This is Bloomberg business Week Inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Strong US economic data making investors rethink and take down again expectations for FED rate cuts this year, and that strong economic news included Friday's jobs report this as Federal Reserve Chair Jay Powell also reminded us in a speech this past week that the Fed has time to wait for clearer signs of lower inflation before cutting interest rates. Meantime, Tim on the company front, Tesla top of mind for
a couple of days. In fact, we'll explain about that in just a moment.
Also ahead of read on the consumer thanks to two views from the c suite.
GJ.
Hart, CEO of Red Robin Gourmet Bergers on the company's turnaround and standing out among a ton of Burger chams, and the co founder of the coconut water company, the Vita Coco Company, Mike Kurbin, on continuing to go it alone.
Plus where the real stress is in real estate, with Lauren Hackfelder, co CEO real Estate Investing over at Morgan Stanley Investment Management, and then Austin Allison, co founder of Picasso, on owning a share of a lux vacation property. FYI, Tim, don't call it a time share, although it does have a lot of similar qualities. I was like, this is a time share?
All that to come? We begin with Tesla. The carmaker reported its first year over year sales decline since twenty twenty this past week, signaling more concern for an ev industry already struggling to find its footing.
We cut up with Bloomberg News auto reporter Gabby Coppola and co host of Bloomberg Technology on Bloomberg TV and Ludlow.
The way that I look at it is it's the biggest deliveries miss against Bloomberg consensus at least, which is the average we take evanist estimates on record. And then you start to ask, well, why did we get this so wrong? What was it that happened in the quarter
that led to this strain? Low's liveries number and Tesla put in its statement a lot of supply side factors, diverting shipments of parts and finished goods because of the situation in the Red Sea, a pause of production in Berlin because of what they called an arson attack, and then a new Model three in Fremont, my home town in the Bay Area, impacting production.
This is that ramp up that they referred to, right.
But how does that skeptical I'm talking the voice of the market is speaking through me. How does that answer why the deliveries were so low? Maybe production which also misestimates, but what happened here? And I think the answer is demand well, and that.
Gets to the bigger macro micro story or macro story, right in terms of EV's still growing, but not the eptic we all expect it corrected exactly.
So the correct way to state it is there is still growth at EV sales, it's decelerating, so we have a lower pace of growth this year than last. I think that what you read more consistently today right now the reaction TESLA is the impact of higher rates and the consumer started to be felt in the first quarter. Then I look at Gabby Coppler's fantastic reporting. What was popular in the first quarter, cheap combustion engine cars.
Well, all right, Gabby, there's a perfect setup for you, so come on in. Your story is great and it gets into what you know Americans are up to. They're looking for a deal, they're looking for a bargain if they're out there shopping for a car.
Yeah, it's you know, it was really striking to me because for so long in this on the Speed I remember talking about how Americans just seem to have bottomless appetite for you know, pickup trucks and pickup trucks that were going more upscale with luxury interiors, and the whole market was shifting from sedan's to SUVs because everybody wanted an suv. And now I think, you know, the interest rates are really starting to bite, and but people still
need transportation, so that's what you're seeing. I mean, I was struck by Toyota, you know, had really you know, strong sales results. I think their sales were up twenty percent quarter on quarter. But what was interesting to me is that their sedan sales actually grew just about the
same as their suv sales. So I mean it shows you that people, i mean sidans are often you know, unless they're like a luxury car they're less expensive than an suv, they're smaller, more compact models, things like that, and that's what people I think the bottom line, like the payment, the monthly payment on your car, is what's really curbing people's interests. You know, they still need to buy something, but they just can't afford a lot of what's out there.
Yes, so okay, so that brings us back to what the racing car buyer.
Yeah, the recent car.
Buyer had love and on the Gossip yesterday.
Oh did you get it?
I got it?
Well, I got a Model Hy Sorry, Gabby. I picked up a Model Y last Thursday. And I did it because my wife and I needed a new car. And as you know, I've been driving a tigue around Volkswagen suv for the last three years. And the least priced three hundred dollars a month for the Tesla Model Why. And that reflects the federal tax credit, but also the incentives that Tesla took off its own back. You know that, the discounting. But Gabby, it's still the same point that
Gabby's making, right, it's economics. And you know the consistent thing that the cell side, the auto's analyst, whoever it is, is saying after Tesla's numbers came out, is we're starting to realize that the market for why and three, or simply put, smaller cars that are forty to fifty thousand US dollars, it's just not there anymore. So when's the
next Tesla thing coming? Cyberdrugs and niche products, funky but niche and the twenty five thousand dollars EV that I think a lot of people really want is a long way away. That's the story here.
I agree that that price and the cost is really the story. But I do wonder if when it comes to the demand for evs, if we still have things like range anxiety or you know, just the lack of charging infrastructure that also is holding things back. I mean,
I hear that a lot from automakers. I mean, of course, everybody wants to give excuses for why their cars aren't selling well, but you know, yeah, I mean, I just think that that when you look at the EV side of things, I don't know if price will cure everything. I know Tesla has a much better charging network than any of its competitors here in the US, but that network is also being opened to a lot of other brands.
Now.
So you hear stories of Tesla owners kind of grumbling that they have to share now. So I'm just going to say, I don't know if that's you know, there may be more to it than just the price.
It's interesting because I feel like we've talked with Keith Nolton right about how hybrids right, Yeah, the hybrid cells have gone up. So people are interested in doing kind of the right thing for the environment, but they don't want to be caught such an.
Economic decision as well, because if you're having, you know, a car with better gas mileage, then you're not you don't have to visit the pump as much. And mileage has improved a lot in recent years.
Gabby, Yeah, it has. And you know, I just maybe I'm cynical or I've been covering this be too long, but I feel like doing what's right for the planet. For some people, maybe that is like a leading factor of why they choose a car, but most people, you know, want a car that meets their needs. And you know, and like what you were just saying, like about it's about it's economics too. You know, gas is still you know, it's not that cheap still, and if you can get
better gas mileage driving in electric mode. And I think, you know, like Toto will make this point that like there are a lot of the hybrids are competitive with the price of a combustion engine car. So once you get to once you get to parody and you're offering people savings on gas, then you know that's that's really appealing. And then you have a gas you know, tank to
deal with your ranging anxiety. But to point, I think you can get some great deals on EV least at least cvs right now if you do want to go that route.
The root of what Gaby and I are reporting on is reflected in the sales data and reflected in the analyst notes, is the the economic reality for a lot of households. Yes, my lease is three hundred dollars a month. It's significantly less than the last these I had on a big combustion suv to charge in the middle of the day at thirty five cents kill of what hour this was about midday Pacific time on Friday last week.
To get from twenty five percent state of charge to eighty was about ten dollars To fill up my gas car is about eighty dollars at the moment, but there is also some fetters. I've only got ten thousand miles a year on the lease. Well, what if you commute sixty miles every day, You're not going to have enough miles in the year to net out and do it.
And then, you know, we talked about a little bit yesterday, I think, but if you then get yourself an EV and you want to install a charger at home, you have a very significant income cap on the state and federal incentives available to help you rebate or pay for that charger. It's not straightforward. I sympathize for any consumer who's like, how do I even get started?
Yeah, it's difficult. Yeah, I mean this is go ahead, Gabby.
Well, there's just one other point I was going to bring up. The ED reminded me the people are also experiencing negative equity, meaning that you know, the auto market is so weird right now, right like the pandemic created all these distortions. There were supply chain s, there were severe shortages of car. Dealers were charging over ANSRP. People
were paying through the nose for a new car. Now two years later, production is normalizing, so used car prices are coming down and a lot of people are being stuck with their car underwater. I talked to a guy who actually bought a He's bought a Tesla Model S that now has forty thousand dollars worth of negative equity in that vehicle, and the only way he can trade it in is if he pays Telsa forty thousand dolls.
