♪ sonali: welcome to "bloomberg markets." we are looking at markets in a bit of a holding pattern. we are waiting for more economic data this week in an upcoming $42 billion of seven-year options for those notes. we are talking about the stalling pattern we are looking at, and the s&p 500 trying to break back into the green and the nasdaq 100 also in the same place, essentially flat on the day, but again, they are i can day of losses for both indexes. you can see it is flipping back

and forth between the gains and losses, particularly in the nasdaq 100 the two basis point you are seeing lower, a bit of a dip in the bond market today erases the move higher in yields just yesterday so we are also in a holding pattern there. seven-year yield definitely in a holding pattern. talk about the auction up ahead and not a lot of movement. let's see where we go after the auction hits the table. some midday movers on the equity side. we will talk about the consumer because first norwegian cruise line's, chattering estimates. they are signaling strong demand despite chaos in the red sea. macy's closing a third of its u.s. locations, fighting off a pair of archivist firms looking to buy the company. finally, autozone hitting record highs today. earnings this morning better than a lot analysts data in the consumer world, but a lot of green on the screen looking at them starts. we have consumer confidence

numbers from the conference board and it for. falling for the first time in four months, american and more pessimistic view about the economy and the job market so let's see if the consumer numbers hold up. there is another ceo who the consumer is running hot and could keep the economy running hot just as well. that is alan waxman who things higher for longer interest rates is on the back of that and can have ripple effects across the economy, particularly when it comes to the property market. >> the last few years, we have not really done that much because without valuations. way too speculative -- valuations got way too speculative and we are sitting with a pretty clean portfolio and there are opportunities across the whole commercial real estate spectrum not only in the u.s. but in europe. sonali: are there ports you that's points you avoid with worries about the work from home and the impact it may have on

big cities? are there parts of the area you avoid? alan: in general, there are a measly different risks as long as something is not binary risk, we can generally present, whether it is real estate, corporate, it culture, that is our job, so as long as it is not a stroke of the pins, we are looking across a whole swath of commercial real estate. sonali: is there an easy way you can say you can get into the office but for the borrower and can be expensive? alan: in a new money situation, if you look at the cost of capital today versus what was pre-coated -- precovid or in most parts of cobit but in time that will start to work itself out and things will normalize once the economy gets to a steady-state. sonali: let's take a massive step back because you think about 2008 and how much the

large banks have retrenched from original banks started to feel the pain of what happened at that time, and the boom you saw in private investment giants, and then you look at the second phase here where there is a chance once again for you and your rivals to get much bigger. there are a lot questions about the loans extended for regional banks and the place that private credit can play in that space. do you see this as a second coming? the ability for you guys to get much bigger in the wake of so many friends contracting on their lending practices. alan: there are a couple of things happening. the stress contracts lending, and a big part of that you are seeing in small and regional sized banks as a result of the commercial real estate exposure. that creates an opportunity for capital players like us to come in but the big thing is really if you go back to what happened in 2008 and obviously you start thinking about dodd frank. when you go back through

history, it is always the quiddity issue that creates -- it is always in the credit issue that creates crisis -- it is always a liquidity issue that creates crisis. sonali: that we bring in our guest -- now in our guest -- now we bring in our guest. the one question he would not answer which i am hoping you would do for me is the cost of capital rising. what does the math look like? >> first of all, thanks for having me. this is the biggest topic around right now. there was almost a trifecta of things that happened, all bad, to commercial real estate and commercial real estate lending. rates went up so quickly and dramatically. that put more pressure on the borrowers and also made properties worth less.

cap rates go up, they are directly tied to interest rates commercial property values are lower. there is office. we will talk about it some more. i think the office story gets worse. that story is not over yet. it is still sort of played out the next several quarters. what that has led to is i will quote steve roth on their earnings call i think last week, call it a lenders embargo. the banks are not lending. a lot of the alternative capital providers, mortgage rates, private lenders are not lending because a third of their portfolios are stuck in stuff that is worth less, specifically office, which is like 30% of their books. sonali: one element that seems more concerning is the broadening of the risk, the broadening of the pain come and use told investors that maybe you guys would screwed a lot of the pain and multi family, but i am wondering if you will speak to some of the pain you are starting to see there. rich: that -- let's talk about

the first risk in addressing that. with a dramatic rise in interest rates, real estate values were worth less. for a multifamily property, well located, it is not a property specific problem but sort of like good companies come about balance sheet. the properties were worth 20% left posterior interest rate rise. maybe for a better property, 50% for a week and one a little -- 15%. for a weaker one, and little more -- a little more. the loan today market to market is probably in the 80's, maybe 90, 95%. the margin for error on that loan is very low. when you talk about what is the distress is most of these borrowers have hedges in place, rate caps. they are not struggling from

