The great Sam Zell, chairman of Equity Investments, was on CNBC this morning talking about a range of topics. A few minutes in he talks about why he has not doneduring the down cycle and his explanation for why the distressed market did not play out the way many people thought it would.
Here are some excerpts from the video. You can watch the whole clip embedded below.
We haven't built anything in this country since July of '07. Except for some apartments, I don't think we're going to build anything in this country for the next two or three years.
Literally, across the country, existing space is being filled.... It's literally getting occupied.
You can't have a commercial real estate destruction without oversupply and we do not have oversupply. Will it take a year or more to fill? Probably. I think that there's a direct correlation between filling of buildings and the end of 'pretend and extend.' In other words, up until now the banks have been able to defer dealing with these issues. But when the buildings get filled, they have no need of the zombie owner anymore. And they're going to take it back and it will lead to what I call, 'dilution is the solution deals' where an institution comes in, puts new capital into a building, pays down the debt, redoes the debt and then the owner ends up with a hope certificate and a management contract.
How much more commercial real estate do we need? Between 1945 and 1969 the city ofgrew immensely and we added one skyscraper in 15 years. And there was nobody sitting on the street at their desk. Demand tends to fit into the available of the supply. Do we need more space? Is it economically viable for a law firm to move to a new building and create the vacant old building, which doesn't get filled up?
In another segment of the interview, Zell talked politics and blasted Obamacare and ripped the Dodd-Frank bill. Those two clips are below.
Aside from that, there are several other pieces to the interview: