level jobs in this
space when it's a consultant or investment banking. The types
of tasks broad tasks that were given to those new entrants,
AI or some other technology is doing that. What type
of training are those folks, those new folks going to
have as they come into the industry.

Speaker 9 (10:13):
They will have training in AI, they will have training
in AI tools.

Speaker 8 (10:17):
We already do that. We offer many hours of training.
That's one of the big advantages of starting at a
firm like EY. It's training. Some people think it's the
continuation of school.

Speaker 3 (10:27):
We train.

Speaker 9 (10:28):
If you look at corporates today and you look at
finance functions and corporates, many many people have had a
start in one of the big four folks, and we
really train the world when it comes to finance, accounting.

Speaker 6 (10:40):
Autot and the Souldier for Minded Cibo, thank you so much.

Speaker 7 (10:43):
We really appreciate good luck with.

Speaker 10 (10:44):
All my thanks to come from great being.

Speaker 8 (10:46):
Here are called me.

Speaker 6 (10:47):
Thanks really enjoyed. Its the CEO of EY joining us
right here at Milkin.

Speaker 2 (10:52):
You're listening to the Bloomberg Business Week podcast. Catch us
Live weekday afternoons from two to five pm Eastern Listen
on applecart Play and and brout Auto with a Bloomberg
Business act or wants us Live on YouTube.

Speaker 3 (11:06):
Now alongside Byron nowly found in Allent Media Group and
Entertainment Studios. In the nineteen nineties, he expanded it from
a few late night syndicated programs to ownership of more
than three dozen broadcast network affiliates, a dozen individual properties,
including the Weather Channel, as well as digital news platforms.
Like Debrio, who's recently added a movie distribution company, and
it's gone public with proposals to buy local TV giant

(11:28):
Tegne in twenty twenty two, a pitch to buy ABC
and Disney assets in twenty twenty three, and this year,
interest in bidding for Paramount Global. Byron joins us right
now here from the milk and stage. You're always bidding
on something, Byron.

Speaker 8 (11:41):
As right back.

Speaker 11 (11:42):
I'm gonna bid on this flower on your lapel right now.

Speaker 4 (11:45):
Well, my wife, thanks you.

Speaker 11 (11:46):
Okay, I'm thinking a billion dollars.

Speaker 4 (11:48):
What do you think I'm gonna say? Thirty billion?

Speaker 11 (11:50):
Okay, I'm out.

Speaker 3 (11:51):
According to Bloomberg Intelligence, that's the amount that you are
prepared to put up for Paramount.

Speaker 4 (11:57):
Are you interested in buying Paramount? And if so, at
what price?

Speaker 11 (12:00):
You know what? We remain interested.

Speaker 1 (12:02):
We think it's a phenomenal asset, and we think Sherry
and our management team they're well positioned to continue their
path or if she wants to sell, we're happy to help.
And I have a lot of faith in Sherry Redstone,
and I have a lot of faith in George Cheeks
and Brian Robbins and Chris McCarthy they are excellent managers,

(12:24):
and if she decides that's the path she wants to
take have them run things, that's great. If she's still
interested in selling, we are very interested in sitting down
to figure out if we can get something done. A
lot has occurred over the last six to eight weeks,
events that we're not used to seeing happen so rapidly,

(12:44):
but we do have strong interest in buying all or
some of Paramount Global.

Speaker 3 (12:50):
Do you think your bid can be competitive both in
terms of what it offers strategically as well as the
financing to do it?

Speaker 11 (12:56):
You know what, capital is not the issue.

Speaker 1 (12:58):
There's plenty of capital available well to support our bid
and to buy the asset. The real commodity here is
certainty of clothes, and the great investor, Mario Gabelli said
it best.

Speaker 11 (13:10):
This deal will live or die at the FCC.

Speaker 1 (13:14):
My advice would be to walk into the FCC with
somebody that is FCC approved, somebody who owns and operates
television statement and Sony can do that well. When you
are a foreign owner, that's tough to hone television station.

Speaker 11 (13:30):
I think you can own up to twenty percent. You
know where they don't allow that.

Speaker 1 (13:36):
So we've invested about a billion dollars buying ABCNBC, CBS
and Fox affiliates around the country. We are broadcasters first,
and we are FCC approved, and that is.

Speaker 11 (13:48):
The key to this deal approval, regulatory approval.

Speaker 1 (13:52):
There's plenty of capital just in this lobby alone, there's
about eighty trillion dollars looking to invest in something.

Speaker 11 (14:00):
As a matter of fact, I can step.

Speaker 1 (14:01):
Off this podium and raise another thirty billion in about
five minutes.

Speaker 11 (14:04):
Just go talk to her or him and her and
we're over. Well, the capital isn't the issue.

Speaker 1 (14:10):
Approval is the commodity, and that's the thing that everybody
needs to be mindful of. You want to be respectful
of the process. I don't think you want to go
into DC saying I don't. I've never owned and operated
television stations. I think that's important.

Speaker 5 (14:27):
Iron Having said that, it sounds like you're pretty far
along in the process.

Speaker 6 (14:30):
Do you have bankers lined up?

Speaker 5 (14:31):
What can you share with us in terms of who
you're working with when it comes to, as you say,
lots of capital out there, So who are you working
with in terms of.

Speaker 7 (14:39):
Lining up the financing to actually do a deal?

Speaker 12 (14:41):
Well, that I can't share with you, but I will
tell you this that the capital is very much available,
not just to me, but others that are skilled in
this area of buying and running media companies.

Speaker 10 (14:57):
And I think that's what's going to come out and
the whole process.

Speaker 11 (15:01):
What you don't want to do.

Speaker 1 (15:02):
What you don't want to do is tie up the
asset for a year or two and not get approval.

Speaker 5 (15:08):
How far along are you though in actually the specifics
on a deal, in terms of getting something.

Speaker 1 (15:13):
Done, well, quite a bit of our capital has already
been investment a committee approved. So we're good to go
in that regard, you know, I think we want it
to be respectful of sky Dance and Redburg Capital. They
have a thirty day exclusive and so we wanted to
see what the story is and confirm whether or not

(15:34):
that exclusivity has expired. We're not you know, A very
smart banker said to me, Byron, you don't have to
do a thing. All roads lead back to you because
there are assets there that we want that others don't.
We want the linear networks. Why I believe in the
linear network business. I think it's the majority of their

(15:57):
revenue and their ibadat you know their folks.

Speaker 3 (16:00):
You know, that's the Contrian approach. Everyone's trying to get
rid of linear off I thought.

Speaker 11 (16:04):
The Weather Channel.

Speaker 1 (16:05):
I bought the Weather Channel six years ago, and they
couldn't I bought it from Vain Blackstone and NBC Universal.

