NASA is preparing for another launch, and it’s not a rocket.
The space agency recently announced its very own streaming service, NASA+ (because of course that’s what it’s called), which will be available later this year. The ad-free, no-cost service will feature footage of launches, documentaries, and content exclusive to the platform. With more than $20 billion in government funding each year, this is one streaming service that won’t have to worry about advertisers or cracking down on customers for sharing their passwords with family.
Morning Brief
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Blackstone has a big new bet.
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The EV wave is sluggish.
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Visa wants to save you a couple bucks.
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Real Estate
Blackstone is Retooling its Real Estate Investment Strategy
It’s Hot AI Summer, and the FOMO is infecting nearly every industry — even if they seem entirely unrelated, like real estate.
For the Blackstone Real Estate Income Trust, or Breit, that means resorts and casinos are out, and data centers are in, according to an analysis published Sunday by the Financial Times.
Virtual Realty
While not entirely a black mark for private-equity king Blackstone, Breit’s massive investment in commercial real estate over the past couple of years already needs retooling. From the start of 2021 through the third quarter of 2022, the fund acquired roughly $60 billion in property, the FT said. Then, amid a widespread downturn and recession fears, the firm limited withdrawal and redemption requests from anxious wealthy investors looking to cash out — even though Blackstone said in a letter that Breit held “virtually no” exposure to the market’s trouble spots, like office space.
To generate liquidity to satisfy redemption requests, Breit completed a series of successful high-profile sell-offs, including its stakes in Las Vegas casinos Mandalay Bay and the MGM Grand, as well as an $800 million sale of a Texas resort and a $2.2 billion sale of a slew of self-storage facilities. In sum, the firm has sold roughly $10 billion in assets since the fall of last year, creating about $2.5 billion in investment gains. Now Blackstone is using some of those gains to gear toward a more future-looking version of real estate investment:
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The firm plans to spend up to $8 billion to build new data centers for tech giants, sources told the FT. Its investments will be made via the QTS Realty Trust, a data center-focused trust it acquired for $10 billion in 2021.
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QTS’s valuation has leaped to around $20 billion and its total leased space has tripled since the acquisition, sources told the FT, and now Blackstone plans to at least double its size again.
“Large technology companies are in the midst of an AI arms race which we believe will be a once-in-a-generation engine for future growth in data centers and is driving tremendous demand on the ground,” Breit recently told investors. The drive to bolster digital infrastructure will foster a roughly $1 trillion data center market in coming years, according to Dell’Oro Group, an independent research firm.
Sovereign Power: While the AI arms race is the driving force of the data center boom, policy decisions, too, are exacerbating demand. Specifically, increased calls for “data sovereignty” — a.k.a., laws dictating that data be stored in the country it is collected from — is fueling data center demand, especially in the data-conscious EU, according to another FTreport. Blackstone may be exiting the Vegas casino game, but “What Happens in AI, Stays in AI” just doesn’t have the same ring to it.
– Brian Boyle
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Automotive
Ford Realizes Customers Can’t Quit Hybrids
(Photo credit: Andrew Miller/Unsplash)
The road to electric vehicles may not be as smooth as we thought.
Ford — along with major carmakers GM, Volkswagen, Mercedes, and Volvo — plans to stop producing combustion engines and go all-electric in roughly the next decade, but based on most recent sales the transition could take even longer.
Hybrid Demand
Ford’s quarterly profit report last week was solid, beating Wall Street’s expectations and raising its outlook for the full year. However, its success was built on traditional gas-powered trucks and SUVs, not its fleet of EVs, where adoption has been slower than expected. It’s not just Ford, though. In a recent study, Cox Automotive found that US dealers have more than 92,000 EVs parked in stock, more than three times the inventory from a year ago.
Even after cutting prices on its EV F-150 Lightning and Mustang Mach-E models, Ford’s EV division lost $1.08 billion last quarter, and the company expects a $4.5 billion loss for the entire year. In addition to strong sales from traditional vehicles, the surprise was the health of hybrids:
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CEO Jim Farley said on the earnings call that he was frankly surprised to see how well hybrids were selling. More than 10% of F-150 customers bought the hybrid, and a whopping 56% of Maverick buyers did the same. Farley noted that hybrids are attracting customers that like traditional engines but crave the added electrical outlet capabilities for job sites and recreation.
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Toyota saw similar action, with its quarterly global hybrid sales growing nearly 40%, and a recent Kelley Blue Book survey found that car buyers today are about twice as likely to consider hybrids over fully electric vehicles.
White House Standards: While sluggish EV sales are a mixed bag for Ford and other car companies, it’s even worse news for the Biden administration, which has made EV adoption a primary goal for American consumers. To further that objective, the US Department of Transportation recently proposed increasing fuel efficiency standards annually by 2% for cars and 4% for light trucks, which would create a fleet-wide average of 58 miles per gallon by 2032. The Alliance for Automotive Innovation trade group said the measures are similar to ones the Environmental Protection Agency proposed in the spring, which the group found “neither reasonable nor achievable.”
– Griffin Kelly
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Payments
Visa Wants to Fight Credit Card Surcharges
Your favorite bodega cat just got a little grumpier.
In a battle against small businesses — amid a larger war to create a cash-free society — credit card giant Visa is cracking down on pesky surcharges sometimes attached to credit card purchases, according to a new Bloomberg report.
Big Sur-charge
Nearly a quarter of all US small businesses impose an extra fee on customers paying with plastic, according to a 2022 survey from payments consultancy Strawhecker Group — a move that supposedly compensates for some processing costs that banks impose on electric credit card payments.
And while those interchange fees often amount to mere pennies per purchase, the costs are starting to add up for merchants. Last year, store owners paid a record $160 billion to process over $10 trillion in payments, a nearly 17% year-over-year spike, according to the Nilson Report. But Visa still thinks merchants have gotten too brazen: In April, it capped surcharges at 3%, down from 4%. Now, it’s getting even tougher on shopkeepers to ensure compliance:
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The company is dispatching in-person auditors to stores and restaurants to ensure its rules are being followed on surcharge fees.
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The company also is levying increasingly steep fines on companies it finds violating its policies: the first strike gets a warning, strike two is a $5,000 fine, and strike three brings a $25,000 fine — presumably all paid in cash to avoid interchange fees.
“We’re just making sure that when consumers do get surcharged, it’s something that’s fair and equitable,” CEO Ryan McInerney said on a recent conference call, Bloomberg reports.
Buy Now, Pay Now: Card surcharges may be a small obstacle compared to the new, looming asteroid headed straight for the payments landscape. Last week, the Federal Reserve launched FedNow, an instant-payments system that can move money into and out of checking accounts with no fees. In countries where instant-payment systems have already been widely adopted by merchants, like the UK and Brazil, credit card usage has significantly decreased. With Americans holding a record of nearly $1 trillion in credit card debt, this might be a good change.
