Lewis Feldman, Chairman, Los Angeles office, Goodwin Procter LLP
Although all of the panelists said they are optimistic about the real estate sector, Sam Zell, right, took a more bullish stance than Barry Sternlicht, left.
Has the real estate boom of recent years come to an end? Worse yet, are we at a valuation peak that will soon give way to a sustained bear market in U.S. real estate markets? This was the primary question addressed by the four panelists at this session.
The panelists represented the leaders in the hotel, office, retail and residential sectors of the U.S. real estate market. Sam Zell of Equity Office Group, David Simon of Simon Property Group, Stuart Miller of Lennar and Barry Sternlicht of Starwood Capital shared their views on the questions of real estate valuation, macroeconomics, international real estate markets and the capital markets.
The key question of real estate valuation provided ample opportunity for debate among the panelists. Although all four experts were optimistic about certain areas of the real estate markets, Sam Zell and Stuart Miller took a more bullish stance, with Barry Strenlicht and David Simon providing a more tempered view.
Miller looked to economic and population growth, as well as land scarcity in population centers to support his view of increasing land values in the future. Zell echoed this view of supply-and-demand factors, and pointed to the growth in liquidity turning to real estate to achieve yield objectives.
Sternlicht chimed in that "this is too bullish" and focused on increased leverage levels and the low cost of debt as hints of an overheated market. Simon agreed and added that retail properties, in particular, had benefited from high rents and high yields on development. He said he sees these results declining in the near term, as yields begin to approach the lower yields found in other sectors of the real estate markets.
All four panelists found technology to be an integral part of their operations, affecting either their marketing, production or both. Zell said that technological superiority provides a strong competitive advantage in his Mexican homebuilding business and that equity will continue to succeed in this market as long as such an advantage persists.
After a rousing discussion covering many key issues of the current markets, moderator Lewis Feldman of Goodwin Procter LLP asked the question many audience members had been waiting for: "What is your favorite type of real estate asset now?" Zell chose Brazil; Miller chose scarce land in growing U.S. coastal markets; Sternlicht favored European properties, such as hotels; and Simon liked strong super-regional malls.
Global Conference 2013
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