Real Estate Outlook: A More Attractive Asset?

Please welcome your panelists on Real Estate Outlook, A Hottest Asset, moderated by Bloomberg TV Managing Editor Eric Schadt. Good afternoon everyone and welcome to

real

estate

prospects, as God just said. I'm Eric Schatz Kerr and I'm delighted to welcome a very distinguished group of panelists. I'll briefly introduce them to you if you'd like to read a little

more

. Of course, the Milken Institute kindly provided us with very detailed biographies. Let me start on the far right, we have Neil. flower of Walton Street Capitol immediately to my right is Bob Morris of Bridge Investment Group to my left a slacker from Ophir Global to his left Simon excuse me David Simon of Simon Property Group and finally Sam Zell of Equity Group Investments I mentioned that they are a distinguished bunch of

real

estate

investors, what sets them apart is that they don't all do the same thing and I think it will become clear that some of these gentlemen are highly specialized in what they do.

David, for example, of course. primarily focused on shopping centers in the retail industry Bob is primarily focused on value-added investments in real estate some of our other panelists cover

more

broadly together I think they will give you a really well-rounded idea of ​​the prospects for real estate as an investment and I think So I'm going to start with a very simple question: where are we in the real estate investment cycle? Which of you would like to start with that? The eleventh inning the eleventh inning of How many innings are there? The extra inning game was longer than I expected, what does that mean?

Sam earlier in the 11th inning. I think you know that the bottom of the recession was 0.9. We had a very unusual set of circumstances since 9:00. Until we were 15 we built almost nothing. I don't think there has been a period since World War II when we have built so little. We are now getting acquainted with the oversupply and over the next 24 months, I think we will see a lot of new buildings. I don't know what you live in. Innings means why you say which. I don't know what 11 innings means because I'm not familiar with football, but baseball just shows you how much.

I know I think what Sam is trying to say is that the carton of milk in the refrigerator is already past its expiration date Bravo and I agree with that why the word is laundered with money in unprecedented amounts and this money is chasing

asset

s at a level that has not been seen before and that causes

asset

values ​​to rise and you are compressed to a level where any change in interest rates or inflation would make them unsustainable, any change in inflation and interest rates, you know, Erica, I think in To answer that question, in part, you have to put it in relative terms compared to other markets and we've heard a lot about stock markets and how stock valuations are high, how interest rates are going to increase, etc., and in the real estate sector.

I think there is potentially some value left on a relative basis compared to some fairly lofty valuations in the equity markets. Now it depends on what you buy, where you buy it, whether you're investing in the US or abroad and in some respects the major markets that are pretty closely correlated, at least historically, have been very closely correlated with the interest rates; It looks quite expensive, but in some other parts of the asset class there may still be some opportunity to gain some alpha at the asset level. Do you think in principle that I would agree in principle with these other two gentlemen that we are quite advanced?

Everyone I've spoken to at Milken says we're very far along, so it must be the right thing to do. Consensus is a dangerous thought, but everyone but everyone is very cautious and no one has been able to explain why we are so far along and what are the excesses that should precipitate a recession, so why don't we ask David Simon or Neil Bloom, let them try it? Why are we so advanced if the excess is apart from the and I'm not sure I would call it excess but the capital surplus is the only one we can see?

Well, we are NIF, I agree that We have reached the end of this cycle, but we are in a very different environment. We are now in a situation where property prices are very high because cap rates are low because interest rates are very low. Now we have interest rates going up. People thought they were moving. They have increased in recent years and are finally starting to do so and there is a situation where there is a disconnect between buyers and sellers, the buyers are waiting for prices to go down and the sellers are still looking in the rearview mirror.

I think cap rates have probably increased. went up, except for the really prime assets, maybe 50 basis points, on the other hand, and now there's a lot more development than there was, as Sam said, Sam Neill, well, Sam, you're looking at a lot of apartments, there's more apartment developments, how about office space? It's starting in hotels, in the industry, there is development everywhere except what I'm going to write so I don't forget, okay, but I would say this if we are going to have higher interest rates and there will be inflation and it will be more expensive to develop new ones. properties, especially with steel, etc.