higher rates but the rate caps go away at maturity. so when the maturity comes, something has to give. sonali: you wonder how much the fed is worried about this problem because it is such a strong economy and the labor market has not cracked meaningfully at so if you look at the stresses in the regional banking system and the banking system in the real estate market, how much of a broader problem could that create for the economy? rich: i think it will but i do nothing the problem is and multi family. sure, there is always better properties and weaker properties. sunbelt construction is always going to do well. most of those properties are in the money. you know, rates come down, the equity holder is making a bet, the lenders will not lose money if any. office is the problem. we still have not seen that story play out. you will have to read tenant holdings. that is very expensive. the lender embargo, where is the money going to come from to

finance the movement of a property from one owner to another? that stuff will take time. we need rates to come down, and ultimately we need to see the benefits of the lack of construction shrinks applied come about properties coming off the market, and then ultimately that is where the recovery will come from, but in the near term with all the maturities coming up, that is where taken -- that is where the pain will be taken. sonali: you look at the expectations for a rate cut in june or july and it is still kind of a flip of the coin. when you are sitting where you are sitting, how does that equation play out? do you think we will see the cut materialize or will rates stay higher for longer? rich: we are not macroeconomists. our thesis, and i will tell you why, i know it has been said many times, hire for longer. we are assuming that inflation is still going to be sticky about the 2% target. the economy is great.

it is surprisingly resilient. the fed has all but flat out told us by the way they foreshadow that they expect perhaps rate cuts but not right away. and i think anybody that is betting has bet on later rather than sooner has generally been a winning bet. from our perspective, rates will come down but don't expect the relief valve to occur in the next quarter or two. it might take longer. sonali: we will have to have you back because this will take a wild to play out. bring up, we will talk about more real estate and more consumer. mace leading a nationwide restructuring, closing dozens of store but boasting luxury offerings. the move comes after response to a pair of activists. this is bloomberg. ♪

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sonali: this is "bloomberg markets." it is time now for the start of the hour. macy's plans to close almost a third of its u.s. locations. it is finding a pair of activist firms trying to buy the department store chain, and they rejected a buyout offer. now it is working to streamline operations and expand bloom you creek and bloomingdale's offerings. we will discuss this with romain bostic, who spoke with the ceo earlier today. he spoke specifically to romaine about the quality of stores he is looking to close. romaine: this was a big thing. he talked about the idea that 25% of the footprint of all of macy's stores combined accounts

for 10% of sales, and they are clearly going to target some of those locations. it is interesting. you mentioned our cows, brigade, and there were a lot of rumors about other activists and investors kicking the tires on this. a new ceo just took over and he declined to even talk about that, basically said it is not on his preview right now, but he made clear some of these changes they are making, reducing the number of stores, refocusing on the luxury brands, that was going to be a big key to unlocking value for this company. sonali: it is interesting to see how the fight plays out at the end. it is not like the activists don't like him, but these are early days. what did he say about the consumer? you and i talked about how in one of the consumer data we are getting, the economic weaker data came after the earnings report. romaine: it was an interesting, because he spent time talking about how they wanted to lean

more into luxury. i asked him, are you doing it at a time when the economy is weakening and that consumer may not be the ballast happened in the past? he acknowledged a lot of shoppers are feeling the pain right now, and spending less, but he thinks they can find a decent mix between the high-end consumer that bloomingdale's would attract, the middle market consumer a macy's would attract, and they can exploit that. sonali: when you think another challenge he has in front of him, is there a whole revamp of the business is its weeks at the edges? romaine: it is hard to know. i reached out to our cows and they said they are still trying to digest the earnings report and the new plan before they comment but when you consider what they were rumored to have been considering in terms of asset sales, some of the rumors around sycamore partners and what they were looking to, i think 150 stores gets you there. they reduced the number of store accounts. they had 700 stores prior to the pandemic. down to 500 now. with this three-year plan, that

would take them down to 350 two is definitely a much leaner operation but will throw off the cash investors want to see? this is still a company in a sales decline. sonali: and we will see if activists have anything left to do. thank you for the interview. arc is selling stock at apollo for the first time. more details on that up next. stick with us. this is bloomberg. ♪

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sonali: this is "bloomberg markets." alan marksman, the chief executive officer of 75 billion dollar investment firm six street partners, said there was a meaningful amount of stress brewing in the property holdings in the banking system. i spoke with him to kick off bloomberg invest series. alan: when we do something in that type of structure, i would not rule it off the table.

