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00:00RICHARD: THERE IS NO QUESTION THAT THERE IS SOME EFFECTIVENESS IN THE HIGH-END OF THE CONDO MARKET. PROBABLY FOR DIFFERENT REASONS. I THINK NEW YORK, THE TOP END GOT OVERBUILT AND THAT MAY BE A SYMPTOM OF A BIT OF A BUBBLE. IN MIAMI, THE MARKET IS SOMEWHAT DEPENDENT ON THE DOLLAR EXCHANGE RATES. A LOT OF THE CUSTOMERS COME FROM LATIN AMERICA AND A LOT OF THEM ARE NOW SUFFERING, ESPECIALLY BRAZIL, FROM POOR LOCAL ECONOMY, SO EVERYTHING IS INTERCONNECTED IN THAT SENSE. IF YOU ARE SERVING THAT PEOPLE, THEN YOU WILL FEEL IT. STEPHANIE: HOW DOES IT CORRECT ITSELF? LAND PRICES ARE SO HIGH THAT YOU HAVE TO BUILD LUXURY, HOW DOES THAT CHANGE? RICHARD: WHEN THE ABSORPTION DISAPPEARS, PEOPLE WILL RETHINK IT AND THE LAND VALUES ARE RESIDUAL, DONE THROUGH RESIDUAL ANALYSIS, SO PRICES WILL COME DOWN. THE INTERESTING PHENOMENON IS AN EPIC THINK PART OF THIS IS THE MILLENNIALS, THEY GO EVERYWHERE, THEY DON'T CONFINE THEMSELVES TO ONE LOCAL COMMUNITY, SO THEY ARE MORE OPEN-MINDED ABOUT WHERE THEY LIVE AS LONG AS THEY CAN BE TOGETHER. YOU'VE SEEN THIS KIND OF EMERGENCE OF THE WATERFRONT IN JERSEY CITY, ADJACENT TO NEW YORK, QUEENS NOW IS GETTING A LOT OF ATTENTION. THE MARKETS CORRECT THEMSELVES, THAT IS WHAT THEY DO. THERE IS POPULATION GROWTH IN NEW YORK. THERE IS JOB GROWTH IN NEW YORK AND SO, THERE WILL BE DEMAND FOR HOUSING. WELL THAT DEMAND BE FOR $10,000 -- CONDOMINIUM ON THE 100TH FLOOR? THAT IS A PARTICULAR THING. YOUR COLLEAGUES SEEM TO FOCUS ON WHAT I CALL REAL ESTATE PORN, BECAUSE THAT IS WHAT THEY WANT TO READ ABOUT, BUT IT'S NOT REALLY THE MASS-MARKET THAT MOST OF US WORK. DAVID: EXPAND IT OUT ACROSS THE COUNTRY. YOU ARE OBVIOUSLY BIG IN NEW YORK AND SOUTHERN FLORIDA. YOU ALSO HAVE SOME ON THE WEST COAST. RICHARD: I OWN 4000 APARTMENTS ON THE WEST COAST. SEATTLE, LOS ANGELES, THEY ARE THE CITIES WE CONCENTRATE IN, AND ALSO HAVE SOME IN SAN JOSE. DAVID: WHAT DO YOU SEE AS THE BIG GROWTH AREA IN REAL ESTATE? RICHARD: THE RENTAL APARTMENT BUSINESS HAS BEEN UNBELIEVABLY GOOD AND WILL CONTINUE TO BE GOOD. PART OF THAT IS BECAUSE WE ARE BENEFITING FROM THE TWIN DEMOGRAPHIC BUBBLE OF THE BABY BOOMERS AND THE MILLENNIALS, ALL OF WHOM SEEM TO BE INTERESTED IN ORGANIZING, INTERESTED IN LIVING IN CITIES, LEAVING THE SUBURBS, LEAVING THE HOUSE. YOU'VE SEEN THAT HOMEOWNERSHIP HAS GONE FROM 70% TO ABOUT 64%. CITIES HAVE BENEFITED FROM THAT. RENTAL MARKETS ARE VERY GOOD IN THOSE CITIES. THERE IS NOT BEEN A LOT OF OVERSUPPLY IN TERMS OF HOUSING. THE UPPER ENDERS ARE NOW GETTING ADEQUATE SERVICE IN THAT AREA, BUT THE MIDDLE AND AFFORDABLE COULD CERTAINLY USE A LITTLE HELP. STEPHANIE: ARE PEOPLE MORE KEYED TO RENT BECAUSE WE ARE NOT SEEING GROWTH? RICHARD: A BIG PART OF IT IS AFFORDABILITY AND THE LABOR MARKET. THIS WHOLE NOTION OF LIVING IN THE SUBURBS MAY NOT BE THAT APPEALING TO SOME PEOPLE. THEY LIKE THE URBAN LIFE. >> THOSE HAVE BEEN THE FACTORS THAT HAVE CONTRIBUTED TO THIS GOLDEN AGE OF RENTAL. WE'VE HAD ABOUT FOUR YEARS OF THAT SO WE ARE SEEING SOME INDICATORS THAT RENT HAS GROWN FAR FASTER THAN WAGE GROWTH AND INCOME AND PEOPLE CAN'T AFFORD THE HIGH RENTS ANYMORE. HOW MUCH LONGER CAN RENT CONTINUE TO CLIMB? RICHARD: I THINK NEW YORK RENT IS GOING TO FLATTEN AND YOU WILL SEE SOME OF THE CONDOMINIUM INVENTORY TURN INTO RENTAL INVENTORY. YOU WILL SEE SOME FLATTENING OUT OF THAT TRAJECTORY, AND THERE HAS BEEN SOME PRODUCTION. YOU ARE IN THE MARKET OF OVER ONE MILLION RENTAL UNITS SO 20,000 IS NOT THAT DRAMATIC. THERE IS SOME OBSOLETE SINCE -- OBSOLESCENCE THAT TAKES PLACE. HERE, THE ISSUES RELATE TO THE FACT THAT SOME OF THE PAYING JOBS ARE BEING REPLACED WITH LESS HIGH-PAYING JOBS WHETHER IT IS HOSPITALITY, THE TECH SECTOR, WHERE PEOPLE DON'T QUITE MAKE THE SAME MONEY, OR THE MEDIA BUSINESS, SO WE WILL SEE IF WE CAN AFFORD THE DOUBLE-DIGIT OR LARGER RENT INCREASES. DAVID: WE ALSO WANT TO TALK ABOUT ENERGY BECAUSE YOU ARE HEAVILY INVESTED. LET'S TALK ABOUT -- YOU ARE RESPONSIBLE FOR PRODUCTION. ARE YOU SEEING YOUR INVESTORS CURTAILING PRODUCTION? RICHARD: WE CUT OUR CAP EX

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