In three or four years you will see a slowdown in construction because you will not be able to get a reasonable return on your cost. of capital on the construction cost of the property if you look into the future, but at this time you still have all the projects underway that have been planned and under construction. I don't know from my experience new higher interest rates at the top tier. The inflation rate it generates tends to generate a higher level of income. This is a textbook. The only thing that can stop it is excess supply. So where is the excess supply?

I think we are in a stage of excess supply. How is the right panel on terrorism in the 11th inning, well, we sat in the 11th 11th, so we're still in the 11th. I would just say that it feels like a late cycle, but I think you have to bifurcate it between the public and private markets because if you look and I would also say that the real estate sector, even if it is a late cycle despite an oversupply and some products in some markets, you won't go, don't expect the carnage to happen, you know the way we've seen the real estate crash.

I think that's the difference here, even though we're late in the cycle. I don't expect a dramatic change in valuation of why real estate is because and again it seems to be fine. I think a lot of people jumped into the boom and bust, yeah, well, I guess. Much of this is due to the discipline that public companies have applied in the real estate world and they also think that the underwriting of financial institutions has become much stricter, so let's take an example and believe it or not, we have all experienced what we have experienced. the real estate recession in late 88 89 lasted until 93 94 that was a real estate recession that happened in Oh 809 was a piece of cake and I think it was brief and temporary in fact real estate really a couple Many people made big mistakes, but overall the industry recovered quite significantly and I think even with the late cycle I would expect some adjustment but not a dramatic drop like we saw in the early 90's and in fact if you look at public securities today Today they are basically already like that, and whether they are right or not, I would say that they are not necessarily correct because I think the business is better than the public markets think, but they are already adjusting. because you know, late cycle, if you look at private values ​​versus public asset values, you know there's a 25 to 30 percent difference, so they're already assuming that they're looking forward, they've already valued a sort of Late cycle securities that dichotomy is really interesting because public rates have come down quite significantly in price, they have greatly underperformed this year and yet when at least when we go out to sell assets, there are enormously bids competitive and

attractive

for the assets that we are selling in the private markets and when we try to buy assets, the terms and conditions under which you do have to submit to put an asset under contract have tightened quite significantly the amount of time that you can have to do the due Diligence the hard money you have to deposit both have become much more favorable to the seller than we benefit from, sometimes we have problems with that, but there is that public/private dichotomy that begs the question to be asked: do you know what party is right?

Maybe you can give me some advice because obviously I've been in the wrong field and you've sold about $10 billion worth of real estate in the last four and a half years. A year and a half ago we put something up for sale and we had 30 buyers and 20 of them ready to work hard. Two years ago we put something up for sale and we had ten buyers and two ready to work hard. Now we put something up for sale. sale and we wait and hope someone shows up now maybe we're only operating in 48 states or something so we may not know what you're talking about but if you do I can tell you you know the big one.

The element that is happening today in the real estate market is like unicorns in high technology. You create unicorns to prevent price discovery. You stay in the private market to avoid price discovery. The public market is price discovery and the public market tells you that. a very different story than the private market, but in the private market, when guys get slaughtered, they don't make the headlines, in the public market they do, so I think you know, putting it well, I'm sure I can't give you much advice, although if you're a million, listen, you've got assets that no one's bidding on, we'd love to see them, that's the reason no one's looking at them, you know, buddy, maybe they're the ones. different sections.

Within real estate, some are of course more

attractive

than others and I'm only talking about the US and I know that many people on the panel have a much more global footprint and presence than the bridge, but there is EE The US is a quite attractive place to invest, there is a lot of foreign capital. I was in Korea about ten days ago and, as you know, Korean investors are still looking for single-digit returns on the real estate investments they make and, at least in the markets we participate in, single-digit returns are in the lower end of what the targets are, they're not the core markets, they're the value-added markets, so there's still a...

We found that there's still a pretty strong supply for the first few assets selected, well, I think there's , you know, in a low-digit Korean time period, you know, that says if we start today, maybe by the beginning of the 22nd century they'll be ready to close, you know, if you go like that. Little by little you can get a great price. I don't think there's any doubt that there aren't as many buyers and sellers transacting right now. The number of actions on your rights has decreased enormously. Read for the reason I said before. there is a disconnect, but there is also a disconnect between the prices of public REITs and the private market.

