Monday, April 23, 2012

Sam Zell on `Overleveraged' Commercial Real Estate

Billionaire investor Sam Zell  says the US real estate market is still significantly over-leveraged with "zombie properties" because of "pretend-and-extend" strategies employed 5 years ago, so in the end it's difficult to have a viable commercial market until this problem is corrected, which in his eyes, is by letting the price discovery process play out. Today's low cost of capital also changes the incentives for banks to clear assets from their balance sheets.

Outside of real estate, he has invested extensively in deleveraging situations with middle market companies that have higher cost of capital, spanning all kinds of industries.

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