Warner Bros Reopens Talks as Paramount Signals Higher Bid

Summary

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Bloomberg Intelligence Podcast

Episode: Warner Bros Reopens Talks as Paramount Signals Higher Bid
Date: February 17, 2026
Hosts: Paul Sweeney & Scarlet Fu

Episode Overview

This episode dives into several timely and complex investment themes, headlined by the evolving merger talks between Warner Bros. Discovery and Paramount, with Netflix in the background. The hosts enlist Bloomberg Intelligence analysts to break down the financial, strategic, and industry implications. Additional segments provide analysis on AI’s growing role in defense tech (Anthropic), healthcare innovation and regulatory risk (Moderna/Merck), and trends within U.S. REITs, focusing on the impact of AI and the outlook for office and senior housing sectors.

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Key Discussion Points & Insights

1. Warner Bros & Paramount Reopen Merger Talks (02:40–07:06)

• Developing Story: Warner Bros. Discovery is now more receptive to acquisition talks with Paramount after Paramount signaled willingness for a higher bid (but hasn’t formally increased its offer yet). Netflix remains entangled with a prior deal, adding complexity.
• Paramount’s Current Offer (as of Feb. 10):
  • $30/share all-cash offer for Warner Bros. Discovery.
  • Paramount agreed to pay Warner Bros’ $2.8B termination fee owed to Netflix if that deal is broken.
  • Promise to assist with Warner Bros's $15B bridge loan.
  • Reimbursement for up to $1.5B in possible fees to Warner Bros bondholders (if a needed debt exchange fails).
• Leverage Concerns: The combined company would carry about $85B of total debt, with a pro forma EBITDA of ~$12B, translating to roughly 7x leverage—a notably high figure.
  • Analyst Stephen Flynn: “If you give [the companies] credit for the ~$6B in cost synergies they expect, you get to $18B EBITDA, but even then, you’re well over four times leverage” (04:33).
  • Critical question: What will the credit rating agencies do? $54B in new financing could be more senior than legacy debt if structured correctly, possibly qualifying for investment-grade ratings.
• Historical Context: Warner Bros. had high leverage post-merger with Discovery and struggled to deleverage. The risk remains that this combined company could face similar, protracted debt reduction challenges.
• Analogy: Comparison to Charter Communications’ split capital structure—secured debt at IG ratings, unsecured at high yield. Even with optimistic synergy estimates, execution risk is significant.
  • Host: “Well, there's a lot of ifs there.” (05:51)
  • Flynn: “Yes, there is. There's a lot of ifs there.” (05:53)

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2. AI & Defense: Anthropic’s Contract Negotiations with the Pentagon (10:21–14:06)

• Context: Anthropic, renowned for its Claude LLM, is renegotiating a Pentagon contract to include “AI constitution” guardrails, designed to constrain certain surveillance and operational uses.
• Insight:
  • Mandeep Singh: “[Palantir] made a name for themselves in…the kind of work these LLM companies…are being tasked to do for the Department of War. Now…these LLMs…can ingest large amounts of data and do analytics at a level we have not seen” (10:43).
  • Government wants maximal capabilities for national security, while Anthropic emphasizes ethical guardrails, creating friction.
• Competitive Landscape: The Department of War is engaging with multiple LLM providers—Anthropic, Google Gemini, xAI’s Grok (which holds a $200M contract)—for redundancy and breadth.
  • Singh: “No one else like ChatGPT has talked about guardrails in such a big way as Anthropic has. That’s the big distinction.” (12:22)
• Market Implications:
  • Anthropic just raised $30B and is likely to go public in 2026, as is OpenAI, reflecting investor optimism in dual defense and commercial applications.
  • “They’re good fundraisers and will most likely go public this year…they want to show they are addressing a lot more areas…high chance we’ll see IPOs.” (13:30)

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3. Healthcare: Moderna & Merck’s Melanoma Drug + FDA Risks (17:20–21:58)

