September 4, 2024 • 20 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Calvin Butts Jr., Co-Founder and General Partner of East Chop Capital, discusses making private equity accessible to Black investors. Eastman CEO Mark Costa talks about the company's transformation from a subsidiary of Kodak into a $10B leader in recycled plastics and sustainable materials.
Hosts: Tim Stenovec and Katie Greifeld. Producer: Paul Brennan.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:07):
This is Bloomberg BusinessWeek with Carol Messer and Tim Stenebek
on Bloomberg Radio.
Speaker 3 (00:14):
Uh, Katie, you know me. I like numbers.
Speaker 1 (00:16):
I like data.
Speaker 3 (00:17):
So here's some not so surprising data around race and
asset management. Not surprising if you've been paying any attention
to what we talk about here on Bloomberg BusinessWeek. I
found this article in the Harvard Business Review and it
says that back in twenty twenty one, this is research
from Josh Lerner at Harvard Business School, of all assets owned,
(00:38):
only one point four percent were managed by minority owned firms.
And back in twenty twenty one, minorities mid up more
than forty percent of the population. As I mentioned Josh
Lerner at Harvard Business School, he's got a ton of
research around this. There's a huge disparity between who has
and who manages these assets based on what our population
in the United States actually looks like. Somebody who's trying
(01:02):
to address that is Calvin Butz Junior. He's co founder
and general partner at East Chop Capital. He joins us
here in the Bloomberg Interactive Broker's Studio. Good to have
you with us, Calvin, how are you.
Speaker 1 (01:13):
I'm doing well. Thanks for having me.
Speaker 3 (01:14):
Yeah, thanks so much for having us. I want to
get to what you're doing at East Chop, but we'd
be remiss if we didn't. And look, you know, one
of the benefits of being in private equity is you
don't necessarily have to mark to market every day and understand,
you know, the value of how your assets have changed.
But you see a day like this in the equity markets,
what do you think.
Speaker 4 (01:31):
Well, I mean it's September, right, I mean SMP is
normally down in September, obviously, you know, still looking forward
to the job report later this week. So it's a
lot going on. I mean, it's a first of the month,
there's four months left in the year. It's just that
time of year. It's that time of year for a
lot of holiday the year season.
Speaker 3 (01:45):
Talk about seasonality.
Speaker 5 (01:46):
Yeah, and it seems like no one is surprised that
we woke up this morning in stocks were just screaming lower.
Speaker 3 (01:53):
Hey, I want to get to h just a headline
cross in the Bloomberg terminal. Calvin, forgive us. This is
what happened is live news in Nvidia. That's a Department
of Justice subpoena in escalating anti trust investigation. The US
Justice Department sent subpoenas to Nvidia and other companies. It
seeks evidence that the chipmaker violated anti trust laws. It's
an escalation of its investigation into the dominant AI computing provider.
(02:16):
Taking a look at shares of Nvidia in the after
hours as we speak, remember shares we're down significantly today,
more than nine percent today, Katie, I believe now down
one point four percent. Yeah.
Speaker 5 (02:27):
And of course, as you mentioned, Bloomberg had previously reported
on this in June that investigators have been contacting in
Nvidia and other tech companies to gather information here. According
to people familiar with the matter that have spoken to Bloomberg,
the DJ's San Francisco office is taking the lead running
the inquiry.
Speaker 1 (02:45):
We know that anti.
Speaker 5 (02:46):
Trust concerns for a lot of these big tech names
have been near the top of the list of things
to worry about. It definitely feels like that has been
the mood music out there, and it's interesting to see
this scoop now in crossing the Bloomberg that Invidia is
that DOJ subpoena in that escalating anti trust Investigation.
Speaker 3 (03:03):
Once again, shares moving lower in the after hours, down
one point five percent. Taken in total today if you
include after hours Katie shares down close to eleven percent.
Speaker 5 (03:13):
Yeah, it's pretty brutal.
Speaker 3 (03:14):
It is brutal. Hey, let's get back to Calvin Butts.
He's been extremely patient waiting for us as we do
breaking news here. That's what happens on Bloomberg Business Week.
Let's talk a little bit about the assets over at
Eastchop Capital, because you guys are doing some really interesting stuff.
When we talk about real estate private equity, you're not
just doing real estate, but you're also doing art investing.
(03:35):
Take me through the assets that you have under management
and where you're looking to grow.
Speaker 4 (03:39):
Yeah, so eas Shop Capital. Starting twenty eighteen, we have
two major verticals. The first one's real estate and the
second one was angel investing. From a real estate perspective,
we operate the largest minority owned luxury vacation home portfolio
right now. We own and operate assets as far north
as Martha's Miny're as far as south as Orlando, and
we have homes being built in Orlando, Florida, as well
as Cinnamon Shore, Texas. And we have homes in Gallenburg, Tennessee,
(04:01):
et cetera.
Speaker 3 (04:02):
When you say luxury, how do you define that?
Speaker 4 (04:04):
So we have anywhere from four to twelve bedroom homes
that are completely you know, renovated with in room master suites,
opportunities for multiple families that come in rent and stay.
We have homes with indoor bowling alleys.
Speaker 3 (04:17):
So you own and manage the home correct correct rent
them out through platforms such as Airbnb.
Speaker 1 (04:22):
Airbnb, verbal innovation, dot com, a lot of a lot
of different platforms.
Speaker 5 (04:25):
Twelve bedrooms that is h Yeah, that's luxury. And I
mean we talk about the luxury market all the time
when it comes to you know, accessories, handbag, shoes, et cetera.
