The opening keynote session of \u201cWhat Comes Next: Opportunities, Risks and Rewards,\u201d the 2008 DLA Piper Global Real Estate Summit held Tuesday in Chicago, featured real estate uber-deal-maker Sam Zell (pictured) of Equity Group Investments in his usual pungent form. \u201cThis entire crisis could and should be placed on the shoulders of the accounting profession,\u201d said Zell. Despite the many grievous mistakes made by other participants that contributed to the market\u2019s current mess, he insisted that \u201cwithout fair-market-value accounting, this whole situation would not have reached its current level.\u201d Zell said that earlier this year, he had in fact suggested to Treasury Secretary Paulson that Paulson suspend what Zell calls \u201cfire-sale valuation accounting.\u201d Zell\u2019s co-keynoter Peter Linneman, Ph.D., of the Wharton School of Business, asked a question that others, too, would ask during the conference: Who\u2019s going to be responsible for performing due diligence for the federal government with regard to all the assets it will be acquiring under the proposed market bailout? Noting the remarkable illiquidity of these assets, Zell commented, \u201cAll the writedowns to date are on spread, for a market that doesn\u2019t exist.\u201d == The central theme of the current crisis, Zell said, is \u201cNo skin in the game.\u201d On a similar note, he said that it was \u201cpretty absurd\u201d that Blackstone was able to buy Equity Office Properties from him for only $3 billion of equity on a total purchase price of $39 billion. On the public policy angle, Zell noted that he has been in the real estate business for 50 years, and that every time in that period that the federal government has tried to drive the home ownership rate up past 62 percent, the results have been disastrous. A key element in our present troubles, he said, was \u201cblind faith in the value of a house\u201d and in the idea that it would keep going up. Both speakers touched on predatory borrowing and the role of speculators, and not just owner-occupants, in driving the housing bubble, Linneman referring to a hypothetical investor with five houses in Phoenix \u2013 and a really unhappy expression on his face. \u201cWhat is the value of anything,\u201d Zell asked rhetorically, \u201cother than the cashflow that comes out of it?\u201d In trying to tackle the apparent disconnect between Wall Street and Main Street, Zell suggested that people have gone from using their home as an ATM to using not paying their mortgage as an ATM. \u201cHousing is not an investment,\u201d he insisted. \u201cIt\u2019s not an ATM. It\u2019s a place to live.\u201d Moving forward, Zell said, \u201cThe biggest issue to focus on is confidence, because without confidence, people won\u2019t make a commitment.\u201d He made a point of saying that he\u2019s very leery of any legislation that would modify existing contracts. Zell said that one of the bright spots in the current morass is that not much commercial real estate supply has been added in the past 18 months. He also pointed out that \u201cThere is no shortage of equity today\u201d for top-tier assets, though he predicted a long, slow recovery for \u201ccommodity real estate.\u201d Finally, despite the current troubles, he expects the dollar to be strong over the next 36 months. \u201cBuying the euro,\u201d he said, \u201cis like investing in turtles.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
The opening keynote session of \u201cWhat Comes Next: Opportunities, Risks and Rewards,\u201d the 2008 DLA Piper Global Real Estate Summit held Tuesday in Chicago, featured real estate uber-deal-maker Sam Zell (pictured) of Equity Group Investments in his usual pungent form. \u201cThis entire crisis could and should be placed on the shoulders of the accounting profession,\u201d…<\/p>\n","protected":false},"author":1314,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1003853859","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"yoast_head":"\n