What Does Sam Have To Say?
February 9th, 2012 | Author: admin
What Does Sam Have To Say?
On more than one occasion Ive mentioned Sam Zell the real estate billionaire and organizer of the original real estate vulture fund now known by the politically correct term opportunity fund of the early 90s. When commercial property turned sour he was ready and armed with his 409 million fund small by todays standards to buy out excellent properties for pennies on the dollar from troubled sellers including the Resolution Trust Corporation.
The RTC was a quasigovernment corporation set up by Congress to take over troubled thrifts and dispose of properties foreclosed as a result of the Samp;L meltdown. He bought brand new apartment complexes for less than 5000 per unit when they were going for 40000 or more shortly before the crisis. He was prepared.
At a December 14th Israeli business conference Zell remarked that the U.S. real estate market will be in recovery by spring 2009. Zell also pointed out that the US population is growing and with fewer than 600000 building starts in 2008 a million fewer than any of the last 10 years demand for housing will rise. Zell blamed the current crisis at least in part on illconsidered decisions disseminated around the world and people in effect respond to it perhaps often without any particular caution or attention.
What that means is that the news we hear is printed without being thought through rationally and as a result people panic. But doesnt it make sense that there would eventually be a housing shortage if new construction is virtually shut off down to only one quarter the normal number of annual new housing starts? Sure there is excessive inventory ten months worth right now but when financing is restored people will buy in a big way and the inventory will be quickly absorbed. In the early 2000s there was excessive inventory too but it didnt take long to turn that around.
Another thing in the U.S. we replace about 2 of our housing stock each year. Add to that the increased number of new household formations and suddenly we need millions of new housing units per year. Its coming. There arent enough park benches for all those who will need housing.
Another factor I think contributes to the panic and confusion is the lightning speed at which information is disseminated around the world by email TV radio and other communications. News comes to us instantaneously in real time and people are able react to it immediately and en masse because they all got the news at the same time. Markets crash and banks suffer a run on deposits when everybody does the same thing at the same time.
If it took a bit longer for news to get around important events would be old news before half the population knew about it. Today we can get the news that Lehman Brothers is going belly up and how awful that is with talking heads putting their own spin on events and how it will affect the world. And then it does because of the speed by which we tend to collectively react.
Were now at or near the bottom of another real estate cycle and those who have the courage to be contrarian and buy today will be the multimillionaires of tomorrow. Its not rocket science brainy or anything like that. Buy low and sell high.
Im certainly not saying that I have all the answers but I have learned at least one thing in my long march to geezer status: Slow down stop and think wait and see.
Remember almost nothing is as bad or as good as you think its going to be.
About the writer:nbsp;nbsp;Doug Mitchell is the CEO and President of Grace Realty Group Inc. a Florida investor in valueadded commercial real estate projects located in the Southeast United States. Grace offers individual investors debt and equity positions in the projects it redevelops.
http://www.gracerealtygroup.com/land2/howtoinvesttgf.html
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