What does the luxury market in real estate rentals look
like right now? We know that the housing market in
general has been pretty frozen. You think about the effect
(04:47):
of higher interest rates that structural under supply of housing.
When it comes to luxury real estate, what's the vibe there?
Speaker 4 (04:55):
So I think the vibe is, you know, you have
to make sure you have the right amenities for folks,
and I think it's not going to be if folks
are not going to travel. It's just how they're going
to travel, and the difference in how they travel. People
are traveling with more families, they're bringing their in laws.
Speaker 1 (05:09):
So you need more.
Speaker 4 (05:09):
Space, more rooms, more amenities, more living spaces, larger pools
and etc. So we've been able to provide that across
our portfolio. What about the art investing side of this, Well, so,
I mean I'm a personal investor in art. So I've
been collecting art for about five years now. We've gotten
our investors from Eachhot Capital into such things like Broadway
plays and other investments, but the art side has really
(05:30):
much me personally, been just trying to give back and
I have a long term vision of donating my art
collection and Hampton University and you know, help us litify
one of the historic black colleges in their museum and
art collecting.
Speaker 3 (05:43):
Okay, so it's not just real estate in art. You're
also thinking about sports, media, beverage. You mentioned entertainment.
Speaker 4 (05:52):
Too, That's absolutely correct. So we have different verticals that
we've invested in. So from a sports respective, we've invested
in a MLS Next Pro team in Connecticut. We're very
excited about that. That's the minor league version of soccer.
And so We're looking forward to being a part of that.
Andre Swatson his team has put together a dynamic opportunity
for our investors to be a part of a minor
(06:13):
league team and hopefully lead to MLS expansion over the
course of time with the plans there in that league.
From a Spirits perspective, we're the largest minority investors and
Uncle Nearest, which will in the fastest growing whiskey brands
in the world right now, So we're very excited to
be a part of that group. I was just on
the phone with fun Weaver earlier today. She's got some
more exciting new things happening and things are moving pretty
(06:36):
quickly in that space as well.
Speaker 5 (06:38):
And I want to talk a little bit more about
your investor base because reading through the details, So you
closed your first fund in December twenty twenty at four
million dollars. You recently closed your second fund at eleven
million dollars in April twenty twenty four. Just give us
more details on who is investing in your funds.
Speaker 4 (06:55):
Sure, So, we have about two hundred and fifty investors
across the real estate and angel investing. About ninety percent
of them are African American of folks of color, and
we have about twenty three percent women. Our first fund,
we went door to door, friends, family, fraternity, brothers and
sisters and you know, kind of going around and you know,
just kind of going door to door. And the second fund,
(07:15):
because of word of mouth, because of track record and
the success of the real estate, it was easier to
raise four x return, you know, and almost a third.
Speaker 1 (07:24):
Of the time.
Speaker 3 (07:25):
Wow, you talked about the composition of your investors. I
started out our segment by talking about the lack of
diversity when it comes to money management of small fraction
one point four percent again going back to that Harvard
Business School research by Professor Josh Lerner there. How does
(07:45):
that change? How did you change that? How have you
changed that?
Speaker 4 (07:48):
Well, I mean, we need to see more folks like
myself actually managing assets, and so our goals to grow
AU into a bigion dollars over time with different vertical sports, media,
real estate, and then from that to bring folks along
with us. That's part of closing the wealth gap, you know,
because you know, we want to educate folks and find
all the credit investors that are that look like us
(08:08):
and give them opportunity to invest in private markets where
the returns are greater.
Speaker 3 (08:11):
How do you find those accredited and investors? And a reminder,
those are people with over a million dollars in network.
Speaker 4 (08:16):
May not in their primary including primary residents, two d
K single income through JK combined with your spouse or partner.
You know, we're gonna it's It's really been word of
mouth for us right now. We've been you know, speaking
at different events and you know, kind of during our
own road show. But really it's about education, right, So
we want to educate folks on their status and once
they understand that they are credit investors and they have
(08:38):
access to private deal flow and private markets, it's an
excitement and a need to be educated and learn how
to get into those deals.
Speaker 5 (08:44):
So I have to imagine that, you know, for some
of those accredited investors that you're linking up with that
maybe there is their first time investing in a VC
fund and I mean, talk us through that. What does
that that education process look like? It's a lot different
I would and then just clicking by on an index
tracking ETF for example, it's been great.
Speaker 4 (09:05):
I mean, we we've had a chance to really educate
folks from A to Z, right so not only identifying
their status and what they're able to invest in, but
also educating on them on how to evaluate deal flow.
You know, what to look for, what questions ask, how
to set up you know, capital calls, and how to
commit to wires And I mean we really have done
it from start to finish and kind of have a
(09:26):
handhelding approach for.
Speaker 1 (09:27):
Our first time investors.
Speaker 4 (09:28):
Now we have other investors who have more a little
more savvyer and have done different private market stuff on
their own, but for the majority our investors, this was
their first investment into a private equity fund and then
now into other ventures that we've got the men via
our SPVs, our special purpose vehicles.
Speaker 3 (09:43):
You say that you are looking to grow assets into
a billion dollars, what's the timeline for.
Speaker 1 (09:47):
That, Well, we want to do it in the next
you know, three to five years.
Speaker 4 (09:50):
I mean, we probably have a two hundred and fifty
million dollar real estate pipeline that we're excited to kind
of roll out over the next couple of months that
will be introducing to our investors to the world. But
then also you know, we continue to seek you know,
deal flow. A lot of unique private market deal flow
is starting to flow down to the community level, and
we want to be one of those firms that curate
(10:11):
that that deal flow for our investor.