The question is which one is right. I guess there's something somewhere in between. Well, prices or the private market are going to go up. will go up and at some point the REITs will readjust the problem with the crowns is the other way around the private will go down private yes the private prices the private prices will go down without a doubt because interest rates are going up and we were not going to have this very low level of a rate capped in perpetuity and that's what's happening, on the other hand, the only thing I would say is that real estate is a better value today than other equities today, so to me, that's even though There may be this adjustment because rates are going to rise or there will be more supply and values ​​will fall, the relative value of the real estate sector is still better today than before.

These are the other capital interests in instruments, I mean now we're talking about our book. but I mean that's the only way REITs are priced today versus how they are measured. Visa V, the SP is one of the lowest it's ever been, it was so low, you know. I remember this at the 1998-2000 level. That's what makes real estate, even though there may be this adjustment in values, still relatively attractive today than it was two three four years ago. One of the points you addressed directly, David, was what the crash will look like when it comes and we indirectly addressed the precipitating factor: interest rates and inflation before we get to the end.

What beyond interest rates and inflation could end this cycle, Eric, is called supply. Oh yeah, of course, you ended up forgetting about it in every real estate scenario. we have been managed, we survived through twenty-one and a half percent of diamonds, real statements, we did not go bankrupt, crimeIt was 21 and a half, so when all is said and done, what created the depression that David and 989 1093 were talking about? It was the Japanese, you know, they came with bushels of money. They said that in Tokyo this building would be the one that would only have a two percent yield.

I bought it for four and then it went empty and then it sold for 50 cents on the dollar. because if I don't have yen because he financed it anyway, it's okay, there is nothing different today than in the past, it's all about supply and there is a tsunami of supply in the future and if someone in this Tappan Oh can explain to me where there is the demand. He's going to face that tsunami of supply, so we've got someone to talk to about the MITensilla there's a book it's the book he's playing in his book go buy the book from him, could you please Sam?

Not better things. There is a supply of apartment buildings in the downtown areas where all the young people have moved because there was a tremendous demand for apartments. and that's going to continue, so you're feeling it more in that area, but the amount of development in the office certainly almost nothing in retail, okay, it's not a huge success, you know, it goes market by market, you know, I think I'm the largest CBD apartment owner in the world, and I can tell you that yes, their supply and our occupancy have increased from 98 to 97, our rents have increased from up to ok, that's the supply we're on. talking.

What about concessions? What about Who concessions? How many months of free nights are we nowhere near what it has been in the past? Well, on the other hand, I would say that the existing retail offering represents the tsunami; no need to build anything. and there is going to be too much office space. Someone is building something called Hudson Yards. 14 million feet of new space in New York. Next door is Brookfield. Five million square feet of new space. Next door is Penn Central Station. Voron Arrow owns seven million if they're not built yet nine million of all that space has been filled committed hasn't been filled yet what's up with all the holes that creates let's get it we work on your credit it's a deal Sam that's New York I have an office building habits ll Co the market how about Drago the rents are going up a lot argon there is a business that is better than the other other than retail trade or retail trade within offices I just want to continue writing office building the effect of rents going down every year without going absolutely absolutely I mean, you know, I have IT.

It has almost doubled in the last three years in new office buildings across the country. You don't think it's a concession, so Sam, are you feeling good about your multifamily exposure? Yes, you know that within reason. and our review I think I'm being realistic because no, we don't see a lot of new supplies in multifamily, certainly not new Class B supplies. I'll send you some pictures. Send us some assets. I'll send you some. photos, okay, you know, I mean, someone is going to find out pretty soon how much industrial space is under construction and how much of that space is compromised, there's no alternative use for those things either, right, but you know, the answer is that they all they think their the building is going to be leased Amazon, everyone's fine, so you know, and God forbid you don't get the lease from Amazon, you know, it's like Ghostbusters, who are you calling?

I thought if Sammy is in a good mood, we'll have a good discussion. Here Eric, you were worried about this being animated, yes, we want to change seats with Sam, yes, let's go to failure, you know, you know, in other industries, from time to time something called supply destruction happens in mining, for example, in real estate, unless you are. In Detroit there really isn't any destruction of supplies, so if you think I'm not sure if this is a question for you, Sam, did you hear a little bit of David's point of view on the subject? You two gentlemen? but David thinks that when the bus arrives it will look mild, let's say that in relation to what happened between 88 and 93 it is that leprosy is better than cancer.