• Innovative Cancer Therapy: Moderna and Merck are testing a therapy that combines a personalized vaccine (using tumor material) with immune system activation—a high-impact 2026 catalyst.
  • Concerns: Phase 2 data was hard to interpret due to unusual control group results. The phase 3 trial enrolls healthier patients, making comparison tricky. There’s also a possible confounding effect from Covid vaccines in the control arm.
    • Sam Fazelli: “That initial data that looked great didn’t behave as we thought it should have…” (17:43)
• Vaccine Approval Challenges:
  • Moderna’s mRNA flu vaccine faced a surprise filing rejection by the FDA despite prior guidance.
    • Fazelli: “It blew my mind, I have to say.” (19:24)
    • Complaints about outdated flu shot selection/approval timelines and potential for mRNA tech to close that gap.
    • “This could have been the approval that the world needs. …Unfortunately, the person at the head of the division of the FDA … made a decision, unilaterally by the look of it, that he doesn’t want to review this file. …It just doesn’t make any sense.” (20:00)
• Industry Impact: Regulatory unpredictability is harder for biotech than pharma giants, given startups' cash constraints.
  • “It is a problem for the biotech sector more than the pharmacy.” (21:57)

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4. Real Estate Investment Trusts (REITs): AI, Office, and Senior Housing (25:13–29:46)

• AI Fear in REITs: Concern that AI will dramatically reduce office space demand, compounded by last week’s broad selloff in real estate and adjacent sectors.
• Current Data:
  • Jeff Langbaum: “We’ve seen some of the opposite. Leasing velocity has been at the highest level since before the pandemic in…New York and San Francisco.” (26:05)
  • AI firms are active lessees, offsetting downsizing by other tenants.
  • Real-time surveys indicate firms are expanding to leverage AI, suggesting continued (or protracted) leasing strength.
    • “Firms are actually leasing more space. …That could actually … prolong the positive vibes for some time.” (27:30)
• Favorite REIT Sector: Senior housing cited as having an unassailable demand story due to demographics—aging U.S. population and very limited new supply, constrained by high capital costs.
  • “You cannot refute the demand story at all…there’s not much senior housing coming out of the ground. So, there’s a huge supply-demand imbalance.” (28:22)
• Investment Nuance: Local operator quality is key to success in senior housing, but overall it's a robust, nationwide demand story.

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Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote/Insight | |-----------|---------|---------------| | 04:33 | Stephen Flynn | "Warner Brothers Discovery would have about $85 billion of total debt pro forma for this deal…Just basic math. You're talking seven times leverage. That's obviously huge." | | 05:51 | Host | "Well, there's a lot of ifs there." | | 05:53 | Stephen Flynn | "Yes, there is. There's a lot of ifs there." | | 10:43 | Mandeep Singh | "These LLMs...can ingest large amounts of data and do analytics at a level we have not seen." | | 12:22 | Mandeep Singh | "No one else like ChatGPT has talked about guardrails in such a big way as Anthropic has. That's the big distinction." | | 17:43 | Sam Fazelli | "[W]e look for problems...the phase two data wasn't as easy to interpret because...the initial data that looked great didn't behave as we thought it should have done." | | 19:24 | Sam Fazelli | "It blew my mind, I have to say." (On FDA flu vaccine filing rejection) | | 20:00 | Sam Fazelli | "[The FDA head] made a decision, unilaterally by the look of it, based on...he doesn’t want to review this file. ...It just doesn’t make any sense." |
| 26:05 | Jeff Langbaum | "Leasing velocity has been at the highest level since before the pandemic in markets like New York and San Francisco." | | 28:22 | Jeff Langbaum | "You cannot refute the demand story at all…there’s not much senior housing coming out of the ground. So, there’s a huge supply-demand imbalance." |

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Timestamps for Major Segments

• Warner Bros/Paramount Deal Analysis: 02:40–07:06
• AI, Anthropic & Defense: 10:21–14:06
• Healthcare: Moderna/Merck Drug & FDA Risk: 17:20–21:58
• REITs: AI, Office Demand & Senior Housing: 25:13–29:46

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Tone & Style

The episode maintains a thoughtful, analytical, and occasionally skeptical tone, especially around deal complexities and regulatory unpredictability. Analyst guests speak directly with technical and financial precision, while hosts interject to surface real-world parallels and investor concerns.

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Summary Takeaways

• The Warner Bros/Paramount mega-deal reflects both high strategic ambition and big financial risk, especially around leveraging, debt structure, and execution.
• AI’s defense applications are quickly broadening through LLM contracts, raising both ethical issues (Anthropic’s guardrails) and investment opportunity (imminent IPO activity).
• Healthcare innovation faces regulatory headwinds; Moderna’s case spotlights how sudden changes at the FDA can disrupt even well-prepped biotech strategies.
• Office REITs are managing through AI-fueled fears with strong current leasing data, while senior housing emerges as a demographic-driven winner constrained only by capital access.