Speaker 3 (10:13):
Base that I want to get right back to Calvin
Bututz Junior. He's co founder and general partner of East
Chop Capital. They got about fifty million in assets under management,
the goal growing that to a billion dollars in the
next few years. Of assets under management. They do private equity,
They got sports, entertainment, media investments, a lot of real estate.
Calvin's here in our Bloomberg Interactive Brokers studio. A lot
(10:34):
of the real estate that you have acquired over the
last few years has been during a you know, uncharacteristically
in recent years, high interest rate environment. How did you
finance those so we did very well pre COVID.
Speaker 4 (10:45):
We bought a lot of our real estate and we
held it during COVID, managed it very well. And then
recently we've been paying cash for houses because of the
current interest rate environment. A goal is to watch their
rates drop and then you know, refinance those out and
have favorable lending terms and you know, give money back
to our investors as well.
Speaker 5 (11:02):
And taught to us about the geography a little bit
I mean, we talked a little bit about the luxury market,
but I also see, you know, looking through your talking points,
this focus on B plus cities that are growing. Talk
to us about who falls into that category when you
look around the map.
Speaker 4 (11:17):
Sure, sure, so from the luxury vacational perspective, we look
at lakes, beaches, mountain resorts. For the rest of the
real estate perspective, yes, we love fast growing B plus
cities Columbus, Ohio, Austin, Texas, Nashville. You know, we're very
excited to kind of be a part of their growth.
You see these teams that are starting to look at
you know, additional sports franchises, look at their urban airbnb
(11:37):
markets expanding, and just really just the overall just entertainment
of what's happening in these in these local cities.
Speaker 1 (11:43):
We want to be a part of that growth.
Speaker 3 (11:45):
Your investors are unique in the sense that they don't
necessarily look like a lot of other private equity investors.
You have two hundred, more than two hundred investors, ninety
percent of them are black, twenty three percent of them
are women. Do you think you'll be able to keep
those that demographic data as you grow?
Speaker 4 (12:01):
Well, No, I mean we're open to all investment. I mean,
you know, that's just where we focus on it. That's
been our relationship, that's been our network as we grow.
I mean, we're excited to welcome capital, you know, from
from all different walks of life, as long as it's
good money, you know, and you know, folks are understanding
what we're trying to accomplish and they have the same
values as us.
Speaker 1 (12:17):
You know, we'll be excited for that.
Speaker 4 (12:18):
But it'd be great to continue to get Black dollars
into into the private market space.
Speaker 3 (12:23):
Where do you see other areas for growth? We mentioned
a lot of the different assets that you own right now,
the types that you have your eye on. Where where
what's interesting to you right now?
Speaker 1 (12:33):
I say, I mean sports is great, I mean ownership.
Speaker 4 (12:35):
You're starting to see a lot of the professional teams
open up little packets or pieces of ownership. We'd like
to be a part of those in all the major
cities and even some of the up and coming, uh
you know, minor league teams that are growing. Kind of
start there and build into owning a professional team one day. Media,
We've got a lot of interest from our investor base
around Broadway plays when at Lasia keys Is Heal's Kitchen
(12:56):
did really well with that, and we've got some other
opportunities come in the pipeline, you know. And then you know,
obviously real estate, I mean looking at supporting our HBCUs
with housing and you know some of the needs that
are there and we want to address those gaps and make.
Speaker 1 (13:10):
Money doing it and keeping the focus on the future.
Speaker 5 (13:13):
Before we let you go, I want to talk a
little bit more about the investor base. So the goal
is to build the AUM to a billion dollars. Right now,
you have two hundred plus investors. What do you think
your sweet spot is in terms of investors. Are you
looking for ultra high net worth individuals eventually are you
happy with just you know, accredited investors? Like where do
(13:34):
you see that going when it comes to your investor makeup?
Speaker 1 (13:37):
So I think it's a blend.
Speaker 4 (13:38):
I think our sweet spot is folks who are making
their first or second private market investment, who have just
identified themselves at a credit. Investors who want to get
into wealth building, want to get a little more aggressive
around you know, building well.
Speaker 1 (13:49):
For themselves and their family. But I mean we also
have great deal flow, so we're open to.
Speaker 4 (13:53):
Family offices and other institutions that may want to support
us in our ventures. I mean, you know, we are
doing real estate, which is a hard asset, which traditionally
does well, and luxury real.
Speaker 1 (14:03):
Estate has been proven to be strong over the course
of the years.
Speaker 5 (14:07):
Well, Calvin so enjoyed this conversation, really fascinating perspective on
the private markets on of course, private equity investing. That
is Calvin Butz Junior. He is the co founder and
general partner over at east Chop Capital.
Speaker 2 (14:21):
You're listening to Bloomberg Business Week with Carol Messer and
Tim Stenebeck on Bloomberg Radio and Television.
Speaker 3 (14:30):
It is Bloomberg Business Week. And thirty years ago, Katie,
where were you?
Speaker 5 (14:34):
I was alive? Okay, yeah, I don't have memories from
that time, but I was definitely alive.
Speaker 1 (14:39):
All right, you were there?
Speaker 2 (14:40):
Yeah?
Speaker 1 (14:40):
Where were you?
Speaker 3 (14:42):
Thirty years ago? How old are you?
Speaker 5 (14:44):
Fifty?
Speaker 2 (14:45):
Yeah?
Speaker 3 (14:46):
Okay, she's funny, isn't she?
Speaker 2 (14:47):
Guys?
Speaker 3 (14:49):
Well, well, thirty years ago, Kodak spun off Eastman Chemical Company. Today,
Eastman is nearly a twelve billion dollar market cap company.
Because it is less on the chemicals and more unadvanced materials.