I don't think anyone has an answer. Hey, do we agree, do we agree with David that he is? a slight downturn for Carlat in the real estate sector or is he uglier than that? Let's start with the original premise: there is more money out there and more than ever before in history. You think all that money won't create loans to build new real estate? Confucius says that developers will build when money is available, which was healthy, you know there are injuries, so maybe the difference arises that just to defend my place, although Sam, you know that's the great fun of my place, no , he didn't know, yes, no, me.

Of course, but I'm not in the business, I can't make fun of it, I feel for you, by the way, I just want to state for the record that we actually had more operating income than Amazon quarter over quarter, but they. We all care about that, but for the record, you know, every time I walk through any room, people say, how are you, David? Yeah, I'm all sorry, and the first time someone felt sorry for me, so it's great that we're together. In fact, I don't mind a little carnage because that's when we've done our best work, so we're trying to get our competitor out of online bankruptcy.

It was the only real disaster, which was smooth growth, but we, you know, it was I had to deal with Bill Ackman, it was a little complicated, but the point is that there is so much capital that they are waiting if there is a down cycle that in the night, apart from Sam, which is the original opportunistic money, there was That money was very little between 88 and 93 and then Neil and Sam really started the opportunistic money type, so when there are these failed deals, whether due to the cycle credit or due to too much development, there is capital to recover it cheaply. and that and that I think softens things a lot more than what we saw in eighty-eight, you know, two ninety-three or four.

I mean that's the difference and there will be a cycle here without a doubt, we haven't had it in a long time and I don't think we had it in 1808 and oh nine, not really, but I don't know if Neil and I, I mean, For me it was so short and so temporary that it really wasn't what I would call a traditional alidade cycle: we entered the recession O seven the first time since World War II, where a country went into recession and the real estate sector did not have an oversupply, the first and only time any other recession began with a real estate oversupply, the recession still oversupply got worse because demand disappeared.

You will have a similar scenario here. Know. I put together the first Opportunity Fund in real estate in 1989. I remember pitching to insurance companies and pension funds, which, by the way, had a lot of money at the time. The problem was that they sat me down and said, what do you mean we're in oversupply? my masters in management our assessment says I'm in very good shape why would I want to finance the purchase of distressed properties? there's not going to be anyone that's where that's what the money source said now do you think that in 2020 these wise guys will become smart unlikely unlikely what are you saying Neal yeah first of all Sam you were talking about developers to be fair I don't think you've never built a building I have you damn and that's why I have another one with him you probably built one and it didn't work three things oh cool three sorry if I had three four three it's been harder to get construction financing in the last few years years partly because of the rules that the bank governs in terms of how much capital is needed, how much from the banks alone and it has been very difficult to achieve much overdevelopment.

I'm not saying we don't have it in some areas, but I'm much more in tune with the argument that's been made that we're in the late innings, we're going to have a slowdown, we're going to have a correction, but it's not going to be a giant problem. like 1990. We both lived in a place where there was a huge construction bill and a recession and everyone thought you know you would survive anything that was cool, I just didn't read good real estate, nothing except one exception is It is true that the banking regulator said no. They no longer lend loans for new construction or construction and all kinds of smart funds came with very smart money and said: I will cover the difference between what the bank gives you and up to 90% was even more at a higher cost and this really galvanized a lot of people to get involved in developments that were otherwise unaddressed and these opportunistic fans have made a lot of money taking advantage of this gap between returns, yes, the TC i--'s of the world and others who came and said: "I will give you up to 90 percent.

I will make a bridge between what the bank gives you and what you believe is the future value and I will give it to you at ten, fifteen, ten or twelve percent, we don't do much. development, so I don't really know much about what the cost of development lending is, but I have to say that in financing assets spreads have come down a lot from what they were just a couple of years ago, even as rates interest rates have risen, the LIBOR rate has disappeared. and where a few years ago we were borrowing at LIBOR plus 250, now we're borrowing at LIBOR plus 160 to 175 for multifamily assets and it's surprising how aggressive a lot of banks are, there are often multiple offers along those lines if the velocity of money slows down.