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This summary captures the episode’s main currents and delivers actionable insights for investors, industry professionals, and any listener tracking the intersection of M&A, AI development, healthcare innovation, and real estate investment.

Transcript

[A]

Support for the show comes from Public Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts? Yep. High yield cash? Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor crypto services by ZeroHash all investing involves risk of loss. See complete [e-mail] disclosures small businesses are.

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Bloomberg Audio Studios Podcasts Radio News you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. It is Tuesday, but there's still a lot of merger.

[A]

Merger Tuesday.

[B]

Yeah, Merger Tuesday. Although this one's been like in the works for so long now. Warner Brothers, Paramount, Netflix. Looks like Warner Brothers is now open to a Paramount bid. A little bit more open than it was before. It is reopening talks with Paramount as Paramount signals a higher bid, but has not actually raised.

[A]

I'm glad you reported correctly because they haven't raised their.

[B]

But they're saying, yeah, they said, you know, we could. So I guess that's good enough for them to reopen discussion. Stephen Flynn is our senior credit analyst on this developing story. So, Stephen, how are you looking at this development?

[C]

Yeah, so you think back a couple of weeks ago, on February 10th, Paramount actually came out. They reiterated a $30 per share cash offer for the entire Warner Brothers discovery. But they did add in a few other things. Number one, they said that they would pay the $2.8 billion termination fee that Warner Brothers would owe Netflix for breaking that deal. They said that they'd help with the $15 billion of bridge loan that Warner Brothers has outstanding from a bond tender deal that they did mid last year. They'd also fully reimburse Warner Brothers Discovery for a potential $1.5 billion fee that Warner Brothers could owe certain bondholders if they do not do a debt exchange by the end of this year. So this is a complicated story that keeps getting more and more layers of complexity on top of it.

[A]

Remind us, Steve, if Paramount were to win this deal for Warner Brothers, this would be a very highly indebted company. You guys don't like that, do you?

[C]

Correct.

[D]

Yes.

[C]

So Warner Brothers Discovery would have about $85 billion of total debt pro forma for this deal. A combination of Paramount and Warner Brothers. Right. So Warner Brothers has about $31 billion of debt. Paramount has about 15. This deal would add about 39. So you're talking about 85 billion. If you just look at the combined EBITDA for both Warner Brothers and Paramount for 2026 combined, they're about $12 billion. Just basic math. You're talking seven times leverage. That's obviously huge. But Warner Brothers, paramount expect about $6 billion of cost synergies. If you give them credit for that, that gives you about $18 billion of EBITDA. It still gets you credit, guys well over four times synergy credit.

[A]

You guys are pretty stingy.

[C]

We could give it, but we give you a certain amount of time to actually show it. Right? This is really important because what will the rating agencies do? And for the $54 billion of debt financing that they have in place to support this deal, to what extent will it be ahead of the other debt through either guarantees and or security. If you could argue that it is ahead of all the other debt and you give them pro forma credit for the synergies, you're talking about three times leverage through that $54 billion, which could potentially get you IG credit ratings. Right. So if we look at Charter as a comparable. So Charter for many years had a total net leverage target of four to four and a half times, but they had a split capital structure. The secured bond debt was ig, the unsecured debt was high yield. And the secured debt, they kept that a little bit over three times. And so if you use that as a comp and give them credit for the synergies, you know, you could say that.

[A]

Well, there's a lot of ifs there.

[C]

Yes, there is. There's a lot of ifs there.

[A]

I like Charter's cash flow better than I like.

[C]

Yeah, but you know, pro forma, Paramount, Warner Brothers should generate a lot of free cash flow. And they, you know, they should. I assume they will commit to use all that to reduce the debt. And typically creating agencies will give the company a few years to kind of hit their targets and show the deleveraging.

[B]

So Warner Brothers, when it merged with Discovery, also took on a lot of debt. How does this potential Warner Brothers and Paramount debt profile look compared to what Warner Brothers look like after it merged.

[C]

You know, in total and thinking about the leverage, it's not too different, but let's hope that this works better. Right. So.

[B]

Because last time it didn't work so well and Zaslav was kind of just preoccupied with bringing down the debt for years.