He's like, I want a new car. I love Tesla, I love my car, but I have to, you know, cough up forty grand if I want to trade this in. So I don't think that's a I don't think that's a huge drag yet, but it's certainly something that I'm watching. I think because you know, the dealers who chose to do that, they thought, oh, you know, I'm going to do what the market will bear I can charge over
an SRP. Well, now when you want to get that person into a new car three years later, good luck, because now you've got to be able to roll over all the debt they have that they took on to pay that price you charged.
So that's like.
Another factor to kind of, you know, think about as we looked at the health of the new car market this year.
Okay, so let's end where we began, and that's what teslave about how the company moves forward from here with the outlook that we understand for the EV market, not just here in the US but globally have of the challenges that Gaby just talked about.
Yeah, what's the company's strategy here?
I take elon musket face value and that is that tests between two waves. So it's the acknowledgment that the growth they saw built on Model Y and three mass market vehicles, it's kind of been and gone. The next wave is the twenty five thousand dollars price point card, which many more Americans but also Chinese and Europeans going forward. But then also acknowledge the big cohort of investors that
don't give a damn about the deliveries. They're only focused on the software story, and you have to give credit where credits due, you know, and their financials will show that software has a role to play for them.
A sector that just continues to be fascinating. Guys, thank you so much, really terrific staff Bloomberg TV's co host of Bloomberg Technology at Ludlow here in studio along with Bloomberg News Auto reporter Gabby Coppola.
You're listening to the Bloomberg Business Week part Catch us Live weekday afternoons from two to five pm Eastern Listen on Apple car Play and Android Auto with a Bloomberg Business app, or want us Live on YouTube.
Hey Carol, Yes, you know what I love talking about food? Love talking about food.
So do He also loves consuming food.
It's not just conversations, okay, But here's the thing. We like talking about it. Yes, not just because we like to eat it, but also because talking to the people who run restaurants, who operate restaurants, it gives us a good idea of how the consumer's doing. And of course what's going on with wages, with employment, with inflation.
There's a lot of inputs with food costs and things, right.
I mean, it's really really important. Red Robin Gormet Berger's one of those restaurants. In the US and Canada. There are more than five hundred Red Robin restaurants, including franchises. The company a microcap with a market cap of roughly one hundred and seventeen million dollars.
All right, here to talk about the earnings the business, what's impacting the menu. A lot going on is GJ. Hart CEO Red Robin Gourmet Berger is joining us from Denver. GJ. Nice to have you here with us. First of all, how are you doing? How's the business doing well?
First of all, It's great to be with you guys today. I'm doing very well. And you know, we have been on a path over the last year and a piece to transform this brand on what we call a comeback in the north Star Plan, and we are feeling really good about where we sit today and excited about what twenty twenty four will bring for it.
How's the comeback going? Because shares down about forty percent so far this year, we're bloomberg. This is the stuff we look at. This is the data we look at. What are investors missing about this turnaround plan right now?
In your opinion?
You know, when we laid out the north Star Plan, we said it was a three to five year plan. When you do these kind of transformations, you know there's there's a time element, and in this particular case, there was a tremendous amount to do, of which we accomplished a lot in twenty twenty three. And I think in some respects it's it's how soon will this happen?
And you can't always predict that.
So when I look at our results in twenty twenty three at a one point six percent comp we grew our ibadad by thirty three percent. We invested twenty five million dollars back into the business. We were able to add the kind of people we needed, managers, et cetera. We upgraded our kitchens, we upgraded our food. Eighty five percent of our menu has been upgraded. You know, I look at all that and say, you know, we are we are in a good place relative to.
Where we thought we would be.
And you know, at the end of the day, the share price goes up and down, and over the long term it will follow the right trajectory. And at this point, we're pleased with where we were in twenty twenty three and where we are now.
But is it frustrating or is there any part of your message that you feel like is not necessarily getting through to investors, because it's not only that it's downstill forty percent this year, but you've got twenty percent of the float that's being shorted, so investors, there's a negative tone to it.
You know.
In our north Star Plan, the fifth point of the plan was we want to earn respect back of our investor base and of our analysts and any any interested party on Wall Street. And I think the company's history, you know, has been not always achieving what they say they're going to achieve, and.
So we're working really hard on that. We think we've done.
A nice job communicating where we are and where we stand.
And so at the end of the day, you.
Know, is it frustrating, Not really, because we're in this for the long haul. You know, we we see a tremendous amount of opportunity ahead of us. You know, we've put this forth like if you're playing baseball, it's a second inning, and that's not meaning second ending in a negative way, but in a positive way in terms of the runway ahead of us, the opportunity to take an iconic brand, a fifty year old brand, and bring it
back into a great place. And so you know, if you believe in that over a period of time, you'll stick with us. And at the end of the day, you know, we we know and believe that we're doing the right thing.
Well, you've, of course, i imagine, have done consumer research, and I'm just curious about the perception of the Red Robin Brand right now where it is, and how it resonates with consumers at this point, and how that's different than where you want it to resonate when you're done with this turnaround, give us the delta there.
Yeah, so you're right, we've had to do a lot of things. First things first, as we like to call it around here, and it really some of the decisions made back five, six, seven years ago for whatever reason, you know, we're things that definitely hurt from the consumer experience perspective. You know, when you get rid of bussers in a restaurant, or you get rid of an expo in the kitchen, or you don't have the same management compliment.
There's a lot of those.
Things that you have to fix before you can really go out with confidence and say, hey, give us another shot. And so we've done a lot of that work in twenty twenty three. Our plan as we go into twenty twenty four is to bump up our marketing efforts. We think we're in a great position to be able to do that, and then right after we do that, we'll be relaunching our loyalty platform to be much more exciting and much more rewarding. For our guests, and so you
know where we are today. You know, with the results we achieved in twenty twenty three, we believe we're slowly getting people to say, hey, I'm going to give red Robin another shot, but we've got a long way to go. At the same time, when you look at our overall consumer sentiment scores and you align that with the work that we did in twenty twenty three, we're pleased to
see nice bumps and all of those levels. So people are starting to see it, but I will say that the frequency at a red Robin had dipped down, so we've got some work to do. So people may not necessarily see it because they haven't been in for quite a while. So this marketing effort we've got going into twenty twenty four here and the loyalty platform will really
address that issue. And at that point, we think that with our plan and executing at the restaurant level, that we'll start to see those guests come back.
Hey, GJ, how do you There are so many burger places out there, and you know that there's more that seem to be coming out every day, So there's I feel like the older guard like your own and I understand like you guys are working on, you know, the transformation and kind of bringing it out differently if you will, But how do you how do you stand apart or how do you differentiate and who is the customer that you want? In particular?
You're right, there's been a heck of a lot more competition. So first, let me address every one of our buildings, says Red Robin, Gourmet Burgers and brutes, and so one of the things that we that I really challenged our team is we're going to have this promise of gourmet burgers. We've always done a great job from an innovation, flavor profile,
what you put with the burger, et cetera. But are we really confident that we can compete in the sea of burgerland today through all the different players that are out there. And the truth of the matter is Red Robin had sort of fallen bey and so hence why we changed our total cooking platform mid year to a flattop of our flattop.
Grill, which we believe is where you.
Start with the right kind of burger to develop a gourmet burger, and so we made those changes. It's twenty percent bigger because it yields better, et cetera, versus having it cooked on a conveyor belt type cooking more fast food oriented. So we did that and we feel like that that really helped us to be able to compete in the gourmet burger space, and our guests and our again, our satisfaction sports would tell us that that's true.
So I just want to jump in because we only have about a minute left here. We talk about ozepic and the weight loss drugs all the time on our program. How are you thinking about this new class of drugs being used for weight loss? Do you change the menu at all?
Well, first of all, you know, we do have some some items on our menu. You know, we've got a turkey burger and impossible burger, and so we have some of that addressed already. But at the end of the day, you know, we'll have to see what the consumer ultimately does.