is not one of our top 10 priorities but if it is a win-win between one of our banking partners, we will always be open-minded of that. our firm was built on win-win partnerships, so we will always be open to it and happy to discuss it if they have a good idea. sonali: bring us inside the thinking. what are the reasons for and against it? should you make some of the more formal partnerships work out, why would you do it? alan: it is really hard to think about because we have a lot going on. we are as busy literally as we have ever been in our history. every one of our businesses is busy. it is not something we are spending a lot of time thinking about. sonali: what is interesting is not just partnerships but your ability to buy assets from other banks. in october, you led a consortium to buy green sky, a consumer lending business that goldman had bought and then exited. why? why did you agree to do that?

alan: again, it goes back to sort of what we talked about earlier, which is when you look at the components of the consumer, their biggest liability is the fixed rate mortgage. age growth has been pretty constant. everyone has a job. it created pretty good conditions, so that is number one. the second thing is it is an franchise, one of the best franchises out there. we followed the longtime marrying -- we followed the company for a long time. sonali: so this is a big bet on the consumer. alan: i would not say it is a big bet on the consumer. i would say it is absolutely a component of the bet but also just a really good franchise with a really good management team and those three things together made it really interesting for us. sonali: as you navigate the area of the consumer that you said a few times there has been so strong, what worries you about the u.s. consumer? you think about the leverage

they hold today in credit card debt alone, any worries about his softening job market. are there concerns you have? alan: the biggest concern is if you start to see big layoffs. what could create big layoffs is people start feeling less good about the economy. sonali: a reminder, you can catch our big version best conference in june in new york it will offer the top strategies for navigating current market risks and seizing future opportunities. check out the qr code on the screen to get access to the details. i want to bring you some breaking news here. a big awaited ipo, another one. it is set for a u.s. ipo and a $20 million valuation. it has been known for being one of the early members, the pioneers of the buy now and pay later model, and this has been a long awaited fin tech waiting to go public. at this market is just opening

up just enough to be sounding out banks for this assets. can't wait to see who gets the lead on that deal. now to switch gears, it is time for the wall street beat. we will go from ipos to private equity because we are black to selling stock in apollo for the first time in three years since he's -- he stepped down as ceo. joining us now from london is ben, who reported on the story. when we look at the sale from leon black, it is surprising. he has been gone for a while and has been the largest shareholder. why now? >> like you said, he has left the business, no longer involved with apollo. i think he is 72 now, starting to do other things. he spent most of his career on wall street. but as he told us through a spokesman for the story, it will go to tax and estate planning. but what is interesting france family office, i think we might

see we are black making some interesting small investments outside of apollo, the company that made his fortune. we are black in other words starting tentatively his next act. sonali: let's talk about the next act. he has been a major investor in other asset classes like art like art -- classes like art. ben: apollo is the biggest asset in his fortune by far. i think we can expect probably some further share sales at some stage of the future from him. it is a problem most of us would like to have. what do we do with the major asset we have? he has some significant real estate holdings in new york and london. what i have been noticing more recently is he has been gifting some apollo stock already. we know that in the story so part of his next act is definitely going to be possibly

a significant philanthropist. where we do not know just yet but we should stay tuned. sonali: it should be mentioned the circumstances with which he left apollo and what his relationship is like now with apollo. a spokesperson for him told you he is confident in apollo's management team, trying to tell you his sale has nothing to do with the direction of apollo moving forward. ben: 100%. have to remember leon is still a major investor. in some way, this is his baby. apollo is something he created from the ground up. that's also member the current ceo is the cofounder with him, so if we are black ones to be a significant investor going forward and they philanthropist at sign apollo, apollo start needs to at least remain stable. sonali: what do we know about not just black moving forward, but he is one of many private equity titans that have moved on from the firms they founded? ben: that is a good question.

post the baby boom generation of u.s. wall street billionaires, is set to reshape any significant way. they have done it for the business sector the last three or four decades. now they are moving into other areas so that is become a culture, art, and us remember in 2024 there is politics so the billions might end up trickling into the political entities. it is an interesting space for sure. sonali: we thank you for covering this story so closely. i want to bring you some news down in dc. chuck schumer and hakeem jeffries are speaking outside the white house after meeting with congressional goods. remember, president biden earlier had worn congressional leaders they should be avoiding this partial shutdown and that it would be damaging for the u.s. economy. we will keep an eye on that.

the first deadline is this week, march 1. i am sonali and that does it for "bloomberg markets" but more coming up through the close. ♪ go deeper with thinkorswim: our award-wining trading platforms. unlock support from the schwab trade desk, our team of passionate traders who live and breathe trading. and sharpen your skills with an immersive online education crafted just for traders. all so you can trade brilliantly.

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>> from the world of politics to the world of business, this is "balance of power." ♪ live from washington, d.c.