Amazon's Erstwhile NYC Site Will Lure In New Money

I'm sure there was a real estate investors and speculators and Queens were screaming into their pillows last night as they were trying to process the news that Amazon will not be coming to Long Island City. To get a sense of what that means for the local real estate market over in Queens, let's bring on Ken Weissenberg. Ken is a partner in charge of the real estate services group at Eisner amper Uh. He is in New York City.

So Ken, you know what does it really mean short term and long term for the Queen's and nyc um real estate market. On a short term basis, the speculation that was going on in the Long Island City area in terms of people buying up the condos that were available is going to pretty much stop for the time being. Um. I think the contracts that were into the two will go through and be completed, but a lot of the other transactions that work that were happening were probably going

to slow down or stop for the time being. The overall market in the Long Island City area is continuing to show, you know, significant progress and growth. Uh. If you look at the site that Amazon was going to pick, it's in an opportunity zone. There's huge interest in the real estate community and developing an opportunity zones. The site happens to be basically on the water on the East River. Um,

it's a prime for development. I think you'll see a project happen there, whether Amazon, it's Amazon or someone else. In other words, do you think it's not that big of a deal. I think it's a big deal. I mean, I think the political ramifications are a big deal to two sides within the Democratic Party have to kind of work things out. But Umland City is going to continue to grow. New York City is going to continue to grow.

When you look at the number of jobs in New York City, Yes, another twenty five thousand jobs would have been great um, the construction jobs, you know, to build that that project would have been great, But other things will be built, other jobs will come in. New York is out out growing San Francisco as a tech center. UM in Long Island City is seven minutes from Midtown

by subway. So, Ken, are you concerned, however, that what happened here with Amazon in the city, in a state of New York perhaps might send a signal to other corporations considering New York City, New York City that maybe New York is not open for business. I don't think so. I think this was a UM targeted political campaign UM that ended Amazon. Amazon didn't want to have any controversy around this UM with open arms. And then you know, there was a lot of a lot of a lot

of pushback from local politicians. But honestly, Ken, I gotta wonder, if Amazon didn't want local pushback, why didn't they do more groundwork ahead of this. I mean, it seems kind of strange that everybody was shocked by this decision on the ground, uh, and that Amazon didn't realize that this would be waiting for them. That is kind of strange. I would have thought that the political politicians would have been lined up, you know, either for against way beforehand. Yeah.

So here's my question for you, Ken, Um. Focused on the real estate sector, you're saying that you don't think it's going to have a material effect that there, that the area will continue to grow. But we'll put a long term, I mean a short term. It's going to be a shock to the system, because this was a real impetus to grow that that particular section of Long Island City could prices decline unreal estate there um from the speculative prices that hit recently. Yes, in a long term,

I think they'll come back. I think they'll be just as strong and the growth we will continue. So, Ken, does this call into question at all the use of incentive to corporations. Let's just focus on New York City that seemed to be one of the areas that received a lot of pushback. Um. Do you think the city and the state will rethink some of the incentives it

offers for corporations. Well, this this was quite a prize for whoever got the headquarters UM, and we were in competition with almost every major metropolitan area in the country for the H two q UM for h Q two rather UM so I think I think they had to put together sweeteners to make make the deal happen. But that's been going on so you know decades where they have been enticing large corporations to move headquarters with with sweeteners.

I think that will continue. UM. Maybe you know, maybe the package was too sweet under the current economic climate, UM and political climate. But you know, even without the packages that they put together, there was you know, large incentives under under existing law that they could have benefited from. One thing that I'm wondering is how much of a

pressure the subway system in New York affected this. In other words, that train line that went to Long Island City is already very crowded that if Amazon was going to come, it would strain the infrastructure more than it would help it in the short term, and in the long term that could make the city less appealing. What do you say to that and sort of what will

this do to efforts to upgrade the subway system. When you look at the overall infrastructure for New York, the infrastructure has been in place probably longer than any other major major metropolitan area in the United States, UM, and it does need refresh and continue rebuild. The first major project in the subway system in fifty years was the Second Avenue subway line, and that's been going on for

thirty years and not finished yet. Uh. They do need to put significant investment into the infrastructure of New York City and the major metropolitan areas around the country. That's more of a federal UM and say combined program, and I'd like to see that happen. UM. A lot of it will be done with private partner you know, public private partnerships, like what's going on at the airport's right now.

So can as New York City in particular continues to try to attract a new corporate citizens and they've had some tremendous success with technology companies, with Google having a big presence in Lower Manhattan, Facebook as well. UM. Talk to me about how the city positions its cost of living challenges to some of these corporations and how that gets balanced, because you know, that has to be a

big challenge for New York cities that attracts corporations. Our rent is cheaper than San Francisco, not by much, but it's a little cheaper than San Francisco. UM. I think the city is is and and state have to address. You know that the housing need for affordable housing for the workforce. Workforce meaning UM policeman, teachers, UM office workers, UM young lawyers and accountants. The prices of Manhattan are basically pushing people out. UM. You're seeing development happening in

the outer boroughs. Brooklyn and Queens are seeing a tremendous amount of development interests. The Bronx is atreading to see significant development interests and certain companies are developing in the transit hubs in the suburbs. So that's going to take some sub of the pressure off New York City. But that also requires infrastructure because people have to be on on accessible and clean, safe transit. Ken Weisenberg, thank you

so much for being with us. Ken Weisenberg, partner in charge of the real estate services group at Eisner Amper

in New York. Talking about the potential ramifications of Amazon withdrawing from the Long Island City site for its headquarters to project a HQ two UH seems to be a growing feeling that in the short run it might have an issue, it might have an impact on prices over the long term, a little bit more optimism New York and in terms of its tech growth yeah, we've we've already seen a lot of tech coming as I mentioned before.

You know, Facebook and Alphabet is here, and of course Cornell has their big tech center UH in the city as well, so up and we've seen news reports about how you know, New York is adding more tech jobs than than San Francisco. So it certainly has a strong foundation there. But you have to wonder about the political support of you know, making tech even a bigger part

of the New York City corporate scene. When you think about the twenty seven billion dollars of economic value added over or created over twenty five year period by this Walmart, I mean by the Amazon move against the three billion dollars in subsidies. That seems like favorable economics. Yet that perhaps wasn't enough. Let's find out a little bit more about what is expected to come from this declaration of

an emergency. And Edgar Tennis joining us now congressional reporter for Bloomberg News, joining us from One Studios in Washington, d c uh and thank you so much for being with us. So talk about what the precedent is for declaring a state of emergency, a national emergency to divert funds away from other projects towards something that the president would like to see. Well, that's that's an interesting question. It's kind of two different questions because declaring a national

emergency is not unheard of. Barack Obama declared a national emergency to combat the swine flu. George George W. Bush declared and a national emergency after nine eleven, So declaring a national emergency happens from time to time. But yours the second part of your question, to shift funds from one part of the budget to another part is unprecedented.

And that's where we're going to run into a real constitutional challenge because according to Article one of the Constitution, it's Congress that has the power of the purse, and there's an appropriation process that goes through Congress. And what the president is trying to do with this declaration is divert taxpayer money to his priority outside the regular appropriation process, and that's gonna be challenged on constitutional grounds, clearly, um

I think, Lisa. The issue here is we know his intention is to uh continue to fund the board of Wall. The question is what type of uh I think? Uh I think challenge will he received various members of Congress and over what time frame. Well, I will say this, it's interesting to see how he's going to try to cast this as a win, and it will be interesting

to see President Trump's tone. I was interested in the Wall Street Journal opinion article that came out today from the editorial board talking about how signing declaring a national emergency is a problem and is actually basically how he painted himself into a corner. Kind of interesting the Wall Street Journal editorial page, usually a conservative place with his conservative opinions, but really highlighting this fissure in the Republican

party over declaring a national emergency? Will this give a precedent to the Democrats to do the same if there is a Democratic president? Also trying to figure out what kinds of lawsuits this exposes the Trump administration to not only from opponents of some of these funding read diversions, but also frankly, the residents that would have to exit their homes due to eminent domain in order to allow this wall to be built. So a lot of issues here. This is going to get tied up in the courts

for a while. Uh. Also a question of where the money is going to come from, and you know what projects will have to be jeopardized as a result of that. But that said, there still is a core of President Trump supporters who would like to see the wall. He has made this a campaign speech issue, he has made this one of the hallmarks of his tenure, and he doesn't want to go down without this victory, even if