If some of that $11 trillion that's been pumped into the financial system starts to come out, if the Fed cuts more than what it's been doing, you could certainly see spreads widening and when spreads widen that's bound to have a negative effect on prices because what you can return on a leverage basis, you know, not being crazy about leverage, not using mezzanine, not using preferred shares, is still quite strong relative to other asset classes globally. and the investor is anyone on this panel if you were to look around the world at what the most expensive real estate asset class is.

Sam is dying to answer this question now, he was describing it to us two seconds ago. Yes, they are offices and residential homes. we mainly mm-hmm I'm talking about us if you go to class a Class A coastal office space I know very little between two between the two coastal areas and residential on the high end of the low end on the high end Sam well, I mean, I want say Hong Kong is that, you know, that's when he and I were talking a few minutes ago. Prices in Hong Kong are off the charts, but do not reflect any market conditions.

It's bad, it's fly cattle because it's too high because there's no supply, guess what? there is no place to supply more, Hong Kong has now been built by building or building on building, I mean, and the oxygen left between the buildings, yes, but that is correct, but basically adding supply is very relevant. I wanted to comment to Neal on what you said about the cost of construction there is no doubt that the cost of construction is increasing, but I think what people don't look at here is that the accordion in real estate values ​​is not the cost of construction of the terrain, huh?

When I went to Hong Kong for the first time, in 1980, I was stunned when the guy explained to me that the value of the land was 80% of the value of the asset in 2000 and that, if you were in New York, the area ratio was It sold for $50 and up when I picked it up. I sold Equity Office in 2007, the most recent FA, our number was $1,500, yes, so the accordion went from $50 and if it is 1500 hours in FA, it will be in seven years, if it went up that much in seven years, who can to say no? low, yeah, I think it was Will Rogers who said, you know, in 1928, overland, they're not going to do any more, obviously he never drove drills through Florida, California or Nebraska, so we, high-end office spaces , luxury residential, you agree, yes, and Hong.

Kong, of course, but in the congressional note, but there is no way to calculate that the conch is not real estate, yes, a safe haven, yes, since Rita's luxurious and expensive apartments in New York were the same for Bob in the markets in which you invest, which is the most expensive asset. I agree With the two comments that were made, we were talking about Hong Kong earlier and Hong Kong has a real deficit in terms of land, so there are 1.3 billion people in China, all of whom want a song at a distant price . We've done a lot of work comparing gateway cities with some fast-growing secondary cities and the comparison is pretty clear: there's a lot of new development in gateway cities, both residential and office, and there's not as much when compare. getting to places like Atlanta or Dallas or Denver to some extent in Seattle elsewhere, so I think the equation is much more balanced when you get away from the coasts and when you get away from the gateway cities and I.

I would just say Eric that in my sector of the world there is no price transparency now because there are no exchanges, but a couple of years ago with retail in New York City in London, you know, Paris, those types of markets, Paris has delayed London.Do you know that it is on the verge of collapse? New York has cracked without transparency and I could never feel comfortable. You know, we looked at every deal there was and high street retail has never been our business, but I could never feel comfortable with the pricing issue. until you know, it was a lucky decision, but that market and now it is no longer long, it is that the markets collapsed, it is in the process, of course, it is collapsing as we speak, but there is no loss, it has turned out that they lost some dollars , I mean, I can Probably not quite gone up, but probably in the billion range of what, let's call it, high street rents.

Yeah, in New York City they have to go down before that market, but they probably have to go away, you know, and I'm not. an expert because you, I would say they have halved essentially because they had at least one David like that, construction is going well, that's supply and demand, they had such an artificial increase in market rents and in our business. We don't see 3/4 percent a year, so we've never had that, but there was such an artificial estimate of what rental market we're going into and what they are, but I would. let's say at least half but you think if the supply in this street retail in high street retail hasn't increased yes it's just the demand side yes chris doumitt yes but today they say that valued the buildings at market rents that are totally unattainable, what they were talking about, they were able to rent them two and a half thousand dollars a square foot, forget it and then sell the retail on the street.

