Wes Edens on Brightline West groundbreaking, geopolitical market risks and the Fed

Joining me now, Wes Edens. Wes, it’s so great to speak with you. You’re in Vegas, you’re joining me from Vegas as you as the groundbreaking starts for Bright Line W walk me through it, the stats, what we can expect from this rail project and when people are going to be able to step on board and use high speed rail to go from Vegas to Southern California. Here we go our first high speed rail in America. It’s coming to you soon. So great to talk to you Brent and Morgan. But so we’re having the groundbreaking here this morning. It’ll start the construction process that’ll take us about four years to to complete. This is a train that’ll go right in the middle of I-15, which is behind me and go to my right right from here to the Los Angeles area. It’ll go be the first truly properly high speed rail. So, you know, 200 miles an hour, it’ll be in the middle of the highway, entirely electrified, entirely run with renewable power. So truly the cleanest, greenest train in the world. And I think it’s the beginning of something really, really monumental, not just for this railroad and this through connecting these regions, but also a real blueprint for how you’re going to do this all over the US. So it’s a it’s a properly big day for us. Yeah. And I do want to get into that blueprint piece of it. But first, $3 billion from the government just spoke a short while ago to Transportation Secretary Buttigieg, who’s on site as well for this ground breaking $12 billion project overall. What does that mean in terms of the capital you’ll raise from the capital markets and from investors, and why is this a compelling investment? Yeah, so the the bulk of the capital will be raised in the debt markets. We’ve got it’s heavily equitized as well, with a combination of the grant from the federal government as well as private capital. But the $12 billion you can think of, the capitalization of it is a big loan from a conservative banks, a big chunk of private activity bonds, and then equity from the government, equity from ourselves, the partnership with the government. And it’s more than one government. It’s the local governments, it’s the state governments, it’s the federal government altogether. Is that that’s the, that’s the real blueprint, That’s the real coalition that we needed to make this happen. And, you know, so it’s very exciting to have the secretary here with us. He and the Department of Transportation have been amazing partners as, as the as the president. So we’re ready to go. And it’s a it’s a great time for us. Yeah. Does this represent sort of a new way to think about public private partnerships and, and engaging investors in a more meaningful way? I think it does. You know, I think that when you look, there’s a lot of history for the government helping to kind of start industry. So obviously they were very, very, very involved with SpaceX originally. They’re involved with the, you know, the kind of the subsidies to help the kind of the electric vehicles get underway. More recently, some of the stuff in the chip side. So this is where government can really be a catalyst to help things get started, get proof of concept, then let the markets take off and, and go themselves. That’s what’s happened in other industries is what’s going to happen here as well. And of course, this isn’t the 1st private passenger railroad in the country that that title belongs to Bright Line in Florida. Lessons learned from that project and how that rail is operating currently that are now coming to Western US. Yeah, I mean, first lesson is people love the train, right? So we have millions of people that ride our train down there. We recently started the service from Orlando to Miami. So the the complete system it’s been, you know, the response to has been, you know, tremendous. So not practically a day doesn’t go by where someone doesn’t call me or write me and tell me how much they love our train. So the first lesson is it definitely works and it’s something that is a very investable product. The second lesson I’d say is that what we did there for the infrastructure is we use the existing infrastructure for the most part. So we used the rail corridor that we had access to for Miami up to Cocoa Beach and then boot built new train lines over to Orlando. When we started out here, we said, look, we have access to I-15. We can build the entire thing as new tracks. You can put in the middle of that highway, you put a fence around it. There can be no grade crossing. So no one has to be worried about driving in front of it or any kind of accidents or whatnot. You can also electrify the whole thing. So you know, version two point O, which is this one, I think is the blueprint of where you’re going to see this replicated at other markets around the country. What will it take to turn a profit? Just people showing up. But, you know, when you look at it, you know, the, the, these intercity rail systems around the world are all highly profitable. So basically, you know, what you, you have is just the, the two coefficients that matters. How many people are going to ride it and how much are they going to pay and how many people are going to ride it? There’s about 50 million trips that happen between Las Vegas and Los Angeles and vice versa every year. 85% of those happen by cars. So simply having those people get out of their cars and get onto this train and have a 2 hour train ride rather than a four or five or six hour car drive is, is obviously a very, very compelling opportunity. In terms of revenue, I’d say when you look at all the train systems like London to Paris or Paris, Lyon or Madrid, Seville or Rome to Milan, they average about $0.50 to a dollar in revenue per mile. Amtrak in this country, the Acela service from New York to Washington, DC is about $1.25. If those kind of rider ships of these 50 million trips to kind of like, you know, trying to get onto your system and those kind of revenues, this will be a highly profitable system. So I think, you know, again, the first one is, is the one that’s the most important and of the high speed