The company counts other companies like Pepsi, LVMH, Patagonia, Procter
and Gamble and others as a customers we've got with
(15:09):
us Mark Costa, CEO of Eastman, he joins us here
in the Bloomberg Interactive Brookers Studio. I would say Eastman
Kodak was a household name for an entire generation of people.
Eastman these days not so much given who your customers are.
Explain how we would interact with Eastman each and every day.
Speaker 6 (15:27):
Absolutely, so you know, long history of innovation. We've been
around for one hundred years as part of Kodak, and
then we're spun off as you noted thirty years ago.
Come up tomorrow morning and we may. We started out
making all the materials for Kodak, and then we branched
out dramatically into a variety of advanced materials and they're
in every aspect of your life. So we are famous
for our Triton, which is a BPA free plastic replaces polycardinate.
(15:49):
So anything whether it's Queison art or a reasonable water
bottle or anything else that says BPA free in the store,
and if it's really clear and hard, the top of
a yetti container, et cetera. That's Eastman Triton. So we
have a wide range of products like that that go
into cosmetic you know, bottles and lipstick holders and sunglasses
or I wear your wearings mete out of our biopalmer
that's a cellulosic derivative.
Speaker 3 (16:10):
Look at that.
Speaker 6 (16:12):
We're the dominant player in the world. And the safety
windows for the laminate for safety windows and cars and buildings,
for aftermarket films, additives into coatings and paints and personal care,
so a broad spectrum markets. We really represent the manufacturing
you know GDP of the world. Also very global.
Speaker 5 (16:30):
So how does your business fit into the macro economic
cycle because it's not as straightforward as you know close
for example, and people buy less closed when inflation is high.
I mean, talk us through sort of the daisy chain there.
Speaker 6 (16:42):
Yeah, absolutely, So we we touch a wide spectrum in markets.
Our three biggest in markets that are in our most
profitable in markets are automotive, building, construction, and consumer durables
you know, appliances, TVs, things like that. But we also
have a huge presence in personal care, in ag and
a variety of other end markets. So we really touch
a wide spectrum and very global in our footprint between here,
(17:06):
Europe and China.
Speaker 1 (17:07):
So we do touch all the in markets.
Speaker 6 (17:09):
But the ones that you know we can see and
really feel the pressure on right now is those consumer
discretionary markets that are interest affected, right auto homes, durables,
and you can see that demand for the world we
live in have been in a recession for two years,
right it started, you know in May of twenty twenty two.
You know, you know, Taylor Swift is a good place
to be, but you know, making things right now when
(17:30):
everyone wants to vacation, you know, it gets a lot
in a tougher road to walk.
Speaker 3 (17:34):
But Katie brings up a really good point about your
perch in so many playing in so many different different areas.
Would you say the consumer globally or here in the
US is weaker now than it's been at any point
in the last.
Speaker 6 (17:45):
Few years for sure. I mean, you know, we're way
off of the peak of twenty one twenty two, but
that was also somewhat stimulated. But we're still below twenty
nineteen on a pre COVID basis. In most of these
in markets you've got existing home.
Speaker 3 (17:57):
Sales, meaning we're worse off than pre nights.
Speaker 6 (18:00):
Absolutely, So you know, you think about existing home sales,
which is ninety percent of market transactions.
Speaker 3 (18:05):
Right, it's a different interest rate environment, yeah, for sure,
twenty eight year low.
Speaker 5 (18:08):
Yeah, so I'm curious. I mean, when we think about
sort of the makers of things right now, you think
about price and volume, And for a while it's felt like,
you know, companies were doing okay because they could just
increase the prices and sort of protect margins and revenue
that way. Now it feels like, especially looking at this
past running cycle, we've entered a different point where you
(18:30):
can't rely on those price increases that you have to
rely now on volume. Right. Where are you and that?
How are you thinking about that?
Speaker 6 (18:38):
That's a great question. So what we're seeing this year
is pretty meaningful volume growth. So our EPs will be
up twenty percent relative to last year, and that is
on volume, but it's really a lack of de stocking
than it is in markets are growing. But the destocking
last year through the whole materials chain was huge, right,
And you have in markets a low level for a
(18:58):
really long time. And that's what I think people are
missing is the area under the curve of over two
years of low demand. There's a lot of demand that's
not been served, whether it's cars, appliances, whatever else. So
at some point, for us in particular, I think we're
really leverage to interest rates coming off in that market
recovering because you've just had so much demand be low
for so long, right, nine or twenty twenty was bad,
(19:22):
but it was bad for three quarters or two quarters.
You know, we've now lapped into the ninth quarter where
demands off.
Speaker 3 (19:28):
So where does it look like we're going?
Speaker 6 (19:30):
Well, I think as you go to next year, to
your point, you're not increasing pricing this year relative to
last year, and certainly not really going to be increasing
pricing next year unless demand gets a lot stronger and
then pricing power will come with it. So, you know,
we look at the world of trying to keep our pricing,
you know, our variable margins sort of constant, you know,
hold the price gains that we've had, but get demand recovering, right,
(19:54):
and you have to get a two ways. One you
want markets to get better, which I think will happen
if the FED starts lowering rates, but the other you
got to create your own growth. So for us, a
big point of our emphasis and a lot of our
growth next year as Eastman will come from the circular economy.
So we've you know, built the world's largest circular circular
you know, molecular recycling facility to take waste polyostra plastic
(20:14):
and use it instead of oil to create all the
polymers that we make, and that allows us to sort
of disconnect from oil. Take waste you know that is
literally going to landfill that has no alternative use, and
recycle it back in and uh and do this infinitely
with the kind of technology that we've deployed.