Speaker 6 (16:11):
They couldn't wait to give me the keys, and thank
you very much.

Speaker 1 (16:15):
In those six years, we pushed up the top line
revenue and we pushed up the evadah and we're running
the Weather Channel at a fifty percent margin.

Speaker 11 (16:24):
So we're very comfortable in the linear business.

Speaker 1 (16:27):
We believe that a number of these linear assets are running.

Speaker 4 (16:31):
A little heavy on both in the linear business.

Speaker 11 (16:33):
Fat I think there is.

Speaker 1 (16:34):
I think the Weather Channel has enormous opportunity to grow.
I think you're going to see us continue to grow.
People are not especially in the weather. The weather business
is a big business because climate.

Speaker 11 (16:45):
Change and global warming is very real.

Speaker 4 (16:47):
It's the one thing we check every day.

Speaker 1 (16:49):
Yeah, it's the one thing. And I will tell you
it's going to be more. I'm not trying to be
Debbie down here, but the weather is going to be
more and.

Speaker 11 (16:56):
More extreme going forward. It's get my end. Whenever we
have extreme weather, we are pretty much number one in that.

Speaker 5 (17:01):
Category fire because you are so upbeat about the linear
TV business, if you will, what is it that other
folks do you think get wrong?

Speaker 6 (17:08):
When they're all saying this is, this.

Speaker 11 (17:10):
Is, this is.

Speaker 6 (17:11):
The time has passed, it doesn't make sense anymore.

Speaker 1 (17:13):
You know a lot of times people just don't see
what you see, and that's key an investment. What people
want to see is double digit growth. They're fascinated by
the double digit growth. That's what they're attracted to.

Speaker 5 (17:26):
But as all linear television, do you think can have
double digit growth? Or is there something special about the
Weather Channel? As you said, climate change and different things
make us want to look at it wrong.

Speaker 1 (17:36):
Yeah, I think what happens I think the sub I
think the subcount will come down, but I also think
that it will migrate to streaming it. You know, when
I bought the Weather Channel six years ago, you.

Speaker 13 (17:45):
Didn't have YouTube and Hulu, So now you know there
are millions of subs that didn't exist before. Content will
be consistent and folks will always want premium content.

Speaker 11 (17:57):
They just want to pay their price for it.

Speaker 1 (18:00):
I think what's happening is you're watching the consumers.

Speaker 11 (18:03):
Say I want this content I just don't want to
pay this much for it. And I think you're going
to see our content survive and do very well because
it's being.

Speaker 1 (18:13):
Priced correctly and it's packaged with other content that they're
willing to pay for.

Speaker 11 (18:18):
So we're not worried about that. That's the least of
our concern. In the last six years.

Speaker 1 (18:23):
If the revenue was going to go down, and if
our if our evada was going.

Speaker 11 (18:27):
To go down, it should have happened in the last
six years, but it didn't. It went up.

Speaker 3 (18:31):
But you're not immune to what else is going on
in the world and what's affecting some of your competitors.
You do just recently announced some cost cuting, some degree
of cost cutting. Out love the exact numbers, but you've
had to trim your tighten your bet.

Speaker 8 (18:43):
Solid as well.

Speaker 1 (18:43):
We have approximately I started the company from my dining
room table thirty one years ago, and we've in our
thirty one years, we've never had you know, lay'll have.

Speaker 14 (18:52):
That dining room table.

Speaker 4 (18:53):
I do, and you're gonna submit that to the Smith
Dounion to do that.

Speaker 11 (18:56):
I'm gonna submit it.

Speaker 1 (18:57):
And more importantly, the chairs that I wore holes sitting
there but we had about twenty five hundred employees and
we reduced our workforce by three hundred, and it was
very painful because we've never done that before.

Speaker 11 (19:09):
During the pandemic, I didn't.

Speaker 1 (19:11):
Lay anyone off because I didn't want anybody going out
into that.

Speaker 11 (19:14):
Code ugly world of the pandemic.

Speaker 1 (19:16):
Unemployment now is hit of a low and there's plenty
of opportunity out there for folks to go and get.

Speaker 11 (19:23):
Other jobs and continue to flourish.

Speaker 8 (19:25):
So that wasn't easy.

Speaker 11 (19:27):
And our focus now is more on streaming.

Speaker 1 (19:29):
We have Local Now, which is something very special, which
is a free streaming service that uses artificial intelligence and provides.

Speaker 11 (19:37):
Local news, weather, sports, and trapping geo fence to the
users zip code and the most important thing here, it's free.

Speaker 1 (19:45):
The world loves spree and it has over twenty thousand
movies and everything else.

Speaker 4 (19:50):
The fire, We're gonna have to leave it there. Always wonderful.

Speaker 3 (19:53):
Thank you, Thank you for having me Byron Allen overall
at Allen Media, and we continue our coverage.

Speaker 4 (19:58):
I hear from the Milk and S agent. You know,
we talked to him about linear TV.

Speaker 3 (20:02):
Let's face it, we have a personal hottake TV and so,
you know, I mean, I don't want to put him
on the spot, but he's always been a big believer
in this, and he's built a business going in places
that other people didn't want to go, or at least
they didn't see the value of going there. And that's
why I kind of wonder what Paramount ends up bringing
to the table.

Speaker 6 (20:18):
He's able to get it and sticking with it.

Speaker 5 (20:20):
It's not like he's you know, bought it, own it
for a little bit and getting out of it. So
it'll be interesting to see ultimately how the deal works out.

Speaker 2 (20:29):
You're listening to the Bloomberg Business Week podcast. Listen live
each weekday. He's starting at two pm Eastern on' Apple
car Play and Android Auto with the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station, Just Say Alexa. Playing Bloomberg eleven thirty.

Speaker 3 (20:47):
Shawn dobbs In is transformed regional broker dealer Amherst Holdings
into a trailblazy real estate investment platform, but the big
focus on single family rental homes, acquiring more than fifty
thousand homes over the years with the combined property value
of ten billion dollars. Shawn joins us now the chairman
CEO and Seisle over at Amherst Holdings and Sean, I
do want to start off talking about that opportunity here,

(21:10):
because there's always two size every coin. You know, when
there's pain in one sector, that can often sort of
bring about opportunities to invest, and you found a way
to do that, specifically in buying up single family homes.

Speaker 11 (21:20):
That's right. The sector has been very exciting.

Speaker 15 (21:22):
It's been a rety complicated over the last fifteen years
system financial prices, but now we're very excited and very
proud of the access that we provide to families who
are having a difficult time buying in the best neighborhoods
in the country.

Speaker 3 (21:34):
For this to be a successful investment strategy, we have
to have a belief that what's going on in the
housing market is structural and will be persistent for some time,
and that that's right.