Today when you look across the broad spectrum those the drug, weight loss, the whole situation, I think it's been slow to be adapted, and particularly in casual dining, because when people go out for an experience like that, they you know, they typically will fall back like, hey, it's an experience. So I'm not necessarily going to be worried about exactly what I eat.
Now.
That's not to say we're not paying attention to it. It's not to say we're not going to address it more so than what we already do on the menu.
But we'll see. I mean, it's definitely something we're paying attention to.
All right.
Well, so appreciate you stopping buy and spending some time with us. GJ. Hart, President and chief executive officer at Red Robin Gourmet Burgers, joining us there.
In number ten. I would like a burger right now.
Yeah, I would too. You and I were both thinking about that a lot Iderberger lest night. I would take another one right now. This is Bloomberg Radio.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting a two pm Eastern on applecar Play and Android Auto with the Bloomberg Business ad. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Well. Vita Coco is one of the top players in the coconut water market. It's a space that's been shared by some brands that you definitely know of PepsiCo and the Coca Cola Company and a few others. Tim and North America has definitely been a dominant market for this drink, specifically.
In the US alone.
The coconut water market size is projected to surpass eighteen point five billion dollars by twenty thirty one, growing at a compound annual growth rate of nearly nineteen percent. With a look at the market and more, let's get to the interview with Mike Curbin, co founder and executive chair at the Vita Cocoa Company. Joining us from New York City. Mike,
good to have you with us this afternoon. Earnings came out late February reported net sales for the fourth quarter that beat the average analy assessment, the stock staring nearly fifteen percent on that news. I do want to take a step back and talk big picture here about the marketplace growth, consumer demand. Where are you seeing demand right now in the category?
Yeah, thanks for having me so.
Coconut water is the fastest growing category in the beverage aisle today, twenty years after we started building this category from scratch. It is one of the largest beverage categories across the tropical world. And now over the last twenty years, we've been building it in North America and Western Europe, and we're seeing coconut water become a household staple across
these markets. And we think that as we continue to grow and continue to educate consumers on the benefits and usage occasions for coconut water, we think it will be continued to become a household staple in both North America and Western Europe and all the other markets where we're continuing to build our business.
Hey, North America, as we talked about, has been a dominant mark for the drink. Talk to us a little bit about if that's kind of where you see the continued growth or how you find and tap into other markets where you see future growth in particular, and who do you see us your kind of typical buyer, if there is one.
North America continues to be our largest market and continues to grow incredibly fast. Today we're in one in ten households in the United States. If you think about other similar type of categories, Ocean Spray is a brand that I like to reference quite a bit Cranberry Juice. Ocean Spray is in one in sorry four and ten households across North America. So you know, this is something you know, as we think about coconut water, which has all these
incredible usage occasions. It's incredibly hydrating drink as a sports drink or replenishment, but it's also amazing in a cocktail, and it's amazing in this movie in the morning. So it has all these incredible occasions for usage, and we think that as we continue to grow, you know, more and more households will continue to get.
Curious about the cost side of the equation here and specifically where the ingredients come from. Where do the coconuts that you guys use come from.
So I actually just got back yesterday from Sri Lanka.
We manufactured quite a bit in Southeast Asia, Sri Lanka, Philippines, Thailand, and also Brazil is also a large center for our production.
Anything any problems that you guys have seen with kind of some of the challenges our wars, I should say, around the world, is that impacting you guys at all?
We saw you know, free costs increased a little bit with the issues around the Suez Canal, but that's been moderating and we've been able to you know, continue to you know, withstand that and grow, grow our margins and you know, uh, we don't see that as a major a major issue for us moving forward.
The animal rights organization PETA has raised issues about monkeys being forced to harvest coconuts in some parts of the world. Has that been something that you've experienced at all when you've been traveling now and sourcing.
These I've never seen a monkey pick a coconut.
This is something that does happen in Thailand in a tourist attraction, but is not something that is used in typical coconut farming techniques. We cracked over a billion coconuts last year to produce our coconut water, and none of them were picked by monkeys.
But how do you ensure you know, Mike, and we certainly have from just reporting in the business world and financial world, you know that when you get into emerging economies sometimes oversight is not always what it needs to be. How do you ensure that everything that goes into a Vita cocoa drink that it is done in a sustainable and caring way and fair way.
Yeah, it's one of the most important parts of our business. Actually, over the last many years, we've built through the Vita Cocoa Project. We've done incredible things on the ground in the Philippines. For example, we've built over forty schools, educating farmers specifically on new techniques and bringing them new types of coconut.
Trees to improve their yield and increase their income. So we do a lot of work on the ground.
We also do social audits of all of our facilities, making sure that everything is done in the best way possible. And I think this is one of the beauties of the business. We've been able to create this business off of what historically was a byproduct of the coconut manufacturing business.
The water.
There's always been a byproduct. We've been able to help up cycle that byproduct, give these markets, these farmers an avenue to sell the product, and at the same time put programs together to continue to develop these help develop these economies.
So it's been that's been one of the most rewarding things for me.
Mike, how have you been able to innovate in the production of this I'm curious about ways that over the last two decades that you've been able to experiment with with cutting costs or their to make this a concentrated product and then add water to it once it's at its final destination. Are there ways to create a fountain drink out of this? Talk to me about innovation here.
Yeah.
So as we think about cost, its scale, right. So, cocaut water, like I mentioned, was historically a byproduct. It's about the actual packaging and process of packaging that is costly. But over time, the more scale we get, the more we're able to.
Leverage that scale and bring down costs.
As we think about innovations and so on, we're really focused these days on more sizes, more pack types, more flavors, and expanding shelf space.
I brought a bution spray earlier.
When you think about it, we built this business over the last twenty years selling single serve individual you know, vitacocos on the shelf. We would have two, three, four or five facings at the grocery store today. Over the last couple of years, we've been introducing new pack types and new formats with twelve paps, four packs and six packs and one leaders and multipacks of one leaders. We're
starting to build out that billboard on shelf. And if you think about that compared to ocean spray, which has four times the shelf space we have. That's kind of something that we're working towards. It's continuing to create this billboard at retail for consumers to see coconut water as they're walking down the aisle.
Hey, Mike, for someone who's been doing this for twenty years, start back in two thousand and four, as you continue your build out and look to do you know, more growth in the North American market and elsewhere. I'm just curious do you plan to continue to do it alone? You're a publicly out company. I get it, but I'm sure you've had people knocking on your door. Is there a plan? At one point, Coca Cola owned a brand,
then obviously it was sold back to its creator. But I'm just curious, is there any plans you know or do you? Are you open? Is there a partner or a price that would make sense for your brand to get together with someone else?
I mean, we have a great partnership with Cure Doctor pept They're the largest distributor in North America and they're a small shareholder.
But they're really a great distribution partner.
So we feel we've got the right partnerships and resources, and we generate a lot of cash and we feel we're in a really good position to continue to invest in growth and that is our main priority today.
Is that a.
Yeah for now to no, it's we could grow this business significant the setup that we currently have well.
Really cool stuff and look forward to talking with you again as you guys continue on that growth growth path. Mike, thank you so much. Mike Kurvan, he's co founder executive chair of the Vita Cocoa Company, joining us right here on Bloomberg Business What.
I was an early adopter of coconut water, like back in the day. I've been on the core coconut water train.
Many different flavors do you have?
I just like the regular one.
Regularly you're listening to the Bloomberg Business Week. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brout Auto with a Bloomberg Business act or want us live on YouTube all right.
Last week you might recall Bloomberg's Matt Day reported on Amazon's plans to spend nearly one hundred and fifty billion dollars in the next fifteen years on data centers needed for the expected boom for AI applications and other digital services.
Data center is one of the real estate investment plays we've heard a lot about for years. More recently, though, the focus and concern has been on the commercial real estate space, particularly offices, as working from home still sticks for many post pandemic. The Bloomberg Read Office Property index down about six percent year to date as we were putting our show together. Last about three percent in twenty twenty three after dropping close to forty percent in twenty twenty two.
