Zell, Zuckerman Headline at DLA Piper Global Market Summit
- Oct 05, 2011
October 5, 2011
By Dees Stribling, Contributing Editor
“The first time a presidential candidate invoked class war was William Jennings Bryan in 1896,” Sam Zell told a packed ballroom at yesterday’s DLA Piper 10th Global Real Estate Summit at the Four Seasons Hotel in Chicago.
“And Sam was there for it,” quipped Mort Zuckerman, who was sharing the stage with Zell, which inspired a hardy laugh from the audience.
“Class war didn’t work then and it’s never worked since,” Zell continued. “I don’t know why the president thinks it’s going to this time.”
Zell, chairman of Equity Group Investments, and Zuckerman, chairman of Boston Properties, both had some choice words about the Obama administration during their discussion, which was the keynote event of the morning. Besides expressing their displease with the administration, the discussion ranged over such topics as the poor economy, residential and commercial real estate, Gen Y and even the prospects of economic development in Mongolia.
Dale Ann Reiss, managing director of Artemis Advisors, moderated the discussion between the two legendary real estate billionaires, who are number 66 (Zell) and number 188 (Zuckerman) on Forbes’ list of 400 richest people in America. Their combined wealth, about $6.9 billion, is larger than the 2010 GDP of some nations, such as the Bahamas, Benin, Laos or Suriname.
Zell’s complaints about the Obama administration were numerous, expressed in his trademark throaty voice peppered with expletives. Mostly he focused on “a lack of leadership” from the president and the continued weak state of the economy. Zuckerman likewise severely criticized the administration, which he said he had initially supported, for its economic policy failures. Noticeably, neither man had any ringing endorsements for any candidate the Republicans might offer in next year’s election to replace the president.
Reiss asked whether the two would be willing to have “their ox gored” in any re-write of the tax code — though fellow billionaire Warren Buffett didn’t come up by name — and the two allowed that they would, provided a new tax code encouraged growth and job creation. No further details about “ox-goring” were offered by the two, however, but the subject did elicit Zell’s comment about class war.
Regarding commercial real estate, Zell posited that there’s good news and bad news. “The good news is that nothing has been built since 2007,” he said. “The inventory is being filled.”
He added that the bad news, at least for ownership, is that “landlords can’t get higher rents.”
Zuckerman said that the new normal of companies “being cautious on costs will continue to affect commercial real estate.” In short, tenants are simply going to use less of it, whether through not hiring more workers or allocating less space per worker.
Reiss broached the idea that Generation Y workers wouldn’t need so much office space because of lifestyle choices that involved working off-site with a laptop and other alternatives to standard offices, a notion that Zell disdained. “When you’re 19 and hippy-dippy, the idea of working in a [expletive] tent is fine, but show me a [expletive] 50-year-old lawyer who doesn’t want to have a regular office,” he said.
The lousy housing market was the source of some disagreement for the billionaires. Zell asserted that the rate of U.S. homeownership shouldn’t go above about 62 percent, because more than that is unsustainable. The rate is still around 66 percent, and Zell thought that it should be allowed to fall — “cleared out” was the term he used.
Zuckerman warned that allowing the rate to fall too quickly would further depress housing prices. “Another 10 percent drop in housing prices could break the back of the economy,” he said. “We don’t want the homeownership rate to drop too fast.”
Zell spoke a bit about his forays into developing nations, while Zuckerman said he generally preferred to stay in markets he understood, and admired Zell for his international ventures. The subject of Mongolia came up, and Zell noted that its economy — largely pastoral at the moment — “could grow 30 percent a year for the next five years. It’s a fascinating place.”