Speaker 3 (20:31):
Mar Costa, thanks for swinging by absolutely. Gluberg Interactor Broker
Studio really appreciated. He's a CEO of Eastman
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:07):
This is Bloomberg BusinessWeek with Carol Messer and Tim Stenebek
on Bloomberg Radio.
Speaker 3 (00:14):
Uh, Katie, you know me. I like numbers.
Speaker 1 (00:16):
I like data.
Speaker 3 (00:17):
So here's some not so surprising data around race and
asset management. Not surprising if you've been paying any attention
to what we talk about here on Bloomberg BusinessWeek. I
found this article in the Harvard Business Review and it
says that back in twenty twenty one, this is research
from Josh Lerner at Harvard Business School, of all assets owned,
(00:38):
only one point four percent were managed by minority owned firms.
And back in twenty twenty one, minorities mid up more
than forty percent of the population. As I mentioned Josh
Lerner at Harvard Business School, he's got a ton of
research around this. There's a huge disparity between who has
and who manages these assets based on what our population
in the United States actually looks like. Somebody who's trying
(01:02):
to address that is Calvin Butz Junior. He's co founder
and general partner at East Chop Capital. He joins us
here in the Bloomberg Interactive Broker's Studio. Good to have
you with us, Calvin, how are you.
Speaker 1 (01:13):
I'm doing well. Thanks for having me.
Speaker 3 (01:14):
Yeah, thanks so much for having us. I want to
get to what you're doing at East Chop, but we'd
be remiss if we didn't. And look, you know, one
of the benefits of being in private equity is you
don't necessarily have to mark to market every day and understand,
you know, the value of how your assets have changed.
But you see a day like this in the equity markets,
what do you think.
Speaker 4 (01:31):
Well, I mean it's September, right, I mean SMP is
normally down in September, obviously, you know, still looking forward
to the job report later this week. So it's a
lot going on. I mean, it's a first of the month,
there's four months left in the year. It's just that
time of year. It's that time of year for a
lot of holiday the year season.
Speaker 3 (01:45):
Talk about seasonality.
Speaker 5 (01:46):
Yeah, and it seems like no one is surprised that
we woke up this morning in stocks were just screaming lower.
Speaker 3 (01:53):
Hey, I want to get to h just a headline
cross in the Bloomberg terminal. Calvin, forgive us. This is
what happened is live news in Nvidia. That's a Department
of Justice subpoena in escalating anti trust investigation. The US
Justice Department sent subpoenas to Nvidia and other companies. It
seeks evidence that the chipmaker violated anti trust laws. It's
an escalation of its investigation into the dominant AI computing provider.
(02:16):
Taking a look at shares of Nvidia in the after
hours as we speak, remember shares we're down significantly today,
more than nine percent today, Katie, I believe now down
one point four percent. Yeah.
Speaker 5 (02:27):
And of course, as you mentioned, Bloomberg had previously reported
on this in June that investigators have been contacting in
Nvidia and other tech companies to gather information here. According
to people familiar with the matter that have spoken to Bloomberg,
the DJ's San Francisco office is taking the lead running
the inquiry.
Speaker 1 (02:45):
We know that anti.
Speaker 5 (02:46):
Trust concerns for a lot of these big tech names
have been near the top of the list of things
to worry about. It definitely feels like that has been
the mood music out there, and it's interesting to see
this scoop now in crossing the Bloomberg that Invidia is
that DOJ subpoena in that escalating anti trust Investigation.
Speaker 3 (03:03):
Once again, shares moving lower in the after hours, down
one point five percent. Taken in total today if you
include after hours Katie shares down close to eleven percent.
Speaker 5 (03:13):
Yeah, it's pretty brutal.
Speaker 3 (03:14):
It is brutal. Hey, let's get back to Calvin Butts.
He's been extremely patient waiting for us as we do
breaking news here. That's what happens on Bloomberg Business Week.
Let's talk a little bit about the assets over at
Eastchop Capital, because you guys are doing some really interesting stuff.
When we talk about real estate private equity, you're not
just doing real estate, but you're also doing art investing.
(03:35):
Take me through the assets that you have under management
and where you're looking to grow.
Speaker 4 (03:39):
Yeah, so eas Shop Capital. Starting twenty eighteen, we have
two major verticals. The first one's real estate and the
second one was angel investing. From a real estate perspective,
we operate the largest minority owned luxury vacation home portfolio
right now. We own and operate assets as far north
as Martha's Miny're as far as south as Orlando, and
we have homes being built in Orlando, Florida, as well
as Cinnamon Shore, Texas. And we have homes in Gallenburg, Tennessee,
(04:01):
et cetera.
Speaker 3 (04:02):
When you say luxury, how do you define that?
Speaker 4 (04:04):
So we have anywhere from four to twelve bedroom homes
that are completely you know, renovated with in room master suites,
opportunities for multiple families that come in rent and stay.
We have homes with indoor bowling alleys.
Speaker 3 (04:17):
So you own and manage the home correct correct rent
them out through platforms such as Airbnb.
Speaker 1 (04:22):
Airbnb, verbal innovation, dot com, a lot of a lot
of different platforms.
Speaker 5 (04:25):
Twelve bedrooms that is h Yeah, that's luxury. And I
mean we talk about the luxury market all the time
when it comes to you know, accessories, handbag, shoes, et cetera.
What does the luxury market in real estate rentals look
like right now? We know that the housing market in
general has been pretty frozen. You think about the effect
(04:47):
of higher interest rates that structural under supply of housing.
When it comes to luxury real estate, what's the vibe there?