Speaker 15 (21:44):
When we started the platform post financial crisis, we realized
was that the access to credit was going to become
very very difficult, and now with interest rates so higher
and so much higher, the access to credit has become
a price is shoe as well as an accessor shoe.
So for those families that are trying to move into
those those opportunities, those neighborhoods of opportunity.

Speaker 10 (22:03):
There's really two ways to get there.

Speaker 15 (22:05):
If you're fortunate enough to have the financial wherewithal to
have a large down payment and qualify for a mortgage,
buying is a a is an option, but today that's
probably less than a third.

Speaker 10 (22:13):
Of families that will beat those things.

Speaker 4 (22:15):
So at that point in your.

Speaker 15 (22:16):
Life where it's time to live in that in that
type of product of three bedrooms and a.

Speaker 10 (22:21):
Nice school district, you need to get there. And if
the capital isn't available, then we supply the capital.

Speaker 6 (22:27):
So what kind of deals are you doing in this environment?

Speaker 5 (22:30):
You guys did find opportunity coming up with a great
financial crisis, Sean.

Speaker 6 (22:33):
Really and it played it plaid off really well.

Speaker 5 (22:36):
Is there a similar type opportunity Like you talked to
us about the environment today, I think.

Speaker 10 (22:39):
It's more subtle and we're not really worried about sort of.

Speaker 5 (22:42):
Of gigantic obviously not depressed properties.

Speaker 10 (22:44):
Now, right, So there's not there's really a scarcity of issues.

Speaker 15 (22:47):
And I'm kind of what I like to say is
that you can think about the residential housing market and
sort of three ways. There's there's those that are locked in,
those that are locked out, and then we have the
market itself is kind of locked up. And what I
mean by that is we've never seen mortgage rates move
so quickly that there's such a large spread between the
available mortgage rate and the mortgage that people have. That

(23:09):
creates a significant lock in effect, and that's brought down
the float with the supply of homes for sale by
a third. This is the largest asset class in the world,
and the supply of available homes.

Speaker 10 (23:18):
For sale dropped by a third.

Speaker 4 (23:19):
It's his story.

Speaker 15 (23:21):
So then you have the locked out, which are the
people that were originally post GFC unable to qualify for
a mortgage because mortgages aren't available unless you have a
very high credit store.

Speaker 10 (23:30):
And now you have an.

Speaker 15 (23:31):
Affordabilion issue that's brought about by price, and you have
a large group of families that.

Speaker 10 (23:35):
Are locked out of the bottom.

Speaker 11 (23:36):
And then my third dumb little thing I made.

Speaker 15 (23:38):
Up here for you is that the market itself is
locked up because the interest rates have risen and investor
returned expectations have risen, and yet asset prices have risen.

Speaker 7 (23:49):
It doesn't sound good.

Speaker 8 (23:50):
Oh, it's a rule estate.

Speaker 2 (23:52):
You have to be patient.

Speaker 6 (23:53):
How do we boost supply?

Speaker 5 (23:54):
Neil Kashkari talked about this and the concerns about how
this plays into the inflationary picture.

Speaker 6 (23:59):
That there isn't enough out there.

Speaker 5 (24:00):
It's pushed up prices and that has put pressure on
inflation and it's made it stick air.

Speaker 11 (24:05):
That's right.

Speaker 6 (24:05):
How do we improve the supply of pry?

Speaker 15 (24:08):
I think supply supply is an issue because it takes
a long time. So it's zoning partnership with the local
government's it's land and two thirds of the price to
build a home in today's market is labor and the
labor cost.

Speaker 11 (24:22):
Of and rising and rising. It's your a cost and rising.

Speaker 10 (24:24):
So there's not like the easy button here.

Speaker 15 (24:26):
This is going to make it to take some time,
and it's going to take collaboration by everyone.

Speaker 10 (24:30):
Involved, including the credit capital markets, to allow that family
that doesn't have a perfect FICO.

Speaker 3 (24:35):
Score a chance to get the world in terms of
being able to acquire these properties.

Speaker 4 (24:39):
What is the cooperation right now with builders?

Speaker 3 (24:42):
Are they realistic on prices right now or is there
still a bit of a gulf the builders.

Speaker 10 (24:47):
Are in a very bull cycle for their business.

Speaker 15 (24:49):
Their business can be a boom bus business, and they're
in a boom because they're the ones that have the land,
and they have the build capacity, and they have the demand.
There are still a lot of consumers buying and borrowing
at these prices, paying these prices and barging at these
rates to really satisfy the builders of product. Now, the
builders have a very difficult time providing services to that
entry level home, which is where we specialize.

Speaker 8 (25:10):
That's sort of three.

Speaker 15 (25:11):
Hundred, three hundred and fifty thousand dollars home between Charlotte
and Texas and the Smile the United States.

Speaker 11 (25:17):
So they have a very.

Speaker 4 (25:17):
Difficult tign producing that home out of profit margin.

Speaker 3 (25:20):
I do have to ask you, and this there was
a great Bloomberg story about kind of the challenge is
of single family rental investment. And this probably applies more
to smaller players rather than Michael Bihemathy like yourself. But
this idea of keeping tabs on properties, dealing with squatters
and other legal issues that come up that can really
affect your cash for here and you were you weren't

(25:41):
quoting the story, but Amhurst was mentioned ed I know
this is something you guys have had to deal with.

Speaker 15 (25:45):
At the end of the day, we managed one home
in one neighborhood and we're providing services to one family
and you have to get that right every day. So
if the water doesn't turn on, if a squatter has
moved in, while it's in the marketing, we have to
solve that. Now, we have a thousand people across the
nation focused on the issue, and automation and a lot
of software.

Speaker 10 (26:04):
We don't get it right every time. We get it
right a lot more often than we don't get it right,
but that's the nature of the business, and for us,
that's the opportunity.

Speaker 15 (26:10):
This is a complicated business and not everyone as well
situated as Attackling.

Speaker 1 (26:14):
So what is the.

Speaker 6 (26:15):
Opportunity in today's environment for you?

Speaker 15 (26:17):
It's really for us, it's expanding the access to capital
so that capital really understands that supporting the renter. Renters
are important. It's always been a third of our economy,
so we need to give them better choices. Right, that's
the opportunity to expand next as to capital, and we build.

Speaker 10 (26:31):
A lot of homes and the building homes and factories,
so it really is the demand We're very different than
a lot of real estate sectors.

Speaker 4 (26:38):
We have really high fundamental demand.

Speaker 15 (26:40):
So for us, it's about building more officially, building in
a higher space, renovating more efficiently, and then getting investors
comfortable that this is the thing to do to support
these families and get them into these neighborhoods longer term.