[C]

Correct? Correct. So when they merged Discovery with Warner Brothers, they purchased it from AT&T effectively and it had a high leverage and they promised to delever and it did not delever as quickly as anticipated. So then that's when last summer you had the whole announcement of the split and they decided to launch a tender offer where they got some new financing in place and told the existing bondholders will buy the bonds back from you, but you're taking some pretty big haircuts to the amount that you're owed. And they still had very good participation.

[A]

Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on Public you can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts? Yep. High yield cash? Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing Member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor crypto services by ZeroHash all investing involves risk of loss. See complete [e-mail] disclosures being a small.

[B]

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[B]

You're listening to the Bloomberg Intelligence Podcast catch us live weekdays at 10am Eastern on Apple CarPlay and Andro Android Auto with the Bloomberg business app Listen on demand wherever you get your podcasts or watch us live on YouTube.

[A]

Anthropics PBC talks about extending a contract with the Pentagon are being held up over additional protections the artificial intelligence company wants to put on its Claude Tool. Absolutely no idea what that means. Mandeep Singh does. Mandeep Singh Global Tech Research Head for Bloomberg Intelligence what's going on with our friends at Anthropic? Because I know they do a lot of work with the U.S. government.

[F]

Yeah. And look, I think Palantir is the company that really made a name for themselves in the kind of work that all these LLM companies are being tasked to do for the Department of War. And look, it's going beyond analytics now. So what Palantir did was you could look at, you know, unstructured data like the GPS coordinates, Thai intelligence in terms of, you know, finding about some source or some entity. And that was heavily used in a variety of use cases. Now, I think these LLMs are trained on, we know, 15 trillion tokens, and they can ingest large amounts of data and do analytics at a level that we have not seen. So in this case, the company Anthropic has talked about their AI constitution or in other words, putting guardrails around the kind of surveillance activities they want the LLMs to do. And obviously from a government perspective, they want to do whatever it takes from a national security perspective. So I think that's where there is discussion going around around the kind of guardrails that they want to see and the level of, I guess, work that the government wants them to do.

[B]

Okay, so the Department of Defense, or Department of War as it's now known, this relationship with Anthropic, it's not limited to just using Anthropic models, is it? Because it wants to make sure that it's got kind of a wide source of AI large language models to draw from. So what is that relationship like with, I don't know, Chatbots or Gemini or even Grok.

[F]

Yeah, all of these companies have a contract with the Department of War. And like, for example, Xi's Groq has a $200 million contract. So, you know, the department is using all the possible tools that are available. And from that perspective, Anthropic is one of them. But no one else like ChatGPT hasn't talked about, you know, guardrails in such a big way as Anthropic has. So that's the big distinction and obviously SpaceX is a defense contractor for the department and now with Xai merger, I think they can do more work around the drone side. So at the end of the day, I think you have to think of it from a geopolitical standpoint what China is doing with that infrastructure and similar concepts and what I think the US Defense is looking to do in terms of surveillance and national security interests. And these LLMs will play a pivotal role because as I said, they can help you find that needle in the haystack that the current technology wasn't able to do.

[A]

Who is Anthropic? Who are these people?

[F]

Well, they just raised $30 billion in their latest funding round. So they're good fundraisers. They're good fundraisers and they'll most likely go public this year. There is a very high likelihood of both Anthropic and OpenAI going public and that's why they're out there in terms of establishing the use cases and the utilities, not just a coding agent. They want to show that they are addressing a lot more areas in terms of where these models are touching and the companies that they are interfacing with. So there is a very high chance that we'll see IPOs.

[A]

Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts? Yep. High yield cash? Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing member FINRA SIPC Advisory Services By Public Advisors SEC Registered Advisor Crypto Services By ZeroHash all investing involves risk of loss. See complete [e-mail] disclosures being a small.

[B]

Business owner isn't just a career, it's a calling. Chase for Business knows how much heart and effort go into building something of your own. That's why they make business growth their priority. The Chase team takes the time to understand your mission, where you are now and where you want to go. Their broad range of solutions is designed with you in mind so you can bring your ideas to life. From banking to payment acceptance to credit cards, you can conveniently manage all your business finances all in one place with their digital tools. Looking for tips and advice, their online resources are always available to give you the solutions you need to help your business thrive. See how your business can get stronger and go farther with Chase for Business. Learn [e-mail] business chase for business Make More of what's yours the Chase Mobile app is available for select mobile devices. Message and data rates. May apply JPMorgan Chase Bank NA Member FDIC Copyright 2026 JPMorgan Chase Co. Finding.

