Sam Zell: Too Early For 'Kumbaya'
Our economic recovery isn't nearly as dramatic as Sam Zell hadhoped. DC is gridlocked, and CRE demand has been patchy, he gripes.
Joined by Tishman Speyer chairman Jerry Speyer and Artemis Advisors managing director Dale Anne Reiss, Sam (with his unique, salty charm) spoke atDLA Piper's 11th Global Real Estate SummitTuesday. He listed some costs of economic uncertainty: The past few years started robustly and flattened out by May 1, corporate cash reserves are at an all-time high, and the soaring stock market resembles the '06 housing market. On the upside, capital is at its cheapest since the '50s. Moto's move (like others happening across the country) picked up on Gen Y demand to live/work/play in 24/7 cities, bifurcating multifamily and office demand (with suburbia and exurbia suffering), he tells us.
Green Courte Partners chairman Randall Rowe andEastdil Secured CEO Roy March (bookending the panel below) discussed the capital markets (after presenting former Vornado CEO Michael Fascitelli, next to Roy,with a "trophy husband" t-shirt for his upcoming second act). Roy says CMBS is setting the pace in the hungry debt markets, sustained low interest rates are creating an "itchiness" for capital to invest and find returns, investors are paying premiums for trophy assets to reduce risk, and concerns over money in wheelbarrows--a.k.a.inflation-- will send more capital into CRE. (And more bankers to Lowe's for wheelbarrows.)
Ventas CEO Debra Cafaro(center)says the ever-acquisitive company has $30B in enterprise value and more than 1,400 assets (and counting) thanks to tremendous, demographic-driven demand for seniors housing and healthcare assets. Not to mention Obamacare sending 32 million previously uninsured people into the system. Equity Residential CEO David Neithercut(second from left) says it's had terrific spreads in multifamily, selling at 6% cap and financing at 3.8% to 4%. EQR took advantage of arbitrage in the condo conversion business back in '05 and '06, but he doesn't think they'll get back into that game. (Hearing that, it looks like blasting Daniel Powter's "Bad Day" is your best bet for reliving 2006.)