Speaker 3 (26:53):
When we talk about housing supply, the mismatch between the
supply and demand, whether it's on the rental side or
on the purchase side, here you see a moment. I
guess I don't know ten years out where we will
see meaningful equilibrium there or is that just apply.

Speaker 15 (27:07):
To you know.

Speaker 8 (27:07):
It's funny.

Speaker 15 (27:07):
It's funny you mentioned this because a year ago we
were looking at the fertility rates the United States and
forecasting out a decline in population, and that would be
one way for this to bounce and self.

Speaker 10 (27:17):
Then we have three million new immigrants in the United
States now in the year and a half. Those are
people that are going to put more demand on housing.

Speaker 15 (27:25):
So the housing market is going to deal with a
lot of confluence of where the demand comes from and
where the supply comes from. But what's really important for
policymakers to think about is like you said, this is
a ten year plan, a fifteen year plan, and you
have to be out in front of it.

Speaker 8 (27:37):
So cities have to.

Speaker 15 (27:37):
Operate in the way that people want to live there,
so they know that ten years from now they have demand.

Speaker 4 (27:41):
What about geographical rotation? Does that not help at all?

Speaker 15 (27:44):
It helps a little bit. But what we've seen is
people leave the core, the big cities, the gateway cities,
and move to these smaller cities. And the smaller cities
are sort of first thing at the seems to.

Speaker 7 (27:54):
Indications everybody's going south, aren't they?

Speaker 10 (27:56):
Everybody more sun, maybe less taxes for now.

Speaker 4 (27:59):
I was in Nashville.

Speaker 3 (28:00):
You ever try to drive through there as a blas
like driving out Fifth.

Speaker 6 (28:03):
Avenue and everybody's in the Carolina Thank you, Thank you guys.

Speaker 3 (28:07):
Sean Dobson over at Amhurst Holdings a nice look, really
residential real estate market and more importantly the investment opportunities
in it.

Speaker 5 (28:14):
I think it's so interesting, Like coming off of Neil
Karshcari and talking about, you know, the shortage of supply
of housing what that means for inflation, talking to Sean
who's in the thick of it, and talking about some
of the dynamics that's needed to come together to be
able to build out the supply and.

Speaker 3 (28:26):
How data driven that Amhurst has been in this. I
mean you talk about them being a pioneer in that space.
You're really taking something that's very local, very by the
gut and applying real data to it, and I guess
that makes it a better investment.

Speaker 6 (28:36):
Great insight.

Speaker 2 (28:37):
You're listening to the Bloomberg Business Week podcast Can't Just
Live weekday afternoons from two to five pm Eastern Listen
on Apple car Play and then brought auto with a
Bloomberg Business app or Warn't Just Live on YouTube.

Speaker 5 (28:52):
This is a company that's in the middle of the
AI play of the software company and Total Bravo is
one of the largest software focused investors in So we're
going to talk about the software of the space right now.

Speaker 7 (29:02):
The gut over one hundred and.

Speaker 5 (29:03):
Thirty eight billion in assets under management as of the
end of last year. So let's bring in Seth Laura.
He is managing partner at the company. Set great to
have you here with us.

Speaker 4 (29:11):
Thank you so much for having me.

Speaker 7 (29:13):
Can you see the results of Palenteer?

Speaker 5 (29:14):
What do you think does it mean anything in terms
of the software area, AI related or other.

Speaker 16 (29:20):
Our view on software is that it is an incredible
long term space to be invested in.

Speaker 14 (29:25):
And what we're seeing right now, at least in our.

Speaker 16 (29:27):
Portfolio, is that this next phase of AI jen AI,
which of course we're talking a lot about it at
this conference, is driving all sorts of incremental interesting use
cases for our portfolio companies, customers, and the.

Speaker 14 (29:40):
Innovation we're seeing is pretty incredible at the moment.

Speaker 7 (29:43):
What kind of software AI related are they specifically looking
for us?

Speaker 16 (29:46):
For us where we see most of the innovation it's
organic inside of our portfolio today, So we're buying within
software the most innovative companies and the sectors that.

Speaker 14 (29:57):
We're focused on.

Speaker 6 (29:58):
What does innovation mean of the AI space?

Speaker 7 (30:00):
AIM it's out is kind of innovative, right.

Speaker 16 (30:02):
The thing about AI that's so interesting is that it
has been a foundational technology in cyber and infrastructure software
for the last decade. Today we've now found ourselves in
the GENAI phase of AI, which is the next phase,
which is everything all that we're talking about. But fundamentally,
AI has driven all of our cyber portfolio and application

(30:22):
and infrastructure portfolio to be able to operate at scale
and do really incredible things. Today, what we see is
that our development teams inside of our portfolio companies are
now leveraging this next generation of artificial intelligence with GENAI
to really deliver incredible applications to their customers.

Speaker 3 (30:40):
So is that sort of the investment opportunity, meaning the
AI product that's put out for whoever that end consumer is,
or is it all the companies that might be leveraging
AI for their own internal things, whether it's drug makers
or even finance companies that might start to fly on
a lot more.

Speaker 16 (30:55):
It's a great question. So we really see it today
on multiple threads. One is delivering more about you to
our company's customers. It's incredible the types of applications that
are being developed in very short order. Second is in
the world of cyber for example, now the cyber threats
are much more incrementally intelligent with the usage of GENAI

(31:16):
defending those threats with AI. So it's really AI battling
AI and this really complex cyber world that we're living in.
And the third is driving a lot of efficiency in organizations.
We really view jenai as an enabler of talent and
we think that what really talented people can do.

Speaker 14 (31:33):
Of course, there's a.

Speaker 16 (31:34):
Lot of those individuals within the software market in every
industry is fundamentally expanded through this new technology.

Speaker 3 (31:40):
But I mean, part of what's made Toma Bravls so
successful and particularly in the technology software space, is the
ability to properly value a potential deal. How difficult is
that right now because there's so much opium, there's so
much hype around AI that, at least from an outsider
looking in, it's hard to know what sort of substantive
and what is.

Speaker 4 (32:00):
Just kind of that sizzle.

Speaker 3 (32:01):
So how do you come to a proper valuation when
it really is just trying to be modeled out like
thirty years it's just on future that nobody really knows
what it's going.

Speaker 14 (32:09):
To be in the world that we live in and
operate in. For us, it's much more about what the
company will do and how it will perform over time,
how much cash flow the business will generate.

Speaker 16 (32:21):
Within all of our companies, which are very established, very
innovative businesses, You're right, there is a component always of innovation,
and we need to be partnered with those businesses that
are the most innovative, and so we look at this
new capability that the company has, and it is table
stakes to have a strategy around Genai today, but it's
part of the overall business and so for us, at

(32:42):
the end of the day, it's much more about company
performance than over the long term than it is about
evaluation at a given point in time.