It's been brutal.
Yeah, absolutely, we continue to ask questions about the space. All right, with a look at the commercial real estate space, we welcome Lauren Hockfelder. She's co CEO of real estate investing over at Morgan Stanley Investment Management. She joins us right here in New York City. Lauren, welcome to Bloomberg. Hey, commercial real estate, we know location, location, location, but it also can be divided into a lot of different buckets.
You've got office, retail, you've got data centers, you've got industrial. Walk us through the different sectors. Where are you seeing strength and where's the continued weakness like perhaps office?
Sure?
Well, first of all, thank you for having me it's great to be here, And I would say it's funny you use the old expression location, location, location, that is absolutely paramount and real estate. But you know, today we talk about dislocation, dislocation, dislocation. We have to look at what's changing, what's being disrupted, and invest accordingly. So yes, take office, take US Commodity office in particular, and it is absolutely being disrupted. You have a dramatic demand destruction.
We all know that people tried out working from home in the pandemic and decided it wasn't so bad.
So we're seeing a dramatic demand destruction.
But frankly, also those assets just don't meet modern tenant demands. They don't meet them from a standpoint of quality or menetization. Frankly, they don't meet their carbon reduction goals. So these are assets that many of which will be stranded because they simply don't have long term cash flow growth potential.
But go to the office.
Wait, wait, wait, can I jump into those So US Commodity Office, you're saying it's going to be stranded, So what happens and what are the financial implications, whether it's to the owners of those properties, to the banks, who hold the loans on those properties. How does that play out? And then how does that maybe make more valuable some of the higher tier office property.
Yeah, no, no, that's a fantastic question. Well, I'll start with the ends. So you're seeing a massive consolidation of demand into.
The best of the best assets.
So perhaps counter intuitively, the destruction of demand for more commodity space is actually driving increased demand for the best of the best.
I'll give you an example. Take San Francisco.
San Francisco office is one of the worst markets globally, and I can tell you even in San Francisco, we own some of the best office assets in that market. Even today we're signing leases at rents above pre COVID levels. So to your point, it speaks to the benefits to the best.
Okay, so let's talk about some of those benefits or what that offers potential tenants. I mean, what exactly in twenty twenty four, in this world of hybrid work that we live in a world where AI companies are just flourishing in the Bay Area and bringing people back to the city. What is an office building? What does an office building need to provide to attract and retain tenants right now.
Yeah.
Absolutely, Look, it's amenities, it's a focus on wellness. It is all of the bones, if you will, so big open ceiling heights, big open windows. But ultimately it comes down to I think amenetization, wellness, and of course location.
Can buildings that don't offer those things right now? Can they be converted at a reasonable cost to buildings that will soon become attractive.
There's a lot of talk about converting old office buildings into other uses, converting it into residential, converting it into life science or lab space, and the reality is some assets will be converted.
We've seen success stories.
For example, here in New York after September eleventh, a lot of office buildings in Lower Manhattan were converted to residential buildings.
But two things were different.
One, many of those office buildings had smaller floor plates, so physical structures that were more conducive to conversion. And two, frankly, there was a government subsidy for that. And I think that the math is simply even for those assets that have the right physical footprint, the math is very challenging when you get to overhauling the mechanical systems, everything going up and down the building.
Hey, one thing I wanted to ask you obviously front and center here coming off the unfortunate bridge collapse in Baltimore, and we are once again talking about supply chains, and that is certainly an investment trend that you guys are seeing. You call it a second mega trend tail and driving demand in the industrial real estate space, and it has to do with the global supply chain. Talk to us about that, and you guys are investing this.
Way absolutely, so I would say, in contrast to office we.
Love industrial real estate.
We love it on a global basis, and it's really for two reasons. The first is e commerce. So that's very much been the story of the last decade. So we, as all of us started buying and increasing share of our goods online versus in store, and frankly demanding it get to us faster and faster. We started buying and buildings those warehouses that get goods to our front doors every day. And as e commerce penetration went grew by
two and a half x, so too did rents. So that's been a great tailwind for US industrial real estate, for global industrial real estate, and I think that will continue, albeit decelerate. The second mega trend, and it's really at the earlier innings. Even more exciting is the overhaul in the global supply chain. Look, we're coming off decades of a super smooth, super efficient global supply chain. We've all enjoyed the disinflationary benefits of that supply chain, but now
things are changing. You look at that what happened tragically in Baltimore this week, But I think it's.
Really it goes well beyond that.
Among the many things that COVID late bear was the fragility of the global supply chain, and we live at daily now. It is event driven supply shocks, so COVID certainly being an enormous one, but you also have what's going on in the Panama Canal or labor disputes at the court, so event driven supply shocks, and.
Frankly, you have the overlay of geopolitics.
Yeah global, Hey, Lauren, we only have thirty seconds left. But I do want to talk politics, not geopolitics. How do investors in this space need to follow the presidential election? Does do things change for you if Biden loses and Trump wins?
Well, politics affects everything, But ultimately we are focused around big mega trends that are durable demand drivers regardless of who's in office.
All right, interesting stuff, and certainly it feels like this is going to be continuing a chapter in the real estate state space in general. Kind of we talk about in terms of how office plays its way out and then just kind of where investors are going. Hey, Lauren, thank you so much. Lauren Hockfelder, CEO real Estate Investing at Morgan Stanley Investment Management, joining us in New York City.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa Play Bloomberg eleven thirty.
Well.
A time share this is not Picasso is a service that allows you to own a share of a vacation home instead of having to buy the whole thing. Like I said, maybe an eighth of a share of a skihouse in Park City or Breckinridge that'll such you back maybe seven hundred and fifty five thousand dollars, or an eighth of a share of a home in Malibu for under a million dollars. So it's not just that you
own a share of it. You share the costs that are associated with the home as well with the other co owners, and then Picasso handles the maintenance and other management issues.
All right, and now it's looking the company to broaden it's appeal by offering shares at a lower price point. So let's get into with Austin Allison. He's co founder and chief executive officer of Picasso. He joins us in our studio, but coming in from San Francisco. How are you.
I'm doing well. Thanks for having me today.
It's great to have you here. You know, before we got started, you said you guys were launched in twenty twenty, so you're coming up on your fourth year.
Yeah, three and a half years since launching. It's been a wild ride.
I bet it is, all right. So give us an idea of the trajectory. I mean, from when you started, and I mean I'm assuming that was kind of fast and furious and that there was a lot of demand or was there.
Yeah, it was a crazy time for sure. Let me just start with the mission and the vision of the company. The vision is about empowering more people to find their happy place through co ownership. And we started the company in twenty twenty in San Francisco. We've grown to now almost every market around the US, but until this week, we were operating in about forty destinations around the US, as well as Paris, London, and Mexico. And what we
do is very simple. We empower families to co own beautiful luxury vacation homes together and Picasso manages every detail, everything from design to furnishing to bill pay and maintenance.
Who determines the time that these families get to go spring break is oftentimes overlaps with other spring break of families.
Yeah, so this is the number one question that we get from prospective buyers. And the answer is we've created a proprietary scheduling tool that we call smart Stay. It's available from an app on your iPhone or Android, and smart Stay will ensure that you get your pro rat of time throughout the year. So if you own one eighth of a home, smart Stay will ensure that you get one eighth of the peak season, one eighth of the non peak season, and one eighth of the holidays.
All Right, so when the plumbing goes, everybody's got to chip in.
Well, yeah, and a lot of that is accounted for and planned and advanced. So as the manager of the home, Picasso is thinking about what things might break or what things may wear over time, and we're actually accruing in the budget so that there's funds available to repair some of those things when they occur.
Yeah, go ahead, Carol, No, no, no, no, no, go ahead.
So talk to us about the business. Because you guys sell you you buy the homes and then you resell them as shares.
Is that correct?