Saira Faith takes care of the building and makes and has the entire building done successfully. It's like selling the penthouse for ten thousand hours per square foot and saying that the rest of the units are worth nine. That's why the English retail rental system is so sophisticated because in the first ten feet of street exposure you get 200 pounds of square feet and then it decreases dramatically as you go inland in New York when at the top they said 2,500 square feet. including the basement, yes, and the second. floor on the second floor and that was based on square footage, it was even more than the actual square footage because the non-retail state sees the Senate exactly to what extent or how fully developed the e- The effect of commerce on retail At this point it had no impact on him at all, for the record, mm, did I train?

Oh, there's no impact, there's no impact, look, it's very interesting, I mean, I could talk a lot and I won't bore people, but you know. Retailing in a bad mall is hard to kill, okay, and it takes years and years to basically establish a business. We had too many small products in our industry. The useful life of bad real estate in a bad shopping center used to be 10 years now it's two three years and the common denominator of a bad shopping center is basically the fact that it was built, two things happen, it was built 30 years ago 40 50 60 years, believe it or not, and the demographics of the neighborhood changed or and this falls into the In the late eighties, developers were building shopping centers on the basis that growth was going to go down this corridor and it went towards the left was either not good or it stopped, but the reality is that you can't replicate good real estate and I think we're just cleaning up the system, we were rejuvenating retailers, you know, all kinds of things have happened to us with capital private of our retailers, you know all these guys are my friends, so I don't like to insult them, but you know that private equity has too much influence on Retail retailers wasted a lot of money on saying that they know how to buy stocks at unspoken levels or invest too much in technology.

It's starting to change and we're starting to see more stability in demand and retailers working on their balance sheets and starting to see a level of commodity. suggested I use it, I don't, just lies, yeah, it sounds like it's sold out, ah, listen, I'm suggesting our company is like anything else, you have to look company by company, mall by mall, listen, We have points of sale. in Japan and if you had made the decision that Japan did not have the macroeconomic environment in Japan was terrible, now it has improved, but in the last 20 years you could have made the decision that I am not going to invest in Japan because you know that there is no growth of the aging population, well the reality is you know it worked in our favor because you know people stayed home and they shopped and they love our Outlet Center so again, real estate is a very specific decision, there are these macro stuff, but at the end of the day you could have a very successful company or a very successful shopping center if in fact you know you have the best real estate in the area, so I think there's a little bit less of a tilt towards e-commerce and more towards the physical world, but it is a force and it will increase the obsolescence of bad retail real estate faster, the excess supply will be removed from the system and the good things will improve and you know, it would just happen, you know, if you want the evidence of that.

It's very simple, we're a public company, we report every quarter, you can see a company that can navigate through this, through this period of time, you know, so no, don't feel sorry for me, okay, okay. , we do not do it. It's not right, I didn't believe it, yes, but it is, it's working its way through the system, but there's a reason why people still want to get out and being in an area you know they can do that. shop, play, work, etc. I mean, that's the nature of our society, so David has a front row seat.

Does anyone else want to test how fully the effect of e-commerce on retail has developed? Well, the only comment I would have. Are you ready? You've had retail stores on the street like in New York. I think rents are already down, maybe 30 40 percent at least, probably more to go because rents went up so much it was crazy and there were all these retailers that felt like we had. a B in New York we would pay anything they would have an emblematic operation there the rents have gone down a lot at some point there will be some opportunities but today we are not in an environment where we are number one, there are not many problems at the moment in the sector real estate and the closest thing would be a retail business, maybe where the prices have gone down a lot, but the other side is that the prices are high, but do you know other assets that are cheap?

I mean, I don't know, is there anything cheap? I can't think of many. Do you think maybe oil or natural gas is cheap, but everyone is afraid that we will produce so much oil and not have as much demand in the long term? term, but generally speaking, whatever, bonds aren't cheap, they're probably face value will go down as interest rates go up, the stock market is trading high, it's a little out of the art world, God My, it's crazy, the height of our team. Residential end, right, me in residential, my God, what would they pay? Guys, you've paid nine ten thousand dollars a foot for a condo in New York, so we're in a world because of low interest rates and the fact that we've had asset values. because the rates are low, everything is expensive and real estate is no different, you know, just because we have a room full of audience and presumably there is some interest in real estate, we have been so negative over the course of our time here, I think you can.