Speaker 5 (32:48):
Well, that's interesting because if we're thinking about Genai and
its real impact is maybe a decade in coming or
it's going.

Speaker 6 (32:54):
To take multiple years, how much of a runway are
you going to give a.

Speaker 5 (32:57):
Company when you look at investing in some like are
you willing to kind of pay up in terms of
multiples with the expectations that it might take three years,
four years, five years or longer.

Speaker 16 (33:07):
And the businesses that we are investors in of which
we genuinely are the control investor, these companies always have
a segment of their development budget that's very, very forward looking.
So it's a combination of what we're doing today and
also looking in the forward You always have to be
funding that innovation cycle. Customers want it, it's exciting for employees.

(33:31):
And today the big difference with this new technology that
really has come to the surface in the last year,
it's usable today. Products are being delivered today to our
company's customers, and the payback is actually relatively quick.

Speaker 5 (33:45):
Can you shed a light into exactly what companies are
doing with all of this, because I feel like some
of Jenai is going to be somewhat mundane tasks, but
they're now done by software or whatever. Like give us
an idea right in and in terms of the broad macro,
we get it like it's going to change a lot
of things and processes. But what's specifically I'm curious about

(34:06):
some of what you're saying.

Speaker 6 (34:07):
And how it's playing out.

Speaker 8 (34:08):
Yeah, you're right.

Speaker 16 (34:09):
I mean today what you're hearing a lot about and
what you're seeing is that larger organizations are able to
use the technology really to drive efficiencies in their organizations.

Speaker 6 (34:19):
Back office and things like that.

Speaker 14 (34:21):
Back office is a great example.

Speaker 16 (34:24):
The way we think about it in the world that
we're living in is that it's an incremental value to
our company's customers. So it really makes the products that
our companies are building and selling much more usable in
new ways to more members of an organization. We're really
optimistic about it as a use case in cyber it

(34:46):
provides our company's customers the ability to prevent threats and
detect threats much quicker, and anomalies much quicker. And it's
again it's an extension of already what's gone on the
machine language for real the last decade.

Speaker 3 (35:01):
I want to ask you a little bit about just
the broader private equity space right now, particularly when the
context of regulation. There's been a lot of rumblings in
Washington about some of the strategies pe firms have taken.
Roll ups, of course, have been kind of a staple
of that, and the idea that at least certain folks
in Washington want to sort.

Speaker 4 (35:18):
Of clamp down on that. How and two are you
right now with some.

Speaker 3 (35:22):
Of those regulatory winds circling and how much of that
is going to force you to maybe rethink some of
the strategies that you've taken in the past.

Speaker 16 (35:30):
I think certainly we're in a different regulatory environment than
we have been in the past. For us, we're operating
in markets that are just so huge and enormous, with
a lot of growth ahead of it, and that are
very fragmented. That it's certainly something that we're thinking about
and that of course you have to, but it's not

(35:50):
something that's taking up a.

Speaker 14 (35:51):
Lot of our time on a day to day basis
as we're making new investments.

Speaker 6 (35:55):
Does the election change that maybe the.

Speaker 5 (35:58):
Regular environment, yes, is as good as my I couldn't.

Speaker 7 (36:01):
In terms of the outcome.

Speaker 14 (36:02):
Easy, It could potentd there could be it.

Speaker 16 (36:04):
I think every time if there's a change right there,
there is certainly a change in regulatory environment.

Speaker 14 (36:11):
We don't plan on that.

Speaker 8 (36:12):
We don't try to predict that.

Speaker 16 (36:14):
Ever, it's you know, it's it's it's just part of
you know, the landscape today, and you're right that the
landscape today is different than it was in the past.

Speaker 3 (36:23):
Do you have another question, Carol, because I want to
pivot to sports, all right, I gotta ask you about
the Ottawa Senators. You know, there was a lot of
mystery behind the purchase of the Senators if you all
back backs, and Bloomberg of course, was out in front
reporting that you were behind that bid.

Speaker 6 (36:41):
Here are you.

Speaker 11 (36:44):
So?

Speaker 14 (36:45):
I am? I am part I grew up in Ottawa.

Speaker 16 (36:47):
Yes, I am a lifelong hockey fan and I played
hockey my whole life and I'm very passionate about it.
And I am part of the ownership group of the
Outawa Senators. But I am certainly not the controlling shareholder
in the Auto Senators.

Speaker 4 (37:04):
Still, that's got to be like a child of dream
come true. Even have a minority state, it's.

Speaker 14 (37:07):
An incredible amount of a fun and something very passionate
in it.

Speaker 5 (37:10):
Yeah, Set, thank you so much, Thank you so much,
Really appreciate you stopping back.

Speaker 14 (37:15):
Saith.

Speaker 6 (37:15):
We're up to o'brauno.

Speaker 14 (37:16):
Joining us here.

Speaker 2 (37:19):
You're listening to the Bloomberg Business Week podcast. Listen live
each weekday. He's starting at two pm Eastern on Apple
car Play and Android Auto with the Bloomberg Business You
can also listen live on Amazon Alexa from our flagship
New York station, Just Say Alexa playing Bloomberg eleven thirty.

Speaker 3 (37:37):
Now, commercial real estate really the top milk it this
year as of last year, with roughly twenty percent of
the four point seven trillion dollars the US commercial mortgage
is held by lenders investors coming due this year. That's
the reason why everyone's talking about it. I might create
some pain out there for some folks who need to refinance,
but it has lord a slew of investors armed with
hundreds of billions of dollars to target commercial real estate.

(38:00):
Deal to one of the most active players is Hines,
which last month announced a new platform called Hines Private
Wealth Solutions that seeks to capitalize on some of those
troubles in the real estate industry. David Seinback the global
chief investment officer at HIES, joining us right now, and
this is it's got to be one of the biggest
opportunities you've seen in your career.

Speaker 17 (38:19):
Yeah, these only come around a few times in your career,
and we definitely have a moment where there's going to
be a real opportunity.

Speaker 14 (38:25):
So it is exciting to see kind of what's ahead
this year.

Speaker 4 (38:27):
But how do you sort of cut through all the
gloom and doom.

Speaker 3 (38:30):
No one's going back to the office, None of these
buildings going to be repurposed. How do you look at
that sentiment and then look at those properties and decide
there's something to value there.

Speaker 7 (38:39):
Yeah.

Speaker 17 (38:39):
So Heines is a global investment manager. We have about
one hundred billion under management and we're in about thirty
countries around the world. So it's a pretty unique perspective
in terms of seeing real estate through a global lens.
And I'll say it's not the same everywhere in terms
of distribment dynamics, not only macroeconomic policy, but also physically
what's going on on the grounds in different places, and

(39:01):
so even the experience of office has been very different
around the world of the last few years.

Speaker 6 (39:05):
Let's go around the world.

Speaker 7 (39:06):
Let's start with the US property and the office space.

Speaker 6 (39:09):
Your exposure. What are you seeing? Is there going to
be another.

Speaker 11 (39:13):
Shoe to draw?

Speaker 8 (39:14):
Yeah?

Speaker 17 (39:14):
Look, I mean I think it's important to remember that
what's happening right now is really two years in the
making since interest rates started going up, right, So we're
over two years into that, and so what this has
felt to me has been a.

Speaker 8 (39:25):
Lot more of a controlled, managed process.

Speaker 17 (39:28):
Certainly there's a lot of pain in the system, but
people have had time to work through the issues, and
so I think time has been the key ingredient here
to finding a way forward. So what we're doing now
is much more looking on the horizon for what's ahead
and where those opportunities are. Certainly there's a lot of
things that need to get fixed still. I think private
credit is a part of that, but I know equity
is going to be part of that solution as well.

Speaker 5 (39:47):
David having said that, people talk about some of the
office properties in like Midtown Manhattan, in the Garnment district.

Speaker 6 (39:52):
Nobody's going to ever want them in terms of office space.
Will they have to be What do we do with that?

Speaker 5 (39:57):
Some have said maybe the government needs to come in
to help to clear some of that out. Is it's
fair to say that there's going to be office space
that never is going to be used again.

Speaker 8 (40:05):
Yeah?

Speaker 17 (40:05):
Sure, I mean look at mean offices as a big
sector in the United States. Yes, there's a lot to that, right.
I think what first needs to happen, and I think
we're going to see it this year. Actually, I think
we need to see some transactions in the trophy.

Speaker 8 (40:17):
Space, so the real, the best of the best.

Speaker 17 (40:19):
We need to see some real trades and have price
discovery there and I think that will be a huge
signal to the market once we really start seeing that.
Right now, I mean we're in conversations with people where
there are discussions. There's still a bed ass spread. I
think that bit ass spread we'll close this year and
we'll finally start see some transactions. That's what the market
really needs to understand how to price the sector.

Speaker 5 (40:39):
So does that mean yes, there will be some properties
that will just never be used again office space?

Speaker 14 (40:43):
Yeah, look at me in New York.

Speaker 17 (40:45):
Yeah, just like in the retail sector, you know, fifteen
years ago. I mean, there's certainly going to be some
things that aren't going to be get repurpose heavily or
torn down. But I know that there are high quality
office buildings where the rents are performing, the fundamentals are there,
but the capital markets are not. And so what we
need to see is the transactions to be able to
have some certainty for how to price the rest of

(41:06):
the space.

Speaker 3 (41:07):
As far as your investment strategy, do you take a
hard look at the properties that need to be repurposed
or you primarily sort of focus more on those ones
that are already set to go.

Speaker 11 (41:16):
Yeah.

Speaker 17 (41:17):
Look, I mean a part of our operating model is
really tapping into what we see as a much bigger
change in real estate investment right now. I mean there's
regime change in interest rates, and it is it's gonna
be a different world. The way I've described it is
the last forty years, it's been downhill scheme in terms
of a sport, and it's going to be cross country
scheme for now, probably for quite a while.

Speaker 10 (41:38):
And so I think that you know, in that new
sport really is a new sport.

Speaker 17 (41:42):
It's a new mindset and new muscle, and I think
there's going to be a real shift from a search
from beta to a search for alpha, and that alpha
generation really is that local execution, and it takes a
very clear eyed view on what office or whatever the
real estate product is and what's going to make it work,
and what's going to make it work in this new
area of investing.

Speaker 4 (42:00):
You know, cross country skiing, it's really hard. I don't
know if you've ever done yet, but it's hard work.

Speaker 5 (42:04):
I was gonna say with climate change, there isn't a
lot of snow out there, so it sounds like.

Speaker 6 (42:08):
It's going to be a little rough either way.

Speaker 4 (42:10):
I am careous.

Speaker 3 (42:11):
I mean, we all kind of are aware of the
issues in the US commercial build. Say, right, you have
international foot pride here, kind of compare a contrast that
with what's going on overseas.

Speaker 17 (42:20):
Yeah, look, I mean it's definitely it depends on where
you are. So last year, certainly Europe was leading the
recovery in many ways, there's more transactions, there was more
pricing discovery points for investors to get comfortable with. But
we're seeing opportunities still in Europe our business is pretty balanced.
Last year we were about a third in Asia, third
in the US, third in Europe. I think the US
will now be more of our business this year, and

(42:43):
we're certainly going to chase that.

Speaker 8 (42:45):
And in Asia there is a lot of opportunity in Japan, Australia.

Speaker 17 (42:49):
You know, built to rent is a significant investment theme
we see around the world beyond States is about three
million houses short. That theme is elsewhere as well, and
there's real reasons for that, and we think we can
help solve some of the problems and bring new products
a lot of these countries.

Speaker 5 (43:05):
Greater China, you've been there since nineteen ninety six. What
can you tell us about the real estate market in
Greater China right now? And the government do they ultimately
need to do something to move this along finally?

Speaker 17 (43:16):
Yeah, Look, it's definitely been a tough situation, and we
do have a presence there for a long time.

Speaker 8 (43:21):
We've been we're still there.

Speaker 17 (43:23):
I'd say, we're very cautious and you know, being very
careful as everybody would be. We've actually begun to focus
a lot more in India the last let'd say, even
twenty four months, and India has been a huge area
of growth for US where we see a lot of
expansion plans for a lot of US companies frankly are
setting up a lot of a deeper presence there, and

(43:44):
so that's been a significant port opportunity for US.

Speaker 7 (43:46):
Do you still want to have a presence in China
Greater China?

Speaker 10 (43:49):
I think Look, I mean, China's going to be one
of the largest economies in the world.

Speaker 17 (43:52):
I think it's just a matter of what it looks like.
You know, we're still there, but we see a lot
of opportunity in the entire region, frankly, and all of
that region feeds off of each other in terms of
how the broader economies work.

Speaker 3 (44:03):
What does the price discovery and price transparency look like
over there right now?

Speaker 8 (44:07):
Though in Asia more broad.

Speaker 4 (44:09):
Well specifically Greater China.

Speaker 17 (44:11):
Yeah, look, I mean it's it's like a lot of
other even the United States. There just hasn't been a
lot of significant trades yet for the for the trophy
type of assets. So but that's the same thing in
the United States. We're waiting for that, Like I was
saying earlier, we're waiting for that as well.

