North County Times
Noted distressed asset investor pushes cross-border airport in Otay Mesa
Real estate and newspaper tycoon Sam Zell sees great opportunity in the commercial real estate market, despite other experts' predictions of doom, he said Friday at a conference in San Diego.
Real estate and newspaper tycoon Sam Zell sees great opportunity in the commercial real estate market, despite other experts' predictions of doom, he said Friday at a conference in San Diego.
Banking analysts warn that the nation could be swept by a wave of foreclosures of apartment buildings, retail outlets, industrial space, and office complexes in the coming year. Zell said some investors expect to score bargains from desperate owners ---- but he doesn't see that happening.
Distressed property markets are Zell's primary expertise. He made his fortune in the 1970s and 1980s investing in discounted properties saddled with debt or other problems, according to a Forbes.com biography.
By 2006, he'd turned his $200 million personal fortune from 1986 into $4.5 billion. In 2007 he became yet richer when he pulled off what his own Web site calls the largest private equity deal in history: At the peak of the commercial property market, he sold his property trust to Blackstone, Inc. for $39 billion.
But this expert in distressed assets, who earned the nickname "Grave Dancer," thinks his preferred strategy won't work this time around.
"There ain't no grave-dancing opportunities, because nobody's got the equity that you can grave-dance," Zell said, speaking at the University of San Diego's 14th annual Real Estate Conference. "If there are opportunities in distressed real estate, it's not in buying the real estate, it's buying the debt."
He said owners with no equity won't bother to sell at any price ---- all the money would go to creditors. Instead, Zell expects to see investors pay off some of the debt in exchange for equity.
And the best place to apply this strategy may be apartment buildings. While he doesn't expect to see any new commercial construction for the next five years, the United States adds roughly 1 million new households a year, which should lead to strong demand, he said.
On other subjects, he said the residential market has hit bottom and is on its way back; he's deeply worried about the debasement of the dollar; and he thinks the health care bill that passed the U.S. Senate is a terrible idea.
But, he said, he's pushing on with a project to build a new airport terminal on land he bought in Otay Mesa. The terminal would allow planes to take on passengers on the American side, but take off and land on the runway in Mexico.
Outside the conference, Zell said he expects to get required presidential permits from both the Obama administration and the Mexican government this year, though he dreads working through the local permitting process.
"San Diego desperately needs more air service and air access," he said. "It's going to take two years to get through the planning process, with each committee waiting for its chance to put another month delay on it."
Distressed property markets are Zell's primary expertise. He made his fortune in the 1970s and 1980s investing in discounted properties saddled with debt or other problems, according to a Forbes.com biography.
By 2006, he'd turned his $200 million personal fortune from 1986 into $4.5 billion. In 2007 he became yet richer when he pulled off what his own Web site calls the largest private equity deal in history: At the peak of the commercial property market, he sold his property trust to Blackstone, Inc. for $39 billion.
But this expert in distressed assets, who earned the nickname "Grave Dancer," thinks his preferred strategy won't work this time around.
"There ain't no grave-dancing opportunities, because nobody's got the equity that you can grave-dance," Zell said, speaking at the University of San Diego's 14th annual Real Estate Conference. "If there are opportunities in distressed real estate, it's not in buying the real estate, it's buying the debt."
He said owners with no equity won't bother to sell at any price ---- all the money would go to creditors. Instead, Zell expects to see investors pay off some of the debt in exchange for equity.
And the best place to apply this strategy may be apartment buildings. While he doesn't expect to see any new commercial construction for the next five years, the United States adds roughly 1 million new households a year, which should lead to strong demand, he said.
On other subjects, he said the residential market has hit bottom and is on its way back; he's deeply worried about the debasement of the dollar; and he thinks the health care bill that passed the U.S. Senate is a terrible idea.
But, he said, he's pushing on with a project to build a new airport terminal on land he bought in Otay Mesa. The terminal would allow planes to take on passengers on the American side, but take off and land on the runway in Mexico.
Outside the conference, Zell said he expects to get required presidential permits from both the Obama administration and the Mexican government this year, though he dreads working through the local permitting process.
"San Diego desperately needs more air service and air access," he said. "It's going to take two years to get through the planning process, with each committee waiting for its chance to put another month delay on it."
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