Also look at some of the niches within real estate that could be interesting and you'll know that maybe they're big enough to justify an investment strategy and maybe they're not, but maybe you know they could be seniors. The house has good foundations around it. David mentioned live-work-play and there are a number of new developments combining Manny's living and living with a commercial or office space on the ground floor. We reviewed an asset recently. which had a first floor of different businesses and then the next seven floors were organized by professions, so there were graphic designers on one floor and software engineers on another floor and there was a lot of collaboration between these four young men and women who were outside of college and looking to start their path in the world, something like 42 percent of the U.S. population is projected to be self-employed or self-employed over the course of the next five to ten years, so I think Prefabricated housing is an interesting area and there are a lot of modular technologies that can help reduce the cost of construction and could also offer some opportunities, but just in an effort to inject some excitement into the dialogue, I want to mention those I love it when people try to be positive.

Can I go back to being negative? Why not? Nobody has anything to add to what Bob just said. Well, listen. I think again that it's like you find yourself in these settings and people like to talk, they are reserved, but I would say that many audiences. read, if you look at the value, these are the other public values ​​that you know are on the value and on the spectrum, now we are not attractive, so what causes the work? I think it's an appreciation, that it's cheap and ultimately new. Capital has to enter the market. We had a lot of Japanese money coming in and going out.

Why don't we see more private transactions on tape? Well we have seen a lot of things in my right, we the French are buying the Australians to get London and the USA, so don't expel, try to explain that then what you know, buy, buy in the west, because we have seen Brookfield for general growth. Brookfield bought out Rouse, I mean there's more and more privatization of their navy, isn't it interesting that the perception on the streets of overall boating growth was 29 to 30 and they're paying twenty three and four. Yes, well, because that says that you have an intelligent buyer who is taking advantage of the situation, I mean, there is no one, yes, the only one who can challenge him is to know that movement and I, yes, I didn't feel like it, because then I would go to Bloomberg , you know, I really see reading these Bloomberg articles, the retail apocalypse. and it makes me see if you were more positive I would have bought general thank you I just want to make a small comment about retail and I really don't know much about this field but I did enjoy the experience of going to a shopping center my children They don't even know how to spell center commercial, they don't go, they don't use it, they buy it over the Internet, so it's a generational change or a bit of a habit that is happening, but I think it may have to be that way. restructure the entire concept of experience in retail and shopping malls what happens for e-commerce to give us a pretty good example of what happens when real estate meets technological disruption mm-hmm what happens when self-driving cars appear how old are you? how old I am?

Yes, how many years do you think I don't have self-driving cars? Do you think they are that far away? Yeah, what's up with the rest of you? I disagree. I think it's coming faster because all the technology that's happened has moved faster than originally projected. and it's going to have an impact. Take parking for example, okay, mmhmm, yes, that's what I have in mind, it's been a business, but I think its future has some doubts because when you have more self-driving cars, you may have much less need for them. In fact, you have to park, since people are developing new projects and I have talked about offices and you have to build a certain amount of parking.

Developers are designing the buildings to be able to get rid of much of the space they are putting up. now and convert it into office or other uses for what is now a parking lot that would be like a shade supply yes, I would just say yes, no, I would just say from our point of view when historically we had to park five to five to one, essentially five square feet for every square meter we would have to five square feet we would have to provide a parking space so over and over again, if you think about the suburban shopping center, it's generally the best location in the best demographic that you know generally, so all of a sudden we have these parking fields that are very underutilized and it's almost like that happens for us, it actually makes you know the number one complaint that we have at the mall today and this is counterintuitive and this is what that you really know, think about it.

So the number one complaint, that we do all this customer research, is counterintuitive, is parking now, since all these malls are empty and no one goes, it's hard to understand why that's the number one complaint, but suddenly parking becomes It's less of a problem because they drop people off, that you may know, it's a little more, who knows, but the realities were very parked and we have the best real estate location inthese cities, so that gives us a good idea of ​​Sam's point. You know, if there's no demand, what do you build? But you're creating a lot of new multifamily locations, you have locations that didn't exist before and now they're going to be there because they will be. very attractive, true, but it is called supply.