rails. We’ll get this one up and going and I think it will then catalyze a lot of development all over the all over the US and these other similar kinds of city pairs. Do you already have your eye on other routes? We do. I mean, you know, obviously the, the ones that are most obvious are the Texas routes, right? So there’s been a lot of chat about that. So you know, Dallas, Houston, Houston to San Antonio, San Antonio, Austin up to Dallas. So that’s an obvious one. Atlanta, Charlotte is a great one. I think you know from, you know, Portland to Seattle, there’s a lot of people that are talking about it. And I think that proof of concept of one system can really then galvanized that and turn those into deals. So we haven’t really sat down hard yet and approached it. We’ve been very, very focused on getting this one off the ground, so to speak. But with when this is actually now under construction fully, those are all markets we’re going to spend real time in and I’m sure we’ll find other opportunities. And if I shift from one type of infrastructure to another, you’re also very heavily involved in infrastructure on the energy side with natural gas, with new fortress energy. I realize earnings coming up in a couple of weeks, but to the extent you can walk me through some of the dynamics and your outlook on the energy complex right now, Yeah, I think that, you know, it’s, it’s been amazingly resilient to me in the world’s markets considering all the unrest in the Middle East and all the potential disruptions and whatnot. Obviously the the Russia and Ukraine war that caused price to spike up heavily has come down. They still remain elevated though. There’s no question that gas is a is a really a primary transition fuel for us around the world, especially with all the needs that we have for power, power just for people who need power and obviously all the impact of AI and data centers and everything else. So gas is a sure thing and it’s needed in, in, in that way we’ve built infrastructure in these different markets around the world to bring gas and power into the markets. On the flip side, we actually have built our first liquifier, it’s offshore and Mexico. And as you said, we have earnings coming up here. So I’m not going to talk out of school about it, but we’re extremely optimistic with the prospects for that. We hope to have big news out of there shortly in terms of that now turning on and being being productive for us. But it’s a, it’s a really interesting time in the energy markets. But I think the one thing that is very clear to us is that gas is going to play a huge role in terms of this transition of energy, both in terms of domestic use and then also this incremental, you know, massive demand you’re going to get out of the data centers in the AI because those things are big energy hogs, obviously. And of course, we’ve talked about it before, the fact that it’s a it’s a critical bridge fuel. One more question on this, and that is, have you been impacted by the Biden administration’s halt on some LNG exports and permits? Well, we have what we have right now in, in our project in Mexico is we have the right to to ship our fuel to FDA countries. So free trade agreements and so that actually gives us enough of an access to the market that we’re not impacted from it. So we’re very, very fortunate in that regard. Obviously we want to get our non FDA approval. We’ve applied for it. We hope that at some point that there is you know a rollback of these pauses and that we’re the first piece of people in line to be considered. But we are quite fortunate. It doesn’t really impact us in the short term, but long term I do think that you know for energy security around the world, you know the US is the biggest exporter of LNG still today. It’s a huge geopolitical chip that we have to play to help out different autonomies in countries around the world. So I’m obviously a big believer that it should be, you know, rolled back and they should allow us to keep to to keep exporting. And obviously that would that would help us as well. You have your hand in so many different types of projects and businesses. If I take a step back, I mean, how would you gauge the current investing environment? You know, it’s an interesting time. I mean, obviously the, the political environment is something that people have to pay attention to. I think over 50% of the world’s population is going to elect a new leader this year. So that’s just that’s unprecedented. That’s a that’s a big amount of change. You know, I think I’ve said before that, you know, the, the amount of like, you know, geopolitical risk in the world is greater than any time that I remember. So that that always he puts an asterisk next to it. That said, there’s still real growth in the US, There’s still real growth in a lot of economies around the world. So there’s a lot of reasons for optimism. But I think that these big, you know, you know, kind of events that could really move the markets in a material way or something to pay attention to. And so on that side, I guess we’re probably a little cautious. OK. Do you think investors fully, just looking across markets, across asset classes, do you think investors fully appreciate how acute that risk is? I don’t actually, I think that, you know, the the people are a little complacent that none of these regional conflicts are going to turn into something more significant. Of course, I have no insight on this. I’m not a political expert at by any means, but you know, there’s a number of different regional conflicts that have the potential of being something which is more severe and I think that that could be a big shock. And so I think that, you know, it’s easy to be complacent about something that isn’t in your consciousness today. But I think, you know, the three or four major kind of conflicts around the world, I think they do have a real, you know, they have the real potential for something to escalate into something more significant. And that’s a, that’s something for people to pay attention to, in my opinion. Yeah. Meantime, here in the US, we have had economic data that’s been more resilient than some folks