Panel: Real Estate: Has the Boom Busted?

Speakers:
Stuart Miller, President and CEO, Lennar Corp.
David Simon, CEO, Simon Property Group Inc.
Barry Sternlicht, Chairman and CEO, Starwood Capital Group
Sam Zell, Chairman, Equity Group Investments LLC

Moderator:
Lewis Feldman, Chairman, Los Angeles office, Goodwin Procter LLP

Everyone wants to know what's going on with the real estate market, and Milken trots out the leading experts in the field to talk about just that subject. First off, some of the panelists just weigh in on whether or not there is a bubble. For the most part, they seem to agree that the market goes up and down, but there really isn't a bubble. Sternlicht is the only one who seems to believe that there is a bubble, and in fact, at one point he compares the current real estate industry to the bubble of the late 1990-early 2000 Internet industry. For my point of view, the bubble talk is a bad sign. People were talking about the bubble a year ago, if not earlier, so isn't there anything else to focus on?

Apparently not. He's not a bubble believer, but Zell does believe that some markets are oversaturated with supply, specifically pointing to Southern Florida, Las Vegas, and San DIego.

Another thing that worries Simon: he says his company has the highest yield on new construction. Meanwhile, he is asked about the growing number of online sites that sell the same things that are sold in his malls---is he concerned about the Internet taking a piece of his market share? Not particularly, he says, noting that 40-50 percent of the stores in his malls sell apparel, which he believes is better shopped for in malls, rather than online.

But for the most part, all the panelists are refreshingly honest. Sternlicht says he was certain we were headed for a recession, but that it hasn't happened yet. He also believes that foreign investment into America will reach a new peak, as the Latin Americans, Germans, Australians, and others purchase property in the U.S.

The panels gets a bit more interesting with the focus on investing. For his part, Simon is a bit more cautious and pessimestic than I thought he would be. He says he's a bit concerned about the whole hedge fund sector's interest in the real estate investment market, but Zell argues the hedge fund guys are really just make up a narrow part of the overall investor market. Who is right? I have no idea.