Speaker 3 (44:23):
Are there distortions like governmental distortions given how much involvement
they have in the property market.

Speaker 11 (44:30):
Yeah.

Speaker 17 (44:30):
Look, I mean, I mean the within the Chinese economy,
certainly the local Chinese insurance companies. There is a lot
of local capital there that I know a lot of
a lot of sponsors are looking to now to backfield
where institutional capital, the international capital was, and so certainly
within that context there is capital and reporting.

Speaker 7 (44:48):
David, you have a massive team, massive presence, and you
see so much.

Speaker 6 (44:52):
You mentioned India.

Speaker 5 (44:52):
I think that's really, you know, fascinating, if you had
to pick one market globally where you're like investors, I
think about the Bloomberg audience they keep an eye on.

Speaker 14 (45:01):
Is it India?

Speaker 11 (45:02):
I think?

Speaker 17 (45:02):
Yeah, I mean, I mean, look, India is a place
of dramatic change, without question, and we're putting a lot
of resources around it. We have a lot of opportunities
that we're locking. But I see the opportunity everywhere, honestly,
and like I said earlier, in the United States, to me,
I think it's going to be where a lot of
investors focus most on. It's probably we're going to see
the most text for extu.

Speaker 10 (45:22):
Months next one months.

Speaker 17 (45:23):
Yeah, I think it'll start with credit and move int equity,
and so I think that's how how investors are looking
at it.

Speaker 3 (45:28):
I have to ask you the interest rate question, the
FED question. We came into this year with the expectations
we're going to get multiple rate cuts. People are still
holding out we get something. How much of your business
right now would be dependent on a meaningful shift in
interest rates, whether it goes.

Speaker 4 (45:43):
Down or h no matter.

Speaker 17 (45:44):
Look, so one data point, if you look at the
last seventeen elections, seventeen election cycles, what did the FED do?
About two thirds of them the Fed actually raised rates,
Only about six of them the Fed lowered rates, and
one of them held steady. So it's interesting knowing that
that we've this is to see the patterns right in
terms of like where past elections were. So I would
say the Fed is likely going to take the right

(46:06):
view of the economy and whether or not rates have
gone up almost five hundred basis points in our business
last two years, whether or not there's a slight cut,
it's flat, even slide up, it's not going to matter
that much in the scheme of our total business relative
to where we've been.

Speaker 11 (46:20):
So we're much more focused.

Speaker 17 (46:21):
On how do we create income, How do we create value,
How do we make the right investments today for a
long term horizon, Because real estate there's a longer term
horizon investment, so it's you know, five to ten years
is often how investors are holding it, and so that's
how we're underwriting it right now.

Speaker 6 (46:35):
You know, it's fascinating, David, Thank you so much.

Speaker 5 (46:38):
But I just feel like so many of our guests
here at milk and have said, a little bit higher,
a little bit lower, it really doesn't matter.

Speaker 18 (46:44):
This is kind of the environment we're thinking we have
to operate with, right, Yeah, I mean, you know, the
other the other analogy I thought of, it's almost like
like car racing, right, So Nascar the economy is like
we were in Nascar, we're just going around a circle
really really fast.

Speaker 17 (46:58):
Now we're shifting into f one where we just don't
know what's around the corner, but we're still going really fast.

Speaker 8 (47:02):
Yeah, And so I think, I think again, it's a.

Speaker 17 (47:04):
New sport to play, and I think in this in
this market, we just have to be a lot smarter
about how we're going to navigate whatever corner might be
around the corner.

Speaker 3 (47:11):
So all right, well, we're gonna have to leave it
there and you're so smart. David Steinbach, the CIO over
at Heinz.

Speaker 2 (47:17):
You're listening to the Bloomberg Business Week podcast Can't Just
Live weekday afternoons from two to five pm Eastern Listen
on Apple car Play and androut Auto with a Bloomberg
Business Ada or on't Just Live on YouTube.

Speaker 5 (47:32):
When I get back to the barn, and you've got
a great indicator of what is going on in the
financial business environment. It is through the world of restructuring
and turnarounds, and we've got a great voice on that
with us as Lisa and Donna Hure she's Alex Partner's
co head of America's in Asia, joining a Romaine and
myself here at Milk and welcome, Welcome, Nice to be
talking with you.

Speaker 14 (47:49):
Great to be here.

Speaker 5 (47:50):
I do think this is a great indicator, right. We
look at different metrics about the business environment.

Speaker 6 (47:54):
What's going on? More broadly, what.

Speaker 7 (47:56):
Are you seeing and what doesn't tell you about the macro?

Speaker 19 (47:59):
You know, we're talking a lot.

Speaker 20 (48:02):
We see hundreds of companies, we work with C suites
executives and what we're seeing is forward thinking leaders are
getting prepared.

Speaker 19 (48:09):
If you think about CEOs and the c suite.

Speaker 20 (48:12):
They've been dealing with disruptive forces for years now, COVID,
ground wars, technological disruption, lots a lot, so forward thinking
leaders are thinking about flexibility, agility, how to take some
of these challenges and look for the opportunities in them.

Speaker 5 (48:30):
Are there's big forward looking and then there's the cumulative
effect of a great financial crisis, a pandemic disruption.

Speaker 7 (48:38):
Having said that, are more companies in trouble?

Speaker 6 (48:40):
Are they looking to do restructions and turnarounds?

Speaker 20 (48:43):
I think more companies are trying to think smartly about
how to operate in this high interest rate environment and
how to deal with whether it's a capital our recession,
small our recession, but really change in consumer behavior.

Speaker 19 (48:58):
And if you think about some.

Speaker 20 (48:59):
Of the economic drivers of certainly the US economy, it's
the consumer. So thinking about if that starts to be
a slow trickle, what management teams can do to get
ahead of that and to be prepared and to think
about how to pivot and think about how to react.

Speaker 3 (49:17):
And also the whole issue that what's ailing the economy,
if you will, isn't just cycrical.

Speaker 4 (49:22):
There are structural changes as well.

Speaker 3 (49:24):
So I would think that means as a corporation, you
have to take a structural look at your business and
whether that's side that's meant or acquisitions or whatever or
I'll complete turn around here.

Speaker 4 (49:33):
What type of questions are you getting on that front?

Speaker 20 (49:36):
You know, that's an excellent question and you hit the
nail on the head. We're working with so many executives
on what should their business model look like, what should
they be doing to be kind of fit and ready, fighting,
ready when more disruption comes.

Speaker 19 (49:53):
We're talking a lot about carve outs.

Speaker 20 (49:55):
We're thinking about what five years ago may have made
sense as part of for your conglomerate, now it doesn't,
and what isn't great for you maybe a jewel.

Speaker 19 (50:04):
For someone else.