have perhaps anticipated. You’ve seen this stark repricing regarding rate cuts in the markets and A and a real run up in rates over the past few weeks. Your thoughts? Does it continue? You know, I think that obviously they’re the Fed is doing their job to try and keep inflation in check. And so that’s obviously a that’s a key principle. That’s their the one key principle that they’re focused on. It’s probably been a little bit slower to come all the way back down and that’s what’s caused a pause. I still believe that you’re going to get rate cuts here sometime later this year. And I think that they’ll be appropriate longer term. I think that, you know, the US needs to get their fiscal house in order. I think that’s a real, that’s a real issue for the USI mean, you know, you can’t continue to spend more than you bring in. I mean, it wouldn’t work for you and it wouldn’t work for me and it doesn’t work for the country either. So I think that longer term, I think that that’s a structural issue that really needs to be focused on. But I do think the rates are likely to come down over the course of the next, you know, 6 to 12 months and then we’ll go from there. Are you seeing signs that disinflation is, is, is still afoot or is it looking sticky across your different businesses and, and from your sort of key vantage point as well? Yeah, You know, if a lot of the the price of materials and goods I think have come down significantly, the thing that is sticky is labor, right? So, you know, if you’re paying somebody, you know, $30.00 an hour and they get a raise in there at $35.00 an hour, the one thing you’re pretty sure about is they’re not going to be happy with $30 going forward, right? So I think that the wage inflation is something to point out in the labor markets have been so robust, right? So there there’s been, you know, increased number of jobs and there’s fewer people to to fill them. So that’s that, that’s probably the one sticky thing. And I’m sure that that’s the one aspect of it that the Fed is really focused on. Yeah, shifting gears again, Bucks just had a just coming off a win last night, the latest, the outlook for the team and and also how you’re thinking about some of these dynamics, especially as the NBA, it’s been a focus, You know, some of these gambling scandals we’ve seen with certain players, whether we’re going to start to see maybe some more rules or some some shifts in terms of some of those dynamics and and relationships. Yeah, first the Bucks, you know, one in a row. So we went to the game last night. You know the guy, the guys played incredible. The whole team played really well. You know, Damian Lillard shows why he’s Damian Lillard in the first half last night. So amazing. So we’re we feel great about that. Obviously, you know, we have a little bit of a set back as Giannis is on the sideline. Anytime you know, the best player in the world is not playing, that’s a negative. But we have a very talented team away from that now that the guys did a great job of the coaching staff did an amazing job in preparing for it. But it’s only one game in a long series and I’m sure that tomorrow will be a real dogfight. But you know, we’re hopeful we’ll get Giannis back at some point and you have a good chance of of moving on. We we think we have a championship team. And so now you don’t have to prove that on the court. You know, in terms of the the gambling stuff, I think that positive. There’s no doubt that people that are gaming and gaming legally are big, big users of data and they’re big like, you know, students and they’re interested in the games. And so it increases viewership. It’s positive for the game. There’s lots of real positives that come out of it. That said, obviously it has to be regulated. That’s why we think that these companies being, you know, public and regulated in the in the daylight rather than, you know, over the counter and not regulated is a good thing. But it’s something that the, you know, the NBA and all the other leagues are very, very focused on. It’s obviously very, very few incidents of it in the aggregate scheme. But any kind of suggestion about any kind of like foul play on this thing is just a, you know, obviously a third rail for all these different sports. And so I’m sure you’ll see, you know, some kind of action that will come out of it at some point. But you know, long term, I do think that gaming is a positive for interest in viewership in this sport. And that’s a positive. Obviously has to be done responsibly. Obviously has to be done in a way that doesn’t doesn’t create in the situations that you’ve talked about last week, finally got to ask you about Aston Villa because you’re you’re poised for Champions League placement here. It’s been such a turn around story since you became a co-owner of the team. We don’t necessarily talk about it enough at CNBC, how compelling the investment in European soccer, particularly British soccer is. Yeah, up the Villa, right. So we had we had a big sports weekend yesterday. We had a big win against Bournemouth at home. So that puts us in square. We’re in fourth place, six points clear of Tottenham. They have a couple of games in hand. So this is far from decided. But getting closer to the end of the season, every game is basically like a finals match. So it’s really, really exciting. I mean, we invested in the team six years ago. It was in the Championship. So Aston Villa is a very, very historic and and proud team, but it had some kind of rough times. And so six years to go from the Championship to Champions League has to be a record of some sort. So we’re obviously really rooting for it. Blessed to have amazing management there. The you know, and I am Marie Mochi are are are, you know, the people that that really operate the team for us on the field are amazing guys. And so, you know, we’ll see, but it’s going to be a nail bite of these next couple of weeks. So I’m hopeful that, you know, we’ll make it through it and we’ll be in Champions League next year. That’d be amazing. All right, W Eden, thank you so much for joining me. Appreciate it. Congratulations again. Great, thanks. Thanks, Morgan.