Sam Zell: Billionaire Explains How COVID-19 Impacted the Real Estate Market | SALT Talks #16

TL;DR

Sam Zell shares his thoughts on the current economy, predicting a U-shaped recovery and discussing the potential impact of a vaccine, the oversupply of office space, and the opportunities in energy and gold investments.

Transcript

hello everyone and welcome back to salt talks my name is John Darcy I'm the managing director of salt which is a global thought leadership forum at the intersection of Finance technology and public policy we've been doing these salt talks in lieu of our in-person conferences in order to replicate the experience that you get at those conferences you... Read More

Key Insights

• 😄 Zell predicts a U-shaped recovery for the economy and believes the ability to eliminate death as a result of the virus will be crucial for a significant recovery.
• 😘 He sees opportunities in energy investments due to scarcity of capital in the oil patch and the low price of natural gas.
• 🏢 The oversupply of office space was a concern for Zell even before the pandemic, and he expects certain office buildings to be repurposed.
• 😀 Zell believes the hospitality industry, particularly hotels, will face challenges with the slow recovery of occupancy rates.
• 🙈 He sees gold as a response to the debasement of currencies worldwide and advocates for its inclusion in diversification strategies.

Questions & Answers

Q: What sectors and geographies will Sam Zell target with his $3.4 billion cash in anticipation of a market downturn?

Zell plans to respond to specific situations and expects to avoid retail assets. He anticipates opportunities in distressed real estate as banks begin to clean their books and foreclosures increase.

Q: Why did Sam Zell start investing in gold and what is his outlook for gold and silver?

Zell purchased gold in response to the debasing of currencies worldwide. He believes it is a prudent diversification strategy. His outlook for gold is positive, as he expects inflation to eventually result from the massive stimulus measures undertaken globally.

Q: How does Sam Zell determine when to take risks off and when to put capital to work?

Zell states that the current situation is uncertain, with a significant disparity between buyers and sellers in terms of property valuations. He believes price discovery through multiple transactions is necessary, and it is too early to determine the impact of the pandemic on real estate.

Q: Does Sam Zell see opportunities in international markets, particularly emerging markets?

Zell believes that the United States represents the strongest and best market in the world due to the rule of law. He sees no reason to leave the US and cites the security and stability provided by the country.

Summary & Key Takeaways

• Sam Zell believes that the economy is likely to see a U-shaped recovery, with significant recovery expected by the end of the year, although unemployment may still be around 10%. He emphasizes the need to eliminate the concept of death as a result of the virus to fully recover.

• Zell is currently investing in energy, seeing the scarcity of capital in the oil patch as an opportunity for significant returns. He also discusses the potential opportunities in the commercial mortgage-backed securities (CMBS) market, although he believes retail assets in CMBS are likely to suffer.

• Zell shares his views on the office space market, stating that while remote work may increase in popularity, physical office space is still necessary for effective business operations. He believes there was already an oversupply of office space before the pandemic and expects certain office buildings to be repurposed.

• Zell also discusses his investment in gold as a response to the debasing of currencies worldwide. He sees gold as a prudent asset to include in diversification.