Well, kind of. Usually the way that it works is we have thousands of listings on our website at picasso dot com. You can also see them on our app, and consumers will go to our website and express interest in homes that meet their needs. Once we see enough interest in a particular home, then Picasso gets involved, works with the listing agent to get the home under contract, We do diligence on behalf of the ownership group, and then we convert it into a co owned Picasso home.
Fascinating. Talk to us about the ramp up and demand and types of sales. Just give us, give us some metrics. We're Bloomberg as we all. Yeah, I'd love to know some of the else.
Yeah, well, back to your question around you know what it was like launching during the pandemic. The first couple of years were crazy. I mean, we grew from zero to We've done more than a billion dollars in revenue over the course of the first three years of the
company's history. We have thousands of owners and the way that our model works is when we aggregate an ownership group and identify the home, we make a service fee that's baked into the share price of the home, and then we provide a variety of services throughout the life of the relationship that we have with our customers. So that includes things like property management, financing. About seventy percent of people who buy a Picasso use financing, and Picasso
is the originator of those loans. We also help with resale, so when you buy an eighth or a quarter of a beautiful vacation home through Picasso and someday you decide to sell, we help with that sales process as well, and it's really easy.
How long do people stay with their ownership, I'm curious about turnover.
Yeah, it depends on the owner. But we estimate that the average owner is going to stay in their Picasso home for about five years because.
They are staying in I mean, you're now three and a half years in so the people.
Yeah, we're looking at cohort trends to estimate what we think the average life is going to be. A whole home somebody would typically stay in for you know, seven to eight years on average.
Okay, let's say I'm interested in the home in the mountains in the winter, I want to ski there in the summer, i want a mountain bike there. Where do I leave my skis? Where do I leave my mountain bike? So the seven other families don't mess with my stuff?
Well, one of the best parts of owning a home is that you get to keep your stuff there. That's true of owning a Picasso as well. We outfit every Picasso home with eight owners closets, so when you show up at the home, you pull your stuff out of your owner's closet and you enjoy the home with none of the headaches or none of the hassle.
What are some of the common headaches so that come up in this process.
Well, there aren't really any any headaches because we're taking on that burden as the manager of the property. But I would say the compromise associated with co ownership is that you don't own one hundred percent of the home, which means you're not going to get one hundred percent of the calendar.
You can't say, hey, honey, let's just for the weekend go up and you.
Know, well, actually you can. You can, so as long as the home is available, you can. But basically, the main compromise with co ownership is that you're sharing the calendar with other people. So the way that most of our owners describe the calendar benefit is you're going to get about eighty percent of the dates that you want out of the calendar, and you're happy to make the trade off on the twenty percent that you're not getting
because you're saving so much money. It's about eighty five percent less expensive to own a picasso when compared to owning the whole home. It's about seventy five percent less expensive per night than renting a comparable Airbnb or short terminal. So it just makes a lot of sense financially, and it's a lot easier as well, because we manage the whole experience.
How do you make decisions that for personalization. For example, let's say I want to get a hot tub at that mountain home, but you know the other families don't want a hot tub there.
How do you do that?
It's like the co op, right, kind of trusted.
Yeah, it is analogous to the co op in some ways. But when owners buy into a Picasso, they're typically buying into the style of that home, the design of that home, which which we manage, and the amenities of that home. So if somebody wants to make a change, like let's say that you bought into a home without a pool, and later you decide you want a home with a pool, most people would just sell out of their Picasso without
a pool and sell into a new one. But it is possible for all the owners in a home to actually vote and make a change to a home such as a bedroom or a pool, and in that scenario, Picasso would facilitate the project on their behalf.
Awstin I'm curious though, if you buy fractional ownership into a particular piece of property and then you sell, do you sell at the price you bought into or you with the market bear? Like, how does that work? Because can you lose money on that initial investment.
Well, like any real estate purchase, yes you could lose money, but most real estate goes up in value over time, and that's certainly what's happened with our real estate. So people who have purchased a Picasso and later resold our customers have made on average a ten percent gain over what they paid. But it trans I mean with Piasso, you're buying a home. The only difference is you're buying a portion of it instead of the whole thing. So it trades just like the underlying real estate would if
you were selling the whole home. But we make the process easier by facilitating the share of part of the home.
There's a huge affordability problem in a lot of these towns, absolutely right. How do you handle pushback? I know that in some areas where you operate, for example in St. Helena, California, you had to reach a settlement with the town. How do you anticipate pushback on this model?
Yeah, well, the housing affordability problem is real and it's here to stay. You know, homes aren't going to get a whole lot cheaper into the future. So what we're seeing is consumers are resorting to co ownership as a way to make housing more affordable.
That could also be said to price out locals from living there.
No, it actually has the opposite effect in a small town. So one of the challenges in a small vacation home community is that second home buyers are buying up a lot of the median priced homes. The beauty of this model is it's kind of like car pulling, but for
second homes, where we're aggregating demand into fewer properties. So instead of having eight families in San Francisco buying median price homes and NAPA just to have them sit empty ten months per year, our model concentrates those eight families into one home, so it actually creates more opportunity for the local workforce. But like any new category, it takes time to be understood.
Who's your typical buyer? Just got about thirty seconds.
Yeah, So the typical buyer ranges from a you know, young family that's early in their career and maybe can't afford or can't justify owning the home of their dreams all the way to a very established, you know, empty nester that's looking for a special happy place for the family.
To get a bulk, that's the range. Just quickly, is there a bulk? Is it like people a certain demographic in terms of age.
I would say the sweet spot is like forty to sixty in terms of age. And I would say seventy to eighty percent of people are looking for a home that's within a two to three hour commute from their primary home.
And just quickly, one last question ten seconds. Do you make money on every transaction? Does?
How do?
What's the business? We make money on the service fee upfront, and then we make money on the recurring services that we provide, including property management, financing and resell.
Really interesting, really cool stuff.
Thank you, Thank you so much.
Austin Allison, co founder a CEO of Picasso, joining us here in studio.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and and brout Auto with a Bloomberg Business app, or watch us live on YouTube.
Plenty ahead in our second hour, the weekend edition of Bloomberg Business Week, including the former drivetime radio talk show host turned influential YouTuber with two billion monthly viewers who now wants to sell you tim a supercar online. We mentioned her in last week's show and knew we wanted to hear from her directly. She joins us a little later on.
Plus, it's springtime in the US, which means warm weather, blooming flowers, and the rejuvenation of the art market, questioned Mark. Our Pursuits teams spring culture opener featuring the tiny Mediterranean island nation known for Golden Visa's online gambling and tax advantages that wants to lure the ultra wealthy with art exhibitions.
It's also probably home to some really great and expensive cars. I was kind of thinking as I read that story, and fast and expensive cars are where we start this hour. Our next guest is well known in the F one racing world as well as to fans of the Netflix show Drive to Survive.
Gunther Steiner is the ambassador of the F one Miami Grand Prix that's taking place on May fifth. He's been eight seasons as the team principal for the has F one team and recently stopped by our New York studio. We began by asking him why Miami.
Miami, Miami, I'm ambassador for the MEMI Gabrix.
It is a new Grand Prix.
It's only the first season that it's on this year, and they came in pretty big and they Reis de BArch in Formula one of organization, just how they do things, you know, just much more entertainment, much more activation, a lot more going on. So if anybody who wants to go and see a Grand Prix, Miami is pretty good because the.
Kind of an event place right correct.
It's it's an event. It's not just a car race, it's an event.
There is a.
Different races post a super Cup. There is a one Academy which is the Woman Racing Series. There's just a lot going on all day. It's a sprint weekend. Sprint weekend means there is a race already on Saturday, there's qualifying on Friday for the sprint race on Saturday, and then it's qualifying for the race on Saturday afternoon.
So a lot of.
Things going on and for sure it will be an exciting weekend.
What does having a race in Miami bring to the race and also bring to the franchise?
I think Miami is Miami going there, it's always it's a cool city.
You know, we didn't do a remote from Miami.
I have that well, I've been. Yeah, it's a great place.