[E]

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[B]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Andro Auto with the Bloomberg business app Listen on Demand. Wherever you get your podcasts or watch.

[A]

Us live on YouTube, let's switch gears to the health care space. And to do that on a Tuesday morning, we check in with Sam Fazelli, director of Research for Global Industries and a senior pharmaceuticals analyst for Bloomberg Intelligence. He's based over there in London. So Sam, I see that Moderna and Merck, they're working together on a melanoma drug here. Cancer drug. What's the status there?

[D]

Yes, so Paul, thanks for having me back on. Look, they have a trial coming up which is a very innovative approach to trying to treat cancer. That is, I'm going to take a drug that releases your immune system and at the same time I'm going to give it stuff from your tumors so that it can recognize the tumors. So you got a vaccine. That's what a vaccine Is right. And the immunotherapy drug Keytruda that everybody's used to, and they've had some really strong phase two data that's come out. So what we've done here is that we've gone and have a look. That's one of the key catalysts for 2026. And everyone's waiting for this trial to read out as to what are the chances of what are the issues that this trial might face. You know, that's our job, right? We look for problems, look for trying to measure up if there's any risk here. And we've identified three. One is that the phase two data wasn't as easy to interpret because the control arm in it, that initial data that looked great didn't behave as we thought it should have done. The second issue is that in the phase three, they're enrolling some healthier patients. What is that going to. Can you therefore use the phase two to bridge your thoughts to the phase three? And on top of that, here's an interesting part. Who makes Covid shots? Well, Pfizer, Biontech and Moderna, another study showed that if you use Covid shots within 100 days of one of these immunotherapy drugs in cancer patients, they survive longer, they have better survival rates. What if that happened in the Moderna trial? The control arm has Covid shots in it, and that lifts up the survival, if that data was correct. So all these things makes us a little bit worried about this data coming. And of course, Moderna has other issues to deal with, which I'm sure you're going to come up to, which is that FDA rejection to accepting their file for the flu vaccine, which is. Blew my mind, I have to say.

[B]

Well, this administration doesn't like vaccines, period, so. And it's been a brutal flu season, right, Sam? I mean, it has been kind. I mean, I think something like 22 million Americans have fallen ill to the flu.

[D]

Yeah, they have. And to be scarlet. The issue is now they're deciding what flu vaccine to give us in the US and Europe in a couple of months. They'll be decided in nine months time. That's nonsense. This is the flu. These are viruses. They change all the time. I think we've learned that, right? Here's a technology that could have potentially enabled you MRNA vaccines to react much quicker, nearer the time when you know what strain you need to target. This could have been the approval that the world needs. I mean, in this world, we need to be able to deal with these infectious diseases. We've learned our lessons, haven't we? Unfortunately, the person at the head of the division of the FDA called cber made a decision, unilaterally by the look of it, based on what people have reported that he doesn't want to review this file. Having they made Moderna had all the right things in place. They had discussed with the fda, they had the allowance to go ahead. They did a trial that's in line with other people's trials. It just doesn't make any sense. And I tell you what, that really worries me about any company interacting with the fda. How can you know that you're not going to get a next week or 6 months or 10 months or 12 months down the road a random rejection, despite the discussions you've had.

[A]

So how are these big health care companies, pharmaceutical companies, biotech companies, how are they dealing with the fda? Because it seems to be a very difficult relationship at the moment.

[D]

Look, Paul, only a week before we were talking about the FDA showing its teeth when he came out and said hims has to stop selling copycat drugs which it had no right to sell. And now we have this. This uncertainty is a problem and they're all trying to manage it. The larger companies can manage it because they have teams of people, etc. But, but it's the biotechs that suffer because they, they have limited amounts of cash on a relative basis. And we've had several of these things that have hit the block with regards to regulatory pushback, which you didn't expect to have. So it is a problem for the biotech sector more than the pharmacy.

[A]

Stay with us. More from Bloomberg Intelligence. Support for the show comes from Public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts. Yep. High yield cash. Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage services by public investing member FINRA SIPC advisory services by public advisors SEC registered advisor crypto services by ZeroHash. All investing involves risk of loss. See complete disclosure [e-mail] disclosures being a.

