Sam Zell is a brilliant Real Estate Investor who sold a lot of his portfolio in 2005 when everyone was still buying. High flying Blackstone Group bought the properties and since buying Zell’s properties the Blackstone portfolio has gone 2 billion in the hole. Sam Zell is brilliant and now he is looking to start buying again. You will find this article very interesting. Learn from the best, I do and that’s how you become a better entrepreneur. Even though he is awaiting for the rebound he is still picking up deals for very cheap. Right now just wait for the homerun deals and opportunities.
Zell Opts for Debt Investing, Awaits Housing Rebound
By Sharon L. Lynch and Greg Miles
Aug. 21 (Bloomberg) — Billionaire Sam Zell, founder of the largest publicly traded apartment landlord in the U.S., is investing in distressed debt instead of real estate stocks or property and expects a housing recovery next year.
“We believe that the opportunities, particularly in difficult situations, are in the debt,” said Zell, who is looking to buy both real estate debt and distressed corporate debt now trading at a discount. He declined to be specific.
The U.S. may see the bottom of the single-family housing market early next year, Zell, 66, said in an interview today with Bloomberg Television. “I think it will be relatively fragile as confidence builds and it will take probably another year for confidence to be completely returned.”
Zell sold Equity Office Properties Trust, then the biggest U.S. commercial landlord, for $39 billion to Blackstone Group LP in 2007 and isn’t yet ready to start buying property again, he said. Existing U.S. home sales fell to a 10-year low in the second quarter and rising residential foreclosures have prompted banks to curtail all real estate lending.
“I think the real estate market as a whole is fairly priced,” Zell said. “I think from a yield point of view, it might be attractive. But I am a capital investor and an entrepreneur, and I need to be able to invest in situations that by virtue of changing them, I can dramatically change value.”
Zell declined to put a dollar value on his expected debt investments, saying only that they would be “significant.”
Any real estate or credit market recovery must include the U.S. government’s willingness to protect the debt of Fannie Mae and Freddie Mac, Zell said, referring to the two biggest suppliers of cash for housing. The government-chartered entities buy and repackage home mortgages to sell to investors.
“Our financial credibility has taken a big enough hit without having GSEs become a problem,” Zell said.
The market value for Washington-based Fannie has shrunk by 90 percent to about $4 billion this year. McLean Virginia-based Freddie has declined 92 percent to under $2 billion.
“I think there is no question that the government’s responsibility must include protecting Fannie and Freddie debt,” Zell said. “It is extraordinarily important. They today represent 70 percent of the mortgage market in this country, and I think that percentage is growing as other lenders are moving away.”
As that happens, and as lenders that need to preserve capital tighten standards on a variety of products including construction loans, Zell expects his remaining investment in the Chicago-based real estate investment trust Equity Residential will pay.
The REIT owned or had stakes in 579 properties with almost 153,000 units as of Dec. 31. Its market value is more than $11.2 billion.
“New apartment construction will be a very small percentage, maybe 40 percent, of what it has been in the past few years,” Zell said. “With no new supply, I think that the prospects for the rental housing market are very strong.”
Zell owns about 3.33 million shares, or 1.2 percent, of Equity Residential and is the company’s chairman.
At the Tribune Co., the media company he acquired for $8.3 billion last year, Zell is accelerating what was intended to be a 2010 business plan and redesigning Tribune’s publications.
The newspaper publisher has no liquidity issues and can handle scheduled debt payments for the next seven years, Zell said.
“We don’t have any real maturities that aren’t covered until 2015,” he said. Tribune, publisher of the Chicago Tribune and the Los Angeles Times, will likely pay off the $593 million remaining principal balance of a $1.5 billion bank loan that’s due in June 2009, he said.
Chicago-based Tribune is trying to manage $12.5 billion in debt and lower costs by cutting jobs, seeking a buyer for the Chicago Cubs baseball team and exploring options for headquarters buildings in Los Angeles and Chicago. The company sold Newsday in July.