it's just on paper. Yeah, it could be a puperic victory, but clearly looks President Trump and the administration is going to fight very hard for this. We do have Anna Edgerton back Coggression, reporter for Bloomberg News, calling from our Bloomberg ninety nine one studio in Washington, d C. Anna, thanks for coming back up. I guess the question here now is just kind of next steps. How does this

play out in your opinion there? So, there are two things that we're looking for from the democratically led House to Representatives. The first is a legal challenge. I spoke with Jerry Nadler, he's the Democrat in charge of the Judiciary Committee, and he said that the House Council will pursue legal challenges to this. The other avenue to challenge this is a joint resolution that would start in the

House of Representatives. So, uh, Nadler has already said that he is going to put question this, this National Emergency declaration in a resolution now that's privileged, so that means it will go through the Judiciary Committee, it will go put on the floor of the House. It will probably pass a Democratic House, and within fifteen days it has to be voted in the Senate. So it's not up to Mitch McConnell, the Senate majority leader, whether or not

to put it on the floor. So it's gonna be really interesting to see if all Democrats vote against this National Emergency declaration and some Republicans who have kind of constitutional qualms with this um, it could pass because it only needs to be one votes. If it's privilege, it doesn't have to get past the filibuster. I think it's interesting though, Mitch McConnell supports declaration of a national emergency, and we've seen this, uh, just the leadership of the

Republicans seems to be behind President Trump. What can you draw from that? That was a really interesting development, and he almost kind of used that as a way to encourage some of his hesitant members to vote for the spending bill yesterday, to say, you know, there will be wall money coming from elsewhere, the President will declare a national emergency. I think this is a political calculation from

Mitch McConnell. He knows that this is a very strong campaign promise from the President and in order to kind of keep that core base with them, they need to do more than they were allowed to do under the

normal appropriations process and divided government. So it definitely looks like a kind of a a political move the McConnell might not like, but kind of weighing what's at stake, it felt like he had to so, and what's the sense of where the rank and file Republican Party, particularly in the in the Senate, where are they falling down on this issue? Are they really willing to go uh

and stand behind the president on this. It's pretty divided right now and senators yesterday we're a little wary to kind of get ahead of their skis before the national declaration is the emergency declaration is actually declared, and also to see which pots of money will be tapped for this. But with there was one really interesting response from Mike

Simpson that I wanted to highlight. He said that he does think the president has pretty broad legal authority to do this the way that the National Emergency Statute is written. But he does worry about the precedent, and he said, you know, I do think the president has legal to do this. Maybe it's the best course of action since he couldn't get Wall money any other way. But the next time we have a democratic president, we could have a healthcare national emergency that gets us Medicare for all.

We could have a climate emergency that gets us the Green New Deal. So, you know, kind of opening this up as an acceptable practice really kind of changes the way to two bridges of government interact. We're speaking with Anna Edgerton, uh congressional reporter for Bloomberg News as we await President Trump to make comments after his expected signing of the bill to stave off another government shutdown, as well as a declaration of a national emergency, which he's

also expected to do. And I'd love to get your sense, just going forward, where would the money actually come from. Can you give us a sense of the projects that could get delayed, postponed, not happen as a result of

money diverted to the Wall. Should this happen? Yeah, My colleague Margaret's talent reported yesterday that the president has identified eight billion dollars, almost eight billion dollars that could be directed for this purpose, and the kind of pots of money we're looking at our unobligated funds that could come from military accounts, although speaking with Jerry Nadler, a Democratic chair of the Judiciary Committee yesterday, he said, you can't

use military money for this purpose because military money can only be directed to military uses, and by law, the military can't enforce domestic law, so that could be one snag. We could also see money being moved from UH funds to rebuild an air base in Florida that was damaged by the hurricane, and also in Campbell June in North Carolina that was damaged by the floods. So there are a few different things that the president's looking at, but um, we expect that to be clear pretty much before the

beginning of next week. So Anna, Obviously, this border wall is a arguably the foundational element of the Trump presidency, at least to this point. But is there any sense that you know, fatigue as setting in within the administration that maybe it's just not worth it. Too many roadblocks here and it doesn't seem to be a clear path