I agree, but we have all this land and we know this goes back to the Sears situation. You know that one of the great opportunities we have is recovery. You know all these Sears stores or you know what we have. a simple example in Buckhead Atlanta where we have Saks and Nordstrom and we had a Belk department store, it was a high end shopping center, so Belk is a nice department store, but more moderate, we will take it back and build Sam's again. I'm going to get beat up for supply, but Buckhead is a unique property, so we're building an office in the Nobu Hotel Nobu restaurant, Lifetime Fitness, which is a fantastic one hundred thousand square foot business and it's a workspace complex and its sports space. it's yeah, nice and again, he didn't give me, he kind of gave himself an out by saying from the beginning that he was talking about his book, yes, I was talking about my book, but I again and that's Which is good, you know I have to do it. defend myself I wasn't asking you to defend driving.

I did answer, but then I talked a little about self-driving cars. I think it raises the question of how relevant or whether central business districts will remain as primary as Primus. they are or if you can see the development of satellite areas, you know, top-tier suburban satellite areas where you can replicate the offices and housing in the park because you don't need transportation arteries because you can be more autonomous if you're in a self-driving car by driving yourself, you don't want most people don't want to spend a lot of time in vehicles and so you might well see a bit of a void in some of the central business districts and the emergence of some prime suburban areas also because you have more land available to develop the appropriate infrastructure.

I think that's the word of the alchemists hmm, more land available and when there's more land available and there's money available, guess what happens, the work You got it, yeah, no, no, I didn't want to talk too much about autonomous vehicles because this It is a realistic panel. Oh no, what's up. Real estate with self-driving cars Neil brought up the topic of parking for example, what I'm trying to unpack is the idea that there is a technological change that creates disruptions and different designs that we've seen happen in real hammers. And now an app called Pumpkin Hero that effectively tells someone coming into town where they have available spots has dramatically reduced the monthly rent on parking structures, which is a huge technological disruption that affects cash flow.

I wouldn't worry about, you know, I think that You know, autonomous industrial vehicles, trucks, they're certainly a lot closer and there's a lot more economic justification for that than the self-driving car, the self-driving car, you know, I mean, remember? what was it like three years ago when everyone It was funny to carry a zipper everywhere, it has become very quiet, ha, suddenly, everyone does not want to share, it happens that there is no economy of driving, economy, to share a car, but yes You are a trucking company and you can't find drivers and you in effect have an interstate that already exists with which you can build a self-driving structure that is much fairer and much more likely to be a factor in the future than the cabin autonomous driving.

I would say the other impact I obviously believe more in self-driving cars and maybe you do that in terms of how quickly it happens, we'll see what happens, but the other impact is that I actually think it's the other way around. I don't think it's going to help the downtown areas because it's going to be easier to get to work, okay, if you don't, if you don't want to take the train, you can get there, you know, you get there, you don't have to drive, it's going to be more easy for people to double up and do it.

So whatever helps the downtown, now what we do to meet the need for easier transportation is build bike rooms and showers for the residents of the building, so the bike storage room in our buildings in Manhattan is much bigger now. We're talking about close to thousands, that's a big deal, but on the other hand, technological advancement is changing the way office users basically use the space that space workers have now reduced from about 200 on average and in some places up to one hundred square feet per shift employee supply coming from the server server rooms are gone package rooms are gone cable rooms are gone all this technology is really making superior use of the veil in existing building spaces of offices, so if it's not necessarily self-driving cars Neal, you think it might be Sam, you don't agree with what the next technological disruption that the real estate sector will face.

I'll give you something to think about since Uber and Lyft have become so prevalent in public transportation use. the country in all markets is down, which is somewhat contradictory, but literally subway use in New York subway uses Chicago Bart in San Francisco everywhere public transportation is down between five and eight percent what It means that? Do we have and how many highways do we have? They have and you know, we talked about how driverless cars will make public transportation even more obsolete, what the impact of that will be and how our society will deal with them, because with the reduction in demand and the public supply situation no I think that's a great question to leave with our audience as we wrap up the real estate

outlook

panel.

Please join me in thanking our panelists for their time.