[B]

Small business owner isn't just a career, it's a calling. Chase for Business knows how much heart and effort go into building something of your own. That's why they make business growth their priority. The Chase team takes the time to understand your mission, where you are now and where you want to go. Their broad range of solutions is designed with you in mind so you can bring your ideas to life. From banking to payment acceptance to credit cards, you can conveniently manage all your business finances all all in one place with their digital tools. Looking for tips and advice, their online resources are always available to give you the solutions you need to help your business thrive. See how your business can get stronger and go farther with Chase for Business. Learn [e-mail] business chase for business Make More of what's yours the Chase Mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank Naomi Member FDIC Copyright 2026 JPMorgan Chase Co. Finding the right.

[E]

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[B]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app Listen on demand. Wherever you get your podcasts or watch us live on YouTube.

[A]

Let's switch gears here. Talk about the real estate business business here in United States. We can do that with Jeff Langbaum. He's the REIT analyst for the US Is it all just data centers today? Jeff, is that all people want to talk to you about? Because it seems like that's the AI play in real estate.

[G]

Well, that's, that's one way to play AI from a positive perspective. Okay, But Right now, what people are thinking about is what the impact is going to be on office space if AI makes all of these industries that lease office space irrelevant. Okay, what does that mean for demand for space? And, you know, we. We saw last week that, you know, that started with software, and then it went to, you know, industry after industry and ended up with the real estate brokers and eventually the office REITs getting hit hard.

[B]

So, so far, this is just kind of fear that's wafting across the market. Have we actually seen any evidence of this happening?

[G]

Not yet. And in fact, we've seen some of the opposite. Leasing velocity has been at the highest level since before the pandemic in markets like New York and San Francisco. The rates that we follow, names like SL Green, Vornado, Boston Properties are now bxp. These guys are reporting very strong leasing volumes. We're starting to see occupancies tick up off the bottom in their portfolios. And, you know, one of the, one of the dynamics at play is that AI firms are leasing space as they grow. And to the extent that companies being impacted by AI start to recede a little bit, there's an offset there.

[A]

So your office REIT stocks last week sold off on this fear.

[G]

Yeah, and it's not a new fear. I mean, it's been. It's been at play for some time now. You know, work from home kind of worked its way through, and everyone kind of got comfortable with where hybrid kind of settled in. And then, you know, what was the next thing to hit office? And it was this. And it's been, you know, it's been out there for probably a couple of quarters now. What is the impact going to be? But last week when. When software rolled over, it's just compounded.

[B]

Is this something where, because of the evidence that companies are still leasing quite a bit of space, that we're going to see a just as sharp recovery?

[G]

Well, that's possible, but, you know, there's also the risk that, you know, the, the equity markets are turbulent and forecasting. Right. And so there is the possibility that there will be negative leasing news to come. It's certainly not showing up in the numbers now. And we do think, and this is backed up by some survey work that we just did last week of, of office workers in both New York and San Francisco. We actually think that there's still a period of time to come where firms are actually leasing more space. They're expanding their headcount to try and figure out how to take advantage of AI and to grow their business. And that could actually, you know, I don't know about a sharp snapback, but it could prolong the positive vibes for, for some time.

[A]

What's the sector of the REIT market that you like the most right now?

[G]

Senior housing is, is. I mean, you know, it's, it's the, it's, it's the one aspect where you cannot refute the demand story at all. And at the same time where real estate guys typically love to build to take advantage of those demand stories, there's not, there's not much senior housing coming out of the ground. So, so there's a huge supply demand imbalance.

[B]

Okay, but is senior housing more attractive in certain markets over other markets? How do you pick between winners and losers when it comes to senior housing?

[G]

It's really more about the local operator than it is about the specific market. I mean, obviously, if you're in a place where, you know, the economics aren't as strong and you don't have as affluent a potential resident base, then that's going to, you know, potentially impact. But local, strong, local operators, when there's not a lot of supply coming out of the ground and, you know, you basically just have an aging American population that is going to need housing solutions, it's really a play across the board.

[A]

30 seconds. Why isn't there the supply?

[G]

The cost of capital is still a little bit elevated and it's tough to get, it's tough for developers to get capital and, and underwrite new deals to make sense. Really, man, you want to start putting capital to work? I'm sure there are developers who would, who would take your money.

[B]

This is the Blue Bloomberg Intelligence podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 10am to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.

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[E]

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