Exactly, you guys want to go there, you know, especially in the winter.
Yeah, from New York winter, you know, yeah, sure no, but no if for the one people, it's also.
They do such a good job.
Organizing it. Stephen Ross and Tom Garfink just they put on this race somewhere I wouldn't say out of nowhere, but the idea behind to make it around the stadium and use the stadium to host the teams in their old hospitalities of the teams are set up in there, and with the general admission ticket you actually can have a look at that stuff. And also you can get
very close. Just with the general admission ticket, which is the lowest class ticket, the cheapest one, you can get very close to the cast.
So it's pretty cool what they came up with.
Guntain, I think there's what five Grand Prix races now on North American soil. So is there a point working be too much? Like? How do you think about that?
In the moment, there is enough in the moment, I would say for the future if the sports keeps on growing in the US. The US was the biggest growing market for Formula one in the last five years since Libert the media took over. They grew it in the States because it was underdeveloped in North America. That was only Mexico and Canada for a long time, and then Austin came in, and then Miami came in, and then
Las Vegas came in. So I think in the moment they have to solidify the market here and then we can think about the next race. But in the moment it's not enough. It's the right amount.
Forgive me, But I have to ask, who do you think is the most like driver and principle in F one?
The most like driver?
Yeah, Louis Hamilton, I would say he's the most like driver.
What about the most disliked?
I don't know.
That's where I was going exactly, Yeah, I think, yeah, I think Lewis Hamilton, And that's fair to say he's a crowd favorite.
Yeah, I think. So, it's good, you know, you forget about that. Daniel Ricardo is very like you know, well, you know, so.
You can't have favorite kids, exactly.
Yeah, you need to love them all, you know, so we love them all.
What was I said?
Is he a good fit? At Ferrari.
Right, Oh, yes, yeah, I would say so. And I think he's motivated. He's now at the stage where he knows that it will be his last seat in F one driving, you know in F one, So I think it's every driver stream to go to ferrag at some style stage. I would say, I didn't I didn't get to know any drive, which I said. He he doesn't want to go to Ferrari, So I think he will fit him.
Well, he's very good.
He's got a very good relationship with Fred for sir, the team principle because when when he was up and coming in the in the law of series is, Fred was his his boss basically.
So I think there's a good scene of j there.
I'm going to say we are mate smarter on this subject thanks to our Hannah Elliott, who you know, covers our you know, our auto columnists here.
But these are all my original questions.
But one of the things we were actually talking about her with some other things earlier, and you know, she asked she moved up this point of like you know how you kind of create more parody, like you could often have a team that wins race after or race after a race in terms of Formula one, and we think about the Red Bull team right, who's done really well. So are there things that could be changed to kind of shake it up so that you don't have the
same team over and over maybe taking top spot? And should it be done or how do you feel about the purity of like leaving it alone.
I'm for leaving it alone. There's a lot of motors pot where there's balance of performance. You put more weight in the car, so you use the power, change the mechanicals or something exactly. But Formula one is the best man should win and the best machine. You know, if it's over and over again, there is a rule if somebody in the rules can make the best machine, he should have that advantage because they are the best. And
I think it will keep on changing. There was a lot of things done that the field is so close together. If you think there is twenty cars out there and in some of the qualifyings between the first and the last is one second? How much is one second? Twenty cars, twenty different people, you know, ten different car made makes you know it's something amazing to have him in one second?
Obviously it's not.
I mean everybody would prefer that every weekend, another car would win, but I.
Think in Formula one that's not possible.
But when you think.
About sailboat sometimes racing, right, they all have the same model and it's like a certain class in something. But you're right, like racing is, it's different.
It's the best, the best machine, and the best man should win.
The best team that figures it out, right, Yeah.
Yeah, exactly, Yeah, that's for the best.
But don't you think from a fan perspective or from the perspective of an audience or building that continuing to build that audience, it might be better for more parody.
It might be short term better for more pality. But then it's it's becoming a stage sport if you manipulate the rules one, because then if somebody is not good, all of a sudden, he gets let's say, fifty horsepower more and he's gonna win. What is the next one doing, not develop the car, just try to ask for a favor to get even another twenty horsepower more. So, it's not really, that is not really what Formula one is about. Formula one is about the best people in the best machines.
I think in the moment you have a little bit go back to Louise Hammerton. He won seven championships almost in a row, you know, and Mercedes was dominating. We forgot about that period, but then it ended. There is Mercedes now their fourth or fifth best. Now in the moment, it can happen to anybody. It can happen that the next three races Ferrari makes some development on their own, behalf without help of any authority, and catch up, you know, so that I think would be the best outcome.
And sometimes there's a case of right, not only the equipment or the car, it's also the driver. Right, So the combination, like you just don't know what plays. You mentioned women and women racing, and I'm just curious about the F one Academy. How do you get more women out there and racing and will the academy do that? And what should be done to not only increase women in terms of racing, but also more diversity.
I think we start with women.
I think with the F one Academy program is started that and it's not short term. We will have a woman in a form. It takes some time. This is a new start to get women into racing because normally girls when they are small, they don't go go crafting boys. Let's say I take a number. We've got a million boys and we've got one hundred women. The chance to find a talent a million is much higher than to find them in one hundred. So we need to bring the amount of girls up which compete in lower classes
to find this big talent to come in. Having now the academy, at least they can see that they can get into the academy, and we create a momentum around And even if the girls which are now in the academy cannot make it because they're already too old when they could get to, at least we create interest and maybe their daughters get into go crafting, and then all of a sudden we get the pool bigger.
It's got to start a much younger. So it's got to start younger.
They need to start younger, like the boys start five six years old.
One other thing I want to ask you, because in sports increasingly we report on it here in Bloomberg, is the amount of money that's coming in from Saudi Arabia bare in the introduction into Middle Eastern money into f one? Is that a good thing? How are you saying about it? And how does.
It change it.
I don't think it changes F one in general. It's just like there is there is quite a few races now. There's five races now in the Middle East, right, But otherwise I think the Middle East is investing in old sports.
If you look to investing in.
Gold, we understand what they're doing. But you think it's okay, it's okay.
Yeah, I think it's okay. There is that, there's nothing, there's nothing wrong with it. I think they are interested to invest in sports, and Formula one is one of the biggest global sports, so why should not they invest there.
We got thirty seconds left. What's next for you? We know Miami, it's your focus.
I don't know the rest. What is for me.
I'm in a good place now. If there's something interesting for me coming along where I get a good challenge and a good opportunity with a vision to go on the podium, I take it. Otherwise, I keep on doing what I like to do, and.
That is I have a choice another team. Perhaps, I don't know a lot of that.
In the moment, I'm still thinking of putting a five year old behind the wheel of a go cart.
You have a son, you.
Can do it.
I have a daughter, you know he's five?
Well real quickly ten seconds? How young do they have to start?
Said five or six?
We did say five or six?
D really yeah, yeah.
My kid can't even get a glass of water without spilling it behind the wheel.
Good to Thank you so much. Good luck and good luck in Miami gudn Steiner. He is ambassador of F one Miami Grand Prix. Joining us here in our interactive broker studio.
You're listening to the Bloomberg Business Week Podcast. Listen live each weekdays starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Well, our next guest was a highlight of this weekend's past Bloomberg Business Week podcast and broadcast. We actually caught up with our Bloomberg Auto columnst Hannah Elliott about the influential YouTuber who started an auction house to sell million dollar cars online. That site, tim sbx Cars, went live today.
Here to tell us all about it is Alex Hershey, co founder of Supercar Blondie joining us from Dubai, which Carolina kind of think alex is a pretty good market to sell hyper cars, true or foss.
True True, yes, definitely, but there are so many other markets, you know, and that's just why we started this, because there are collectors from all over the world who want these incredible cars.
We'll talk to us a little bit about the need that you saw and why you started SPX cars. What was the need that needed to be fulfilled in your mind.