Speaker 4 (04:55):
So I think the vibe is, you know, you have
to make sure you have the right amenities for folks,
and I think it's not going to be if folks
are not going to travel. It's just how they're going
to travel, and the difference in how they travel. People
are traveling with more families, they're bringing their in laws.
Speaker 1 (05:09):
So you need more.
Speaker 4 (05:09):
Space, more rooms, more amenities, more living spaces, larger pools
and etc. So we've been able to provide that across
our portfolio. What about the art investing side of this, Well, so,
I mean I'm a personal investor in art. So I've
been collecting art for about five years now. We've gotten
our investors from Eachhot Capital into such things like Broadway
plays and other investments, but the art side has really
(05:30):
much me personally, been just trying to give back and
I have a long term vision of donating my art
collection and Hampton University and you know, help us litify
one of the historic black colleges in their museum and
art collecting.
Speaker 3 (05:43):
Okay, so it's not just real estate in art. You're
also thinking about sports, media, beverage. You mentioned entertainment.
Speaker 4 (05:52):
Too, That's absolutely correct. So we have different verticals that
we've invested in. So from a sports respective, we've invested
in a MLS Next Pro team in Connecticut. We're very
excited about that. That's the minor league version of soccer.
And so We're looking forward to being a part of that.
Andre Swatson his team has put together a dynamic opportunity
for our investors to be a part of a minor
(06:13):
league team and hopefully lead to MLS expansion over the
course of time with the plans there in that league.
From a Spirits perspective, we're the largest minority investors and
Uncle Nearest, which will in the fastest growing whiskey brands
in the world right now, So we're very excited to
be a part of that group. I was just on
the phone with fun Weaver earlier today. She's got some
more exciting new things happening and things are moving pretty
(06:36):
quickly in that space as well.
Speaker 5 (06:38):
And I want to talk a little bit more about
your investor base because reading through the details, So you
closed your first fund in December twenty twenty at four
million dollars. You recently closed your second fund at eleven
million dollars in April twenty twenty four. Just give us
more details on who is investing in your funds.
Speaker 4 (06:55):
Sure, So, we have about two hundred and fifty investors
across the real estate and angel investing. About ninety percent
of them are African American of folks of color, and
we have about twenty three percent women. Our first fund,
we went door to door, friends, family, fraternity, brothers and
sisters and you know, kind of going around and you know,
just kind of going door to door. And the second fund,
(07:15):
because of word of mouth, because of track record and
the success of the real estate, it was easier to
raise four x return, you know, and almost a third.
Speaker 1 (07:24):
Of the time.
Speaker 3 (07:25):
Wow, you talked about the composition of your investors. I
started out our segment by talking about the lack of
diversity when it comes to money management of small fraction
one point four percent again going back to that Harvard
Business School research by Professor Josh Lerner there. How does
(07:45):
that change? How did you change that? How have you
changed that?
Speaker 4 (07:48):
Well, I mean, we need to see more folks like
myself actually managing assets, and so our goals to grow
AU into a bigion dollars over time with different vertical sports, media,
real estate, and then from that to bring folks along
with us. That's part of closing the wealth gap, you know,
because you know, we want to educate folks and find
all the credit investors that are that look like us
(08:08):
and give them opportunity to invest in private markets where
the returns are greater.
Speaker 3 (08:11):
How do you find those accredited and investors? And a reminder,
those are people with over a million dollars in network.
Speaker 4 (08:16):
May not in their primary including primary residents, two d
K single income through JK combined with your spouse or partner.
You know, we're gonna it's It's really been word of
mouth for us right now. We've been you know, speaking
at different events and you know, kind of during our
own road show. But really it's about education, right, So
we want to educate folks on their status and once
they understand that they are credit investors and they have
(08:38):
access to private deal flow and private markets, it's an
excitement and a need to be educated and learn how
to get into those deals.
Speaker 5 (08:44):
So I have to imagine that, you know, for some
of those accredited investors that you're linking up with that
maybe there is their first time investing in a VC
fund and I mean, talk us through that. What does
that that education process look like? It's a lot different
I would and then just clicking by on an index
tracking ETF for example, it's been great.
Speaker 4 (09:05):
I mean, we we've had a chance to really educate
folks from A to Z, right so not only identifying
their status and what they're able to invest in, but
also educating on them on how to evaluate deal flow.
You know, what to look for, what questions ask, how
to set up you know, capital calls, and how to
commit to wires And I mean we really have done
it from start to finish and kind of have a
(09:26):
handhelding approach for.
Speaker 1 (09:27):
Our first time investors.
Speaker 4 (09:28):
Now we have other investors who have more a little
more savvyer and have done different private market stuff on
their own, but for the majority our investors, this was
their first investment into a private equity fund and then
now into other ventures that we've got the men via
our SPVs, our special purpose vehicles.
Speaker 3 (09:43):
You say that you are looking to grow assets into
a billion dollars, what's the timeline for.
Speaker 1 (09:47):
That, Well, we want to do it in the next
you know, three to five years.
Speaker 4 (09:50):
I mean, we probably have a two hundred and fifty
million dollar real estate pipeline that we're excited to kind
of roll out over the next couple of months that
will be introducing to our investors to the world. But
then also you know, we continue to seek you know,
deal flow. A lot of unique private market deal flow
is starting to flow down to the community level, and
we want to be one of those firms that curate
(10:11):
that that deal flow for our investor.
Speaker 3 (10:13):
Base that I want to get right back to Calvin
Bututz Junior. He's co founder and general partner of East
Chop Capital. They got about fifty million in assets under management,
the goal growing that to a billion dollars in the
next few years. Of assets under management. They do private equity,
They got sports, entertainment, media investments, a lot of real estate.
