Lately, in spite of various frustrations, I have been trying to think through where the opportunities will be in real estate. We’ve discussed my Panama Canal thesis before – but, with that one, in a certain sense it depends of global trade increasing and a growing economy. Put differently, the Third Coast will perform relatively better, but relatively is not always absolutely.
Anyway, I tend to focus on macro trends, then trying to translate them down to specific, investable ideas. One area that has my attention is the direction of interest rates. Given that I believe money-printing will result in a more obvious level of inflation (at some point), it stands to reason that rates will rise. And, in doing so, there will be some opportunities in the debt space, suggesting that the term “distressed debt” could even mean something again. And so it is with great interest that I read the following in a recent WSJ piece about Sam Zell:
“Mr. Zell's breakthrough came when he and Merrill Lynch raised a fund to buy distressed assets just ahead of the early-1990s recession. That downturn differed from the latest partly because banks, thrifts and regulators capitulated quickly on pricing troubled assets, allowing investors like Mr. Zell to snap up enormous portfolios of loans and property at super-discounted prices. This time, lenders have been more inclined to hold distressed assets because interest rates are low.”
If low rates are what is holding this all together (we knew that), then there will be a play at some point. “When?” is the great question of our time.