to get this funding. I don't know if there's I mean, I think there's a kind of a constant fatigue in the administration just because it's just, you know, kind of happens. It's such a high frequency. But there's certainly as a kind of political concern that the more the president kind of sacrifices or puts himselves out there to pursue this one priority, the more damage she could be doing in

other areas. Like for example, the government shut down, you know, was supported by those who really really want to build a border wall, but it really made the president's approval ratings take a hit, and you kind of see him compensating for that a little bit. There was an really interesting peace in political last week kind of highlighting the overt embrace of pro life priorities and kind of really attacking the state laws that have been in the news

recently about abortion. And that's the president trying to shore up his evangelical basis. So even as he pursues the wall and does everything he can, maybe even you know, using some of his political capital to do that, he's trying to kind of shore up his coalition and other areas as well, and adgertain we will please be speaking with you soon. Well, lots of news coming out of Washington,

d c is. We just listened to President Trump's press conference about the government funding UH for border security, talking about China trade. It's got a sense of how a lot of these geopolitical issues are impacting the US and global credit market. We bring in Michael Temple. Michael's a director of Corporate Credit US and portfolio manager for a Mundy Pioneer. A Mundy Pioneer has approximately eighty billion dollars under management. Michael joins us here in our Bloomberg Interactive

Broker studio. Michael, thanks for being with us. UM A lot of geopolitical noise out there, news out there, whether it is China, whether it is the US government shutdown, whether it's Brexit. How does that factor into your analysis of the credit markets? Well, you know, I think it's a top down factor that we have to think about.

How it might affect um consumer confidence, how it might affect business confidence, and whether or not at the margin it's going to create a slower economic activity, either in the US or overseas. So if you look at the bottom up, you see companies that still have pretty high leverage, even though there's some d leveraging going on. You see YO bond yields that have come down dramatically more than

five percent returns so far this year. Are we out of the woods with respect to another credit crisis or could we see another one? Well? I think a lot of it depends on whether or not the slowdown that we're seeing globally, in particular in Europe and you just heard about China, whether or not that ends up causing a much more rapid deceleration of growth in the US. If it does, then we're going to revisit this problem

sometime in the near future. If it doesn't, if the fedbacking away causes an improvement and confidence and the economy is fine, then uh, I think we've probably seen seen this for the last time for a while. Okay, So, if the economy does slow materially in the US, what will be the epicenter of the next credit crisis? Well,

you know, it's a good question. A lot of people are looking at the US credit markets as the point of a problem, and of course everybody looks back to the last cycle when bank loans are doing really poorly and had enormous defaults in the US I actually don't think it's necessarily going to be the U S as the epicenter. I think it's going to be overseas UM. Clearly, growth is a lot slower in Europe right now, and

you're seeing a number of countries in recession. So could you see defaults and increasing problems in Europe that ultimately cycle back to the US. And what about China? What if China cannot reinvigorate growth with its current stimulus program, um, then we can start to see problems coming out of China. So if if the FED is on the sidelines, which it appears to be, does that imply that we're in a trading range here, if at least for the short term.

I think so. You know, you've seen a tremendous rebound in credit spreads. So the question will be, now that the Feds off the table, what will be the next factor that could potentially either cause credit what credit spreads to tighten or widen? UM. I think now the market is going to be focused on the um earnings growth. So you know, I coined a phrase fed up with the Fed. I think the market's done trying to figure

out what the FED is going to do. The FED is basically said, we're on hold for some period of time, so everyone's going to be focusing on different things. So is the market fed up with the Fed? They are for right now. Next week though, the Federal meet, and I'm sure everybody will be laser focused on them once again, im parsing every word of FED speak. Michael Temple, thank you so much for being with us. Michael Temple, director of Corporate Credit US and portfolio manager for a Moondy

Pioneer which oversees eighty billion dollars. Definitely interesting to think are we out of the woods of the FED is on hold? People still want to know that what they're going to do with their balance sheet, and certainly there is a lot of discussion about whether we have seen the last rate hike of the credit cycle. Amazon dot Com project scuttled in Long Island City raises a lot of questions about the municipal bond market and frankly, infrastructure

to all using those funds. Focus on MUTIS is brought to you by Build American Mutual BAM Green Star Bonds finance projects that were protect and restore the environment with more renewable energy and efficient transportation and buildings visit build America dot com, slash green Star BAM Building America joining us as he does to talk munis every week. Joe Maisak, editor for The bloom Brief, focused on the muni bond market.