Calvin's here in our Bloomberg Interactive Brokers studio. A lot
(10:34):
of the real estate that you have acquired over the
last few years has been during a you know, uncharacteristically
in recent years, high interest rate environment. How did you
finance those so we did very well pre COVID.
Speaker 4 (10:45):
We bought a lot of our real estate and we
held it during COVID, managed it very well. And then
recently we've been paying cash for houses because of the
current interest rate environment. A goal is to watch their
rates drop and then you know, refinance those out and
have favorable lending terms and you know, give money back
to our investors as well.
Speaker 5 (11:02):
And taught to us about the geography a little bit
I mean, we talked a little bit about the luxury market,
but I also see, you know, looking through your talking points,
this focus on B plus cities that are growing. Talk
to us about who falls into that category when you
look around the map.
Speaker 4 (11:17):
Sure, sure, so from the luxury vacational perspective, we look
at lakes, beaches, mountain resorts. For the rest of the
real estate perspective, yes, we love fast growing B plus
cities Columbus, Ohio, Austin, Texas, Nashville. You know, we're very
excited to kind of be a part of their growth.
You see these teams that are starting to look at
you know, additional sports franchises, look at their urban airbnb
(11:37):
markets expanding, and just really just the overall just entertainment
of what's happening in these in these local cities.
Speaker 1 (11:43):
We want to be a part of that growth.
Speaker 3 (11:45):
Your investors are unique in the sense that they don't
necessarily look like a lot of other private equity investors.
You have two hundred, more than two hundred investors, ninety
percent of them are black, twenty three percent of them
are women. Do you think you'll be able to keep
those that demographic data as you grow?
Speaker 4 (12:01):
Well, No, I mean we're open to all investment. I mean,
you know, that's just where we focus on it. That's
been our relationship, that's been our network as we grow.
I mean, we're excited to welcome capital, you know, from
from all different walks of life, as long as it's
good money, you know, and you know, folks are understanding
what we're trying to accomplish and they have the same
values as us.
Speaker 1 (12:17):
You know, we'll be excited for that.
Speaker 4 (12:18):
But it'd be great to continue to get Black dollars
into into the private market space.
Speaker 3 (12:23):
Where do you see other areas for growth? We mentioned
a lot of the different assets that you own right now,
the types that you have your eye on. Where where
what's interesting to you right now?
Speaker 1 (12:33):
I say, I mean sports is great, I mean ownership.
Speaker 4 (12:35):
You're starting to see a lot of the professional teams
open up little packets or pieces of ownership. We'd like
to be a part of those in all the major
cities and even some of the up and coming, uh
you know, minor league teams that are growing. Kind of
start there and build into owning a professional team one day. Media,
We've got a lot of interest from our investor base
around Broadway plays when at Lasia keys Is Heal's Kitchen
(12:56):
did really well with that, and we've got some other
opportunities come in the pipeline, you know. And then you know,
obviously real estate, I mean looking at supporting our HBCUs
with housing and you know some of the needs that
are there and we want to address those gaps and make.
Speaker 1 (13:10):
Money doing it and keeping the focus on the future.
Speaker 5 (13:13):
Before we let you go, I want to talk a
little bit more about the investor base. So the goal
is to build the AUM to a billion dollars. Right now,
you have two hundred plus investors. What do you think
your sweet spot is in terms of investors. Are you
looking for ultra high net worth individuals eventually are you
happy with just you know, accredited investors? Like where do
(13:34):
you see that going when it comes to your investor makeup?
Speaker 1 (13:37):
So I think it's a blend.
Speaker 4 (13:38):
I think our sweet spot is folks who are making
their first or second private market investment, who have just
identified themselves at a credit. Investors who want to get
into wealth building, want to get a little more aggressive
around you know, building well.
Speaker 1 (13:49):
For themselves and their family. But I mean we also
have great deal flow, so we're open to.
Speaker 4 (13:53):
Family offices and other institutions that may want to support
us in our ventures. I mean, you know, we are
doing real estate, which is a hard asset, which traditionally
does well, and luxury real.
Speaker 1 (14:03):
Estate has been proven to be strong over the course
of the years.
Speaker 5 (14:07):
Well, Calvin so enjoyed this conversation, really fascinating perspective on
the private markets on of course, private equity investing. That
is Calvin Butz Junior. He is the co founder and
general partner over at east Chop Capital.
Speaker 2 (14:21):
You're listening to Bloomberg Business Week with Carol Messer and
Tim Stenebeck on Bloomberg Radio and Television.
Speaker 3 (14:30):
It is Bloomberg Business Week. And thirty years ago, Katie,
where were you?
Speaker 5 (14:34):
I was alive? Okay, yeah, I don't have memories from
that time, but I was definitely alive.
Speaker 1 (14:39):
All right, you were there?
Speaker 2 (14:40):
Yeah?
Speaker 1 (14:40):
Where were you?
Speaker 3 (14:42):
Thirty years ago? How old are you?
Speaker 5 (14:44):
Fifty?
Speaker 2 (14:45):
Yeah?
Speaker 3 (14:46):
Okay, she's funny, isn't she?
Speaker 2 (14:47):
Guys?
Speaker 3 (14:49):
Well, well, thirty years ago, Kodak spun off Eastman Chemical Company. Today,
Eastman is nearly a twelve billion dollar market cap company.
Because it is less on the chemicals and more unadvanced materials.
The company counts other companies like Pepsi, LVMH, Patagonia, Procter
and Gamble and others as a customers we've got with
(15:09):
us Mark Costa, CEO of Eastman, he joins us here
in the Bloomberg Interactive Brookers Studio. I would say Eastman
Kodak was a household name for an entire generation of people.
