Publications

- September 1, 2019: Vol. 6, Number 8

Real estate for video games

by Mike Consol

Real estate investors and developers looking for the next hot thing might consider esports, which require arena-like venues for professional video gamers to congregate by the hundreds or thousands. This rise of esports (as in “electronic sports” played using video games) has been huge. There are now leagues, tournaments and other professional-level competitions, and these have already attracted hundreds of millions of online viewers and participants around the world. But the esports business needs more arenas where competitors can play and fans can watch competitions. Check out the real estate opportunities posed by esports by reading the Market View column on page 26.

Retail real estate players keep insisting there are still great opportunities in retail shopping centers for those who know what they’re doing, even as bankruptcies among traditional brick-and-mortar U.S. retailers continue piling up. The list of 2019 bankruptcy victims, as compiled by Retail Dive, includes Barneys New York, Payless ShoeSource, Gymboree, Beauty Brands, A’gaci, Diesel USA and Z Gallerie, among others.

Investors in niche real assets might be interested to know trading cards have been trouncing the S&P 500. As of Dec. 31, 2018, the PWCC Top 500 Index racked up a 10-year ROI of 165 percent, compared with S&P’s 71 percent. PWCC says the best-performing trading cards of 2017 (most recent year available) were the rookie cards of Tom Brady, Bob Cousy and Wilt Chamberlain, as well as the 1911 “red portrait” Ty Cobb card, and 1933 “yellow goudy” Babe Ruth trading card.

Those backing a $15 minimum wage for U.S. workers were delighted by a Congressional Budget Office report estimating it would lift the earnings of 27.3 million workers, then discouraged to read it would result in 1.3 million lost jobs — at least for starters. One would assume that massive infusion of newly realized disposable income for average Americans would result in significantly boosted consumer spending, fueling the economy. But there are other considerations to take into account, according to a recent Washington Post story that said a collection of research on the subject indicates a $15 minimum wage could transform society in broader ways. Among the most notable findings (some of which were also cited by the CBO) are the following effects: rising consumer spending, more productive workers, wage increases gravitating upward to businesses, less job-hopping, older Americans working longer, poverty rates declining, dropping suicide rates, and lower recidivism among paroled criminals.

Truck driving might be a good option — with starting salaries upward of $60,000 — while waiting for that $15 federal minimum wage to finally be enacted. Trucking companies are short about 60,000 drivers, according to the American Trucking Association, and the number could rise to 100,000 in just a few years. There’s a downside. The average tenure for truck drivers is less than one year, according to Indeed, the internet job site. Clearly, sitting behind the wheel of a big rig is not for everybody.

Stephen Schwarzman, head honcho at Blackstone, told The Economist his firm isn’t done growing, despite already being the world’s largest “alternative asset manager,” as it now calls itself. Currently, Blackstone manages about $512 billion in assets — as much as Apollo and Carlyle, its two nearest rivals, combined — and its funds have posted 15 percent internal rates of return since the 1990s, and 400,000 people are employed by the companies it controls. Blackstone has created around $41 billion in value for shareholders since listing its shares in 2007. Little wonder the firm raises money like it’s running the U.S. Mint. The firm has raised $238 billion during the past two years alone, nearly doubling its AUM and building a $133 billion cash hoard of investor capital it is seeking to place.

Bill Gates and nuclear ambitions have been placed on ice, at least for now. The Microsoft co-founder had struck a deal with the Chinese government to demonstrate a next-generation nuclear reactor by building one in China. Beijing’s leaders liked the idea, until things turned sour between them and the Trump administration. Gates and his nuclear energy company, TerraPower, signed the agreement in 2015 with the Chinese government for the construction project, slated to be completed by 2022. The objective was to demonstrate that TerraPower’s more advanced technology was dramatically safer and substantially cheaper than current nuke plants. The new reactor — which would run on depleted uranium rather than enriched uranium — had great appeal both because its small design lowered costs and because it would run on the spent fuel produced by the current generation of nuclear energy stations. In his annual year-end letter for 2018, Gates wrote that “we had hoped to build a pilot project in China, but recent policy changes here in the U.S. have made that unlikely.”

 

Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.

 

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