The CEO of a real estate corporation worth more than $3 billion known as
Douglas Emmett Inc, is actually rooting for a recession,
because a recession might actually lead to desperate workers, and
desperate workers will comply with what their bosses want them to do.
Now keep in mind that this real estate corporation has a portfolio of commercial
real estate, and they want their tenants back,
they want the workers back in the office, because there profits
have been suffering from the fact that people have been working from home.
Now, during an August 2nd earnings call Jordan Kaplan, the CEO of
Douglas Emmett Inc stated that recession could be good for commercial real estate.
The executive, Kaplan,
then repeated that the thought would be that unemployment would be up.
And therefor, employers would be in the driver's seat to bring
people back in the office, which is where they want them,
meaning that's where the real estate company wants them.
Now Kaplan made the remarks in response to a question from Citigroup analyst
Michael Griffin, who said that quote, we've seen some of your office peers come
out and say potentially that a recession could be good for the office space.
Curious kind of to get your thoughts of what we could expect from an impact on
the portfolio, just given the central recessionary environment on the horizon.
And real quick this is during an earnings call,
which by law they have to be as honest as possible.
Because if it's an earnings call, it's with investors, and
if the company is found to lie to the investors,
they're defrauding the investors and that's a big no, no, in America, right?
That's where you'll actually suffer some real consequences.
So the one area where there are robust regulations, it's this area.
During these earnings calls, they have to be honest about what's going on, or
what kind of outlook they have when it comes to things like recessions.
By the way earlier in the call, Kaplan stated that our number
one goal is to get our least rate back up over 90%.
Remember we went into this around 93%, currently, he said,
the company was soundly up over 80% utilization,
meaning utilization of their commercial real estate.
Jake.
>> Yeah, so first fun inside baseball side note here,
Kenny clips wrote this article for the intercept, and he used to work at TYT.
And our managing editor, Jonathan Larson's specialty is go on investor calls, because
not only do they tell you, are they forced to tell you the truth on investor calls?
They also brag about their profits and the revenue, and all these things.
And then later they go on cable news and go, we had to cut wages, our profits.
No, no, wait, wait, wait, I was on the investor call.
You were bragging about your profits.
So anyways, great job for ken Klopfenstein breaking this story.
Now, to the important part of it.
Okay, so look, I think Kaplan is not the most guilty party here.
Okay, so they asked me a question about what other CEOs are roundly saying in
commercial real estate, and he says in the full context, look,
I don't really agree with them, I think recession is bad for us.
I think that less people will rent office space.
But yes, the silver lining is, workers will have less leverage, and
then their boss will have to force them to go back to work, and
in commercial real estate back into the offices,
helps commercial real estate because we're the offices, right?
So I'm giving you the full context of it.
But the most important part of this is not necessarily is capital,
a good guy or a bad guy,
but what does the industry think and what do ceos in general think now?
So, he's like the least guilty potentially, right?
[LAUGH] The other guys are way worse.
But on top of that you have all these other industries that can also
wrote about.
So for example, anonymous Texas business executive told the Dallas
branch of the Federal Reserve this quote.
I suspect the work force pulls his head out of its rear when a correction or
recession, makes jobs scarce and people start to feel a pain or
fear of not providing for their family and loved ones.
To them, that's a good thing, when their workers are in fear that they won't
be able to provide for their loved ones, then they got them, and then they can
pay them as low as they want, and have them work under any conditions they want.
And they're pretty brazen in admitting this left and right.
>> Yeah, I mean, but Jake, that's not the bug, it's the feature, right?
There's a reason why there was so much pressure on lawmakers to
end unemployment benefits early during the pandemic.
They wanted to make workers desperate, desperation for
the employers is perfect, because they have all the leverage.
And that's essentially what's being communicated over and
over again during these earnings calls, and it's absolutely disgusting.
And so, look, at the end of the day profits over people,
like that's how this system works.
They have the fiduciary responsibility to return on investment for
their shareholders.
And they see labor as the top cost.
It is the top cost, cuz you got to pay wages, in some cases you got to pay for
benefits.
And in this very specific case,
if you've got commercial real estate in your portfolio, well,
the health of that portfolio relies on people showing up to the office.
And workers don't want to show up to the office,
because to make it very obvious if it isn't for
some of these deregulation lovers and pro-corporate people.
If you don't make it easy for people to find child care that they can afford,
then they're not gonna want to go back to the office,
because they don't know what to do with their kids.
That's number one.
Number two,
gas is really expensive even now with the prices going down a little bit, right?
So how about incentives to convince your workers to go back into the office?
But those incentives will also cut into their profit margins,
they don't wanna do it.
So that's the issue here, that's the underlying issue.
>> Yeah, and Ken did a great job of also going back to an essay written in 1943 by
Michael Kolacky, where he explained this entire phenomenon.
So it's been around forever and it's not just profits,
it's that they want to have leverage over their workers and
they're worried that if the workers have a little bit of comfort, they will develop
class consciousness and they will have the luxury of being able to do strikes and
make more demands and they don't want the workers to feel comfortable.
So they are happy in situations including recessions which maybe even cut
into their profits as long as it keeps the workers basically in their place.
And that is a really sorry indictment of capitalist