So I want to start there with Amazon, the idea that you know, there was all of this activity that was supposed to be coming there a lot of money from tax revenues, albeit not the extra three billion dollars of tax breaks that they did get. Are there any projects that you know of that have actually been scuttled or seriously called into question by Amazon's exit from Long

Island City? Uh, just from the Amazon effect or nationally, I mean, I don't think there's been any you know, New York projects that people have decided, no, forget about it, let's not do it. But I guess that then on a national level, has it been anything, uh, any movement with respect to cities cities uh and sort of inviting businesses in with with the potential for rebates and things like that. No, this is the way it's done, you know, the providing these tax subsidies, and it's not cash, it's

you know, it's kind of a tax cut. If you will over a period of years is an acceptable way and it has been an acceptable way of doing business now for decades. I want to say, and you know, I think it's going to go away because of Fox Con in Wisconsin. We've had some very good coverage to that this week, much bigger disaster than this Amazon business. And of course the Amazon business, Uh, that's not going away.

Every once in a while you'll hear about a city rejecting the idea of subsidies for a sports stadium, but otherwise, now, yeah, that's what I want to go to, Joe. I mean, the subsidies issues. Will was one of the issues that I think some of the folks that came out against the Amazon deal cited, Um, you know, why should New York City provide three billion dollars of subsidies to the you know, the biggest company in the world, the wealthiest person in the world. But that is a key part

of how these deals are done. Do you see any change to that, man? You know, I I have I have two words for municipalities out there who all of a sudden decide that, yeah, they're not going to play the subsidy game anymore, and that is Brooklyn Dodgers Brooklyn. Brooklyn's heart was ripped out for decades when the Dodgers left. In theory, I mean, arguably you could say they never recovered it, never recovered. The Dodgers should still be in Brooklyn. However,

the game wasn't played, and this is what happens. So fine, you know you're happy now? I mean I want to ask some of these politicians, particularly generous, I guess, uh, you're happy now. You're not getting these jobs, You're not getting this revenue. Huh what was the trade? Three billion for billion and probably higher? Yeah. Well, I think this definitely will will cause some soul searching among a variety

of different New Year political figures. I do want to shift gears a little bit from one coast to another. California scaling back its plans for a high speed rail line. What's the deal here? And uh, you know, are there any financing plans or expectations that are going to be

affected by this? Well, the state of voters approved ten billion dollars for high speed rail in California, and that money, those bonds will be sold, some of them already have been sold, and they will use that authorization on a much scaled back, so you're not getting Los Angeles to San Francisco, You're getting more like a central valley. Uh you know, uh link if you will. Um. Yeah, it's very disheartening. I mean, I think the whole, the whole

high speed rail thing. You know, sometimes I almost wonder that this is really more of a federal project than anything else. Yeah. I think in the state of California that loves the automobile, I'm not sure how embrace the train would be, but they could certainly use some help with the congestion there. So Joe in Florida, you have the that's no longer called bright Line. They cancel the cancel the I p O and said, well, we have other sources of money. It's a railroad game is very

difficult to It's a very difficult game costly. So let's go to another area that seems to be doing a little bit better from a municipal bomb perspective. And that's my favorite muni bond topic, which is Puerto Rico. Puerto Rico had a good week last week with the senior secured bonds. What are next steps for Puerto Ricos that tries to dig out from this bankruptcy. Man, they gotta di on the on on whether or not they're going

to go through this repudiation of six billion dollars. I imagine this is something that has to be decided in court over perhaps the rest of this year. But you know, we'll, I mean, we'll certainly see how they move along, because the geos are next. That's the next logical thing, and I think there's seventeen billion in geos. They want to repudiate six billion that were sold because they thought that those bonds ran into the debt limit on the common volt.

Joe Mesac, thank you so much for being with us as always. Joe masak uh He is editor of the Bloomberg Brief, focused onymous of the bond market, checking out all things in the muni world, which has been hot recently, especially as a number of Congress members talk about a possible revival of an infrastructure deal. Thanks for listening to the Bloomberg Penl podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer.

Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Wohits. I'm on Twitter at Lisa Abram woits one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.