I've been traveling the world for the last seven years and meeting collectors and dealers and OEMs, and what I've worked out is that there was no central location full of these collectors around the world to meet to buy and sell their cars. And so you know why we get calls from collectors and say, hey, listen, do you know where I can buy this car? Or do you know who can buy one of my cars? And I just didn't have the time to connect these guys. So
now this platform is what solves that issue. And we're here really to shake up how supercars and premium cars are traded around the world.
Well, and how's you know, just obviously first day the auction site went up up and running, went live what can you tell us about earlier activity? Actually, aren't it?
Yeah, it's quite exciting actually, So yeah, we just went live a few hours ago. On our listings, we have tens of thousands of views already and we have registered bidders from all over the world. We just our latest registered bittered was from Egypt and then we had one from Japan. So really they're in markets that we feel are underserved by these in house auctions and digital auction spaces.
You know, there are so many collectors around the world who cannot travel physically in person to these in house auctions, and so for them just to be able to sit at home from whatever country they're in in the world and bid on their dream car from their home is awesome.
So, Alex, does that mean they don't get to kind of take it for a test drive or kick the tires kind of thing. Do they just buy it online and they've just got to kind of trust it? How does that work?
Yeah, Look, they can go and see the car.
We encourage buyers to go and see the cars in person, so the cars are available to go, and you know, these collectors, it's not the first time they're doing this, right, these collectors are used to buying cars from overseas and shipping them into their own location, So if they have any questions about the car, they can go and send one of their team, you know, collected the collection manager to go see the car in person. Otherwise we've got
we on every single listing. We've got about one hundred and fifty photos of the car, and the folks need to be super recent and through our network we can always like make sure that these cars are listed as is.
Hey, I'm wondering about just the development of you professionally over the last seven years, as you mentioned, and sort of the way that you've built this not just this media organization, but the way you built this profile within this niche community. Where did you interact with so many people who can afford these vehicles, I mean vehicles that are literally once in a one and a one of
a kind vehicles. How do you think that car community views you now versus when you started back in twenty seventeen or went full time in twenty seventeen.
So differently, so differently.
Yeah, when I started in twenty seventeen, I came at or came to this world as like a layman, right, I wasn't a car expert, a car journalist. I was
just a girl who loved cars. And when I came into the community, it was really male focused, and I really wasn't that welcome, to be honest with you, I was, first of all, I was a woman, which is fine, but also I was coming in from a social media perspective, and the automotive world has really rely on traditional journalists for you know, since time began to advertise their cars, and coming in from social media, this whole new form, this whole new world, it really wasn't understood and we
were just kind of taken as cowboys, right. But over the last few years, manufacturers now I've realized that social media is a crucial way to get the word out about new cars and advertise their cars. So for me to have kind of the biggest presence online for the automotive world has been quite a shift from seven years ago to now.
And now you know, I'm taken very seriously, which is very nice.
So you are taken very seriously, and I guess that's why people will entrust you with their expensive cars. Like, let's talk about that process. Because some of these cars, you know, millions of dollars. There's not necessarily a lot of them, depending on the specific car, So how do you actually find them and get a hold of them out.
Well, I suppose that's also why we're doing what we're doing with his platform, because I have been hunted. That's been my whole job, hunting down these super rare, super collectible cars from around the world, and so doing that, I have developed this network of collectors and dealers who really have the krem de la creme of cars in
the world. And it was always really hard for these guys to sell it because they might know a few people in their own country or in their own network who might want to buy one of these cars, but to reach people outside of their country was really difficult. You had to go through private broke of private broker, private broker. It would take months and months and months. So for me, I have that network already built, so I have. What was really amazing is I didn't expect
that kind of feedback from them. They said, take my car, take my car, I trust.
How do you get them?
How do you get them to trust you?
Though?
I mean, these are valuable cores and in that case is super rare.
Well, they've been they've been trusting me to drive these cars, and.
You know, and which is just amazing for me.
I'm driving ten million dollar cars that do not belong to me, so the trust was there to be able to get me behind the wheel. And now with the brand up built and the reach that I have, you know, we get two billion views per month on average, and for people wanting to sell their cars, that is really really valuable. So for them to know, Okay, you've got this reach and you can get as many eyeballs as possible, or more eyeballs than any auction house in the world, take my car.
Here you go, and you don't have to put up okay and be a little silly, but I'm serious because I'm just thinking, oh my gosh, do you have to put up a bard, you have to do anything? Like do you have to for them to say, okay, here take the car.
And so basically what's good is the seller just keeps their car where it is right So with in house auctions, they would usually have to ship their car to wherever the auction is being held, which could be halfway across the globe.
They would have to take our insurance.
It's a big risk right, So for us, the seller just keeps the car wherever it is right now, which mitigates the risk if the fees are way lower on the digital platform because we don't have the millions of dollars that goes into creating these in house auction spaces, right, so we can keep the fees lower for the buyer as well.
We'll talk a little bit about those fees. Give us an example of the transaction fee that you would take in order to facilitate a transaction here.
Yeah.
Sure, So for the seller, it's just admin fees, so it literally starts at two hundred and fifty dollars. You can sell your car on our platform to for two hundred fifty dollars. And so if you want a professional photography, we have a whole team of photographers around the world who will come to you in whatever country you're in and actually take those photos. That cost is nine hundred and fifty dollars. Then we have our white Glove service.
So that's when you have a really really special collect action or a one off car there's worth you know, twenty thirty million dollars. We can customize the way that we sell that car. We can even have like a preview somewhere beautiful and invite all of these potential buyers.
So that's the seller.
The buyer is only five percent on top of the sales price. So when you look at in house auctions between the buyer and seller, it can be around fifty twenty percent, So ours is five percent, which you know is a lot less for the buyer.
Hey, just thirty seconds. Are there enough truly rare cars in the world to support your business?
You know?
I was asking that when I first started traveling around the world trying to find them to film them. Now I know there is because we traveled every single day for seven years to find these cars, and we found hundreds and hundreds and hundreds of them.
So they're all going to be on our site.
Ten seconds. What's what's one real quickly that you that might be interesting to buyers?
Real quick merceds one, AMG one. It's the first time it's ever going to be for auction.
How much?
Oh?
Yeah, how much?
Well, we can't say yeah, but it doesn't.
There the reserve.
Yes, is there a reserve price? There is a reserve.
We can't say the reserve, but once you near the reserve price, you're going to be able to see it on the side, it'll say near reserve price and then everyone's like, oh, the next bid it could sell.
All right, well, listen, come back soon and we'll check in with how it's all going. Alex. Thank you Alex Hershey, co founder a supercar Blondie. Of course, her new live auction website has just gone up xbx cars. Really great to check in with her. Joining us there from Dubai.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Easter Listen on Apple car Play and then brought auto with a Bloomberg Business app or watch us live on YouTube.
It's time for the Green Culture Opener, courtesy of our Bloomberg Pursuit Steam, which means something at art, something at books, something to see on the bigger, little screen. It is all here. These stories, by the way, featured in the new issue at Bloomberg Business Week on newstands, already online at Bloomberg dot com, Slash BusinessWeek, and of course tim on the Bloomberg terminal.
For more on this, we're joined by the editor of Bloomberg Pursuits, Chris Rouser, along with the Bloomberg Arts columnist James Tarmi. Hey, Chris, I want to start with you and just sort of get a holistic view of how you think about putting together the Spring Culture Opener, because it's got a lot of culture in it.
Yeah, yes, it sure does. Spring is a good time for TV and movies because film studios are building up for the summer blockbuster season. Streamers want to get out their TV shows before Emmy deadline. Books are also coming out before the summer because they want to be the hot summer book. So there's just always a lot going on.
And this summer the great year for global art biennials, which is you know, fine art, contemporary art at the Whitney in New York and Venice, and so there's just a lot to talk about right now, and we were
excited to have James oversee all of it. And so this year we had Malta on our where to Go lists, our annual places you should travel in twenty twenty four lists, and it would because malta little island nation off of Sicily, is having an art biennial, a big contemporary art fair for the first time this year, and they're also opening later this year, hopefully a contemporary art center like a permanent museum. And so I said, James, you should go to Malta and check all of this out.