Eastman these days not so much given who your customers are.
Explain how we would interact with Eastman each and every day.
Speaker 6 (15:27):
Absolutely, so you know, long history of innovation. We've been
around for one hundred years as part of Kodak, and
then we're spun off as you noted thirty years ago.
Come up tomorrow morning and we may. We started out
making all the materials for Kodak, and then we branched
out dramatically into a variety of advanced materials and they're
in every aspect of your life. So we are famous
for our Triton, which is a BPA free plastic replaces polycardinate.
(15:49):
So anything whether it's Queison art or a reasonable water
bottle or anything else that says BPA free in the store,
and if it's really clear and hard, the top of
a yetti container, et cetera. That's Eastman Triton. So we
have a wide range of products like that that go
into cosmetic you know, bottles and lipstick holders and sunglasses
or I wear your wearings mete out of our biopalmer
that's a cellulosic derivative.
Speaker 3 (16:10):
Look at that.
Speaker 6 (16:12):
We're the dominant player in the world. And the safety
windows for the laminate for safety windows and cars and buildings,
for aftermarket films, additives into coatings and paints and personal care,
so a broad spectrum markets. We really represent the manufacturing
you know GDP of the world. Also very global.
Speaker 5 (16:30):
So how does your business fit into the macro economic
cycle because it's not as straightforward as you know close
for example, and people buy less closed when inflation is high.
I mean, talk us through sort of the daisy chain there.
Speaker 6 (16:42):
Yeah, absolutely, So we we touch a wide spectrum in markets.
Our three biggest in markets that are in our most
profitable in markets are automotive, building, construction, and consumer durables
you know, appliances, TVs, things like that. But we also
have a huge presence in personal care, in ag and
a variety of other end markets. So we really touch
a wide spectrum and very global in our footprint between here,
(17:06):
Europe and China.
Speaker 1 (17:07):
So we do touch all the in markets.
Speaker 6 (17:09):
But the ones that you know we can see and
really feel the pressure on right now is those consumer
discretionary markets that are interest affected, right auto homes, durables,
and you can see that demand for the world we
live in have been in a recession for two years,
right it started, you know in May of twenty twenty two.
You know, you know, Taylor Swift is a good place
to be, but you know, making things right now when
(17:30):
everyone wants to vacation, you know, it gets a lot
in a tougher road to walk.
Speaker 3 (17:34):
But Katie brings up a really good point about your
perch in so many playing in so many different different areas.
Would you say the consumer globally or here in the
US is weaker now than it's been at any point
in the last.
Speaker 6 (17:45):
Few years for sure. I mean, you know, we're way
off of the peak of twenty one twenty two, but
that was also somewhat stimulated. But we're still below twenty
nineteen on a pre COVID basis. In most of these
in markets you've got existing home.
Speaker 3 (17:57):
Sales, meaning we're worse off than pre nights.
Speaker 6 (18:00):
Absolutely, So you know, you think about existing home sales,
which is ninety percent of market transactions.
Speaker 3 (18:05):
Right, it's a different interest rate environment, yeah, for sure,
twenty eight year low.
Speaker 5 (18:08):
Yeah, so I'm curious. I mean, when we think about
sort of the makers of things right now, you think
about price and volume, And for a while it's felt like,
you know, companies were doing okay because they could just
increase the prices and sort of protect margins and revenue
that way. Now it feels like, especially looking at this
past running cycle, we've entered a different point where you
(18:30):
can't rely on those price increases that you have to
rely now on volume. Right. Where are you and that?
How are you thinking about that?
Speaker 6 (18:38):
That's a great question. So what we're seeing this year
is pretty meaningful volume growth. So our EPs will be
up twenty percent relative to last year, and that is
on volume, but it's really a lack of de stocking
than it is in markets are growing. But the destocking
last year through the whole materials chain was huge, right,
And you have in markets a low level for a
(18:58):
really long time. And that's what I think people are
missing is the area under the curve of over two
years of low demand. There's a lot of demand that's
not been served, whether it's cars, appliances, whatever else. So
at some point, for us in particular, I think we're
really leverage to interest rates coming off in that market
recovering because you've just had so much demand be low
for so long, right, nine or twenty twenty was bad,
(19:22):
but it was bad for three quarters or two quarters.
You know, we've now lapped into the ninth quarter where
demands off.
Speaker 3 (19:28):
So where does it look like we're going?
Speaker 6 (19:30):
Well, I think as you go to next year, to
your point, you're not increasing pricing this year relative to
last year, and certainly not really going to be increasing
pricing next year unless demand gets a lot stronger and
then pricing power will come with it. So, you know,
we look at the world of trying to keep our pricing,
you know, our variable margins sort of constant, you know,
hold the price gains that we've had, but get demand recovering, right,
(19:54):
and you have to get a two ways. One you
want markets to get better, which I think will happen
if the FED starts lowering rates, but the other you
got to create your own growth. So for us, a
big point of our emphasis and a lot of our
growth next year as Eastman will come from the circular economy.
So we've you know, built the world's largest circular circular
you know, molecular recycling facility to take waste polyostra plastic
(20:14):
and use it instead of oil to create all the
polymers that we make, and that allows us to sort
of disconnect from oil. Take waste you know that is
literally going to landfill that has no alternative use, and
recycle it back in and uh and do this infinitely
with the kind of technology that we've deployed.
Speaker 3 (20:31):
Mar Costa, thanks for swinging by absolutely. Gluberg Interactor Broker
Studio really appreciated. He's a CEO of Eastman
Hosts And Creators
Tim Stenovec
Carol Massar
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