Speaker 20 (50:05):
We're looking at customers. I mean, the simple truth is
all customers aren't created equal. Into time to fire a
few customers and take a look and really understand what
on cost to serve.

Speaker 3 (50:16):
Yeah, on that point, though, as these companies sort of
make these assessments here, there's this idea that what's happening
now is kind of slow moving, at least relative to say,
global financial crisis.

Speaker 4 (50:27):
Some of the big sort of shocks where all the
pain kind of happened at once.

Speaker 3 (50:31):
Do they have a bit more of a luxury of
time on their side this time around versus past crisis?

Speaker 20 (50:37):
You know, I don't know that i'd call it a
luxury because I think the C suite of today is
dealing with faster and faster change. We're dealing with two
ground wars the emergence of more accessible AI.

Speaker 19 (50:49):
I mean, the truth is AI's been around for over
a decade.

Speaker 20 (50:52):
But when you think about what CHATVT needs in some
large language models, what a lot of our companies are
thinking of is how can I use that? How can
I use that to be more efficient? We're working with
a very healthy company and what they're trying to think
about is how do I use customer fragmentation? How do
I use to enhance the customer experience target the customers

(51:16):
in the right way, not in a robotic way, but
in a human, authentic way.

Speaker 19 (51:20):
So there's some really cool things I think coming out
of AI. And again I go back to the forward.

Speaker 20 (51:27):
Thinking executives, the executives that are thinking, Okay, this may
be a little.

Speaker 19 (51:31):
Rough sledding, but I'm going to be ready for it.
I'm going to be lean, I'm going to be forward thinking,
I'm going to think about opportunities versus just crisis.

Speaker 5 (51:41):
So Lisa, one of the feature speakers was, of course
last night Elon Musk. He did not talk about Tesla.
Oh we waited, but it didn't happen. But you are
seeing something when it comes to the electric vehicle space.
Give us an idea, because it does feel like, yep,
there's still growth, but it's at a slower pace.

Speaker 6 (51:55):
What do you see?

Speaker 20 (51:57):
You know, I do a lot a lot of thinking
about energy transition and what that means, not just for
electric babels, but across the whole electric grid. And I
think one of the biggest indicators of maybe a little
bit of a slowdown. I think, folks, everyone knows where
we want to go, and everyone knows that ultimately we're

(52:17):
going to get there. The question is how long does
it take? What are the steps in the internment? In
my mind, what is the required infrastructure to support it?
And you think about what happened with Hurts and the
pullback on their electric fleet as a result of the
primary market price is going down, which then of course
effect the secondary market price is going down, and maybe

(52:39):
the consumer wasn't quite ready for longer hauls not feeling
comfortable with the charging stations and understanding what the infrastructure
looks like. I think we're still getting there. I think
we will get there. I think that the hybrid is
the now and.

Speaker 14 (52:55):
The EV is the future.

Speaker 7 (52:57):
What are you doing restructuring.

Speaker 5 (53:00):
Working with companies that kind of need to reset their
metrics in the EBU space, We're working.

Speaker 20 (53:04):
With companies that are trying to think more broadly about
from a macro perspective, what's happening.

Speaker 6 (53:10):
And what does that mean to me?

Speaker 20 (53:12):
And importantly, what does it mean to my customers and
my competitors in that space? In that space, but honestly,
energy transition impacts all of us, So it's not just
uniquely that space, but in that space, helping them think
through how to be more efficient, how to again speak
to the customers, and then what that transition means to

(53:38):
you as a CEO, as a C suite executive.

Speaker 3 (53:41):
Well, another big change that's been going on over the
last few years is the refocus on supply chains.

Speaker 4 (53:46):
Yes, obviously you're in the US.

Speaker 3 (53:48):
We had the big disruptions from the Globally, we had
the big disruptions from the pandemic. There's been a big
push in your shore because of trade wars and other
geopolitical issues. Here is this going to also potentially be
a new avenue of business or an expanded avenue of
business for you.

Speaker 20 (54:04):
One of the things, as you know, you mentioned that
I focus on Asia as well, and I've spent in
the last eighteen months. I've been there five times, across China, Singapore, Tokyo.

Speaker 19 (54:16):
Et cetera.

Speaker 20 (54:17):
And there's a couple of things that we're seeing as
it relates to supply chains.

Speaker 19 (54:20):
Number one, and I get asked this question a lot.
I don't think that we're.

Speaker 20 (54:24):
Going to be deglobalizing and moving completely away from China.
We're too interconnected. It's too big a market to ignore.
But what I am seeing is a lot of large
global manufacturers are thinking about redundant supply chains.

Speaker 19 (54:37):
They're thinking about keeping what they have in China and looking.

Speaker 20 (54:40):
At Vietnam, Japan and Mexico has been a huge beneficiary
of that type of movement. But I think and what
we're seeing and what we're working with folks on is yes,
it's about cost, but it's only about cost. It's not
only about cost, it's about surety of delivery and making
sure that you actually get the peace, so you don't
down your manufacturing line because of uncertainty with a.

Speaker 19 (55:03):
Long supply chain.

Speaker 6 (55:04):
Yeah, fascinating. I do think about the.

Speaker 5 (55:06):
Redundant costs of maintaining those supply chain, especially when you
bring them back home.

Speaker 4 (55:10):
Yeah, but you know some of them they have no
choice to do that, right, Absolutely.

Speaker 3 (55:13):
I think to Lisa's point, the idea that it's more
than just the financial the initial financial costs.

Speaker 4 (55:18):
Right, it's the long time they've.

Speaker 7 (55:19):
Showed that too.

Speaker 5 (55:20):
And and and some of the technology battles are the
g of political battles that we are having.

Speaker 7 (55:25):
He said, great to get some time with you.

Speaker 6 (55:26):
Thanks, I appreciate it.

Speaker 7 (55:27):
See you guys, he said Donahue.

Speaker 6 (55:29):
She is a co head of the America's and Asia
at Alice Partner.

Speaker 8 (55:33):
Yeah.

Speaker 4 (55:33):
And then she brought up Mexico too.

Speaker 3 (55:34):
I mean we've seen so, I mean, Eric, we have
to get we have to do a whole show on that,
because I'm fascinated by that. How much is it moved
back towards the order. I remember we went through this before,
back in the A half the days and then they
kind of died down.

Speaker 5 (55:47):
They cut up with the architect Gensler and they are global,
and they talked about all of the activity and facilities
that they're building, specifically.

Speaker 6 (55:54):
In South America, Mexico in particular.

Speaker 4 (55:56):
So it's happening absolutely. Will you be around for that
show too? Or do you chucker two?

Speaker 6 (56:01):
I don't know, let me think about it.

Speaker 2 (56:02):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
and always on the Bloomberg terminal