And I thought he was joking, But when I realized that he was serious, I why do you.
Think he was joking?
First of all, well, it's just, you know, Malta is not necessarily synonymous with contemporary art, which is the entire point of what I ended up writing about, and the entire point of what all these people are trying to do. Malta is predominantly famous as either a tax haven or a country that has been issuing these so called golden passports, which allow people to have Malti's passports and therefore access to the EU, which they sell for a lot of money.
It's not necessarily known as with its finger on the pulse of the contemporary art scene. So that's sort of why I thought he was being lightly facetious. But when I went there, I was actually quite dazzled by the efforts that people had put into actually making this very very small place and interesting destination for our lovers.
James, you think it's reputation though as a place for golden passports, as a place for gambling and in the words of some folks you spoke to as a place to launder money. We'll hold it back when it comes to art.
Honestly, the thing is that we just simply don't know, right.
You know.
The thing about reputations, as the saying goes, is that it's a lifetime to make and just takes a little bit to rip apart. So I think the cultural reputation of the island is going to definitely take some time. That being said, they are really looking to this as a means forward passed this sort of present perceptions about the island as a sunny but shady place.
I have to say, there's a line in the story which should be an easy touristic cell. The country boasts spectacular history, storybooks, cities, and dramatic citadels, all drenched in daylight, so dazzling that sunglasses are more of a necessity than accessory. I love that line. And Chris, as you were like, as James came back and kind of was telling you about what was going on, what kind of jumped out for you before we get him to kind of dig into some of the details of what he saw.
You know, I had heard of I've never been to Malta, but I know I actually know some people who are doing the passport program. I have plenty of friends who have been, and so I've always known it's a beautiful place with some great, very interesting history. And what really excited me about what James saw was that for this biennial they put art all over the islands. They put art in castles, they put them in grain silos and
old citadels. There were performances in beautiful fields on the cliff side, and I just thought it would be like such a great place to go with fresh eyes and see interesting art that you've never seen before.
Al Ron, go back people who are doing the Golden Passport thing, because it's basically eight hundred thousand bucks to just get a passport for the EU by going to Malta.
Yeah, it's you don't have friends doing that, No, guess.
I gotta hang out with Chris Moore.
I have to say, looking at the story too online, just some of the pictures, so James tell us about what you saw.
The thing is that they do have all of these unbelievable places as showcases for artwork. So I was in the historic Grandmaster's Palace of the Knights of Malta looking at different works. I was trekking, as Chris says, to the island of Gozo, where I climbed up to the top of a citadel and into these unused green silos where there was this like machine that was strobing lights.
I mean, it was very, very cool, and it allowed me to see the island in a way that I absolutely never would have even if I had been there as a tourist. And also it was a showcase for all these old places, even though these old places were showing very new things.
It's very small if you think it, like, if you go to see this, like you're gonna you're gonna walk around the island, right and see a lot of your old trade in the history.
Yeah, it's the actual old city of Valletta. You will recognize it from Game of Thrones shots. You know, it's very classically well it goes back to Game of Throne, well kind of, I guess. But the rest of the island is also quite picturesque. Then there are parts of it that are not at all these new developments and resorts and stuff.
But okay, James, I just wanted to touch on this idea of what the art market is going to look like this year, because I didn't know this until reading your story, but twenty twenty three wasn't so great of a year for the folks selling art.
Yeah it wasn't a disaster, but it was not great. Global sales down about four percent, but of course that doesn't count for inflation, so they're they're actually down quite a bit more than that. But more to the point, as I say in this piece, the art market creates
its own momentum. Right, people get excited, and then they get other people get excited, and then then there's there's buzz, and there's and there's a market, and there's purchasing that didn't happen last year, and one that made it hard hard to write pieces, and two it made it hard to sell art. And so people are really hoping that this is the year that contemporary art, but also kind of generally twentieth and twenty first century artworks broadly sort
of get their mojo back. But really what that comes down to has nothing to do with art and everything to do with interest rates.
Is this amazing. I was really surprised. I just thought people who buy art are like, they.
Don't care they're like people who just bought pay cash for.
A place to take out some gold bars. Right, and just like by this piece.
Of art, you would be stunned by how much of the art market is built on debt.
That amazing.
I had no idea any.
Said prime loans.
I don't know know, well, actually you know the debt. Occasionally people do get bridge loans, particularly galleries, because they have short and liquidity crunches.
All right, well, I can't afford art masterpieces and I yeah, other things can't afford, but I can't afford books and going to see movies or my streaming services. So Chris take us to some of the things we can read and what we can see on the bigger little screen. How did you guys kind of pull that list together?
So we have our contributing movie credit, movie and TV critic Esther Zuckerman. She has seen a ton of the movies already that are coming out because they've been out and festivals and stuff. Some are actually there's this one Zandia movie, Challengers, that has actually been delayed quite a bit. And so she she did a great preview of the TV shows and movies that you should see. And James Also, James is a really fast reader and he read tons of books Gallley form.
Just becuse nothing was going on in the art market exactly.
Right, I guess not.
But yeah, I'm really fun fun stuff command Yeah, okay, James, I can't believe you got to read all these books. That's pretty cool thing to do for work. Ian Fleming known for James Bond.
Yes, not necessarily known for being the grandson of one of the most important British financiers, who effectively was able to corral a tremendous amount of British capital and put it into American railroads. But that's that's a side note. Yeah, a cool side note, a very cool side note. The man had a very very interesting life, and oftentimes he's conflated in the contemporary imagination with his kind of most
famous character, which is James Bond. But he while also being debonair and British and possibly working for the services and kind of being a real what could generously be described as a ladies man, what could more accurately be described as a serial womanizer. You know, he was actually quite different than Bond and a very very interesting person.
And so this new biography of him has unparalleled access to the Fleming family's papers, so you get all of this new information that helps reappraise our understandings of who he actually is.
Chris, is there a book that kind of stands out for you?
Yeah, there's a few. I'm really excited about RuPaul's memoir The House of Hidden Reading Meanings rather the House of Hidden Meanings. And you know, RuPaul has had such an interesting career and life and has sort of famously has a lot of sort of wisdom to impart and so I'm excited for that. And the author Claire Masud, also who always has something wonderful, has a book called This This Strange, Eventful History that's coming out to me.
Should we end on the American Nightmare?
Well, as always, do.
You want to just give us a quick rundown of this movie?
The movie is Civil War and it's from filmmaker filmmaker Alex Garland, and it stars Karson Dunce and some other great people. And it's about a war, a civil war in America, and it doesn't really dwell on why the war started or who the two sides are. It's not really a red stave versus Blue stage story. It's really just a kind of almost like Saving Private Ryan battlefield movie, except for the battlefields are cities and towns and farms in America. And esther the critics that it was incredibly
chilling and powerful to watch. She said the last thirty minutes, she held her breath for the last thirty minutes. She's never seen anything like it, So I think it's going to make a big splash and be tough to watch.
Yeah, you know, honestly, it's a different kind of war movie because the backdrop is American town's cornfields. Yeah, us the US capital. This is not a movie where it's fictionalized. Really, it's it's a movie where it tries to be as realistic as possible, which is I think what the really uncanny, chilling part of it is depressing.
I think I'll go to Malta instead.
I'll just read, maybe read a book, I don't know, create my own art, yeah.
Exactly, Borrow some money and got a golden.
Yeah, hang out with Chris.
He'll send you to Malta.
You can take us offline and talk some more with you.
Hey, big thank you to Bloomberg Art's collednist James Tarmi, along with the editor of Bloomberg Pursuits, Chris Rouser.
This is the Bloomberg Business Week Podcast. I'll a little Apple, Spotify, and anywhere else you hit your podcast. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal