A message from Sam Zell (Creator of the RIET)

[bbuzzard]

Sam Zell is a legendary real estate investor who created the REIT (Real Estate Investment Trust). Late this year he sold his REIT to Blackstone, a large private equity and real estate investor. This is his Christmas card (yes, it's real, I verified it with a reliable source). Somewhat finance-nerdish, but funny and not a little bit frightening to those is us looking for yields to live on.

http://www.yieldsz.com/

For those who want some background on the credibility of the source, I give you:

Samuel "Sam" Zell is an American billionaire real-estate entrepreneur. With an estimated net worth of US$4.5 billion, he is ranked the 52nd richest American. Zell received his BA (1963) from the University of Michigan and his JD (1966) from the University of Michigan Law School. His early years in real-estate investment could be traced back to, while an undergraduate, purchasing apartments in Ann Arbor with his fraternity brother, the late Robert Lurie, Zell's longtime partner and friend.

The pair went on to create the Equity Group Investments, L.L.C., which spawned three real estate public companies, including: Equity Residential, the largest apartment owner in the United States, Equity Office Properties the largest office owner in the country, and Manufactured Home Communities, a mobile home company. In addition Sam has created a number of other public companies, and many private companies.

Mr. Zell is also Chairman of Capital Trust Inc., a finance and investment management company focused on the commercial real estate industry, and Anixter International, the world's largest distributor of communication products and electrical and electronic wire and cable.

He helped found the Real Estate Department at the Wharton School of the University of Pennsylvania, as well as the Zell-Lurie Institute at the University of Michigan. Zell also endowed the Zell Center for Risk Research at the Kellogg School of Management at Northwestern University, and the Samuel Zell and Robert Lurie Real Estate Center at the Wharton School.

[Robert the Red]

Funny, whether or not it's authentic.

[wabmester]

Loved it!

I think yields will improve, but it might be a mistake to think so. REITs have made real estate more liquid, so why should the premium return?

People used to think stocks should have a yield comparable to T-bills. Once yields dropped, they *never* came back. And they shouldn't. Both stocks and real estate give you *real* yields that rise with inflation, so we should really be comparing them to the real yield on TIPS rather than T-bills.

[haha]

I have heard Mr. Zell speak; the spoken introduction is his voice. Also, these are his opinions as expressed elsewhere.

Ha

[dex]

It doesn't load for me - can someone give me the headlines?

[Lsbcal]

Don't know about the message but I loved it anyway! So what is Zell going to do with all his liquidity?

Les

[bbuzzard]

Quote:

Originally Posted by lsbcal So what is Zell going to do with all his liquidity? Les

If I knew that, I would be the 50th richest man in America !

[Delawaredave]

Sorry if this is a stupid question, but:

What does "monetization of hard assets" mean ?

Thanks.

[dex]

Quote:

Originally Posted by Delawaredave Sorry if this is a stupid question, but: What does "monetization of hard assets" mean ? Thanks.

Selling a hard asset for cash.

Sell you old car to someone for cash and you have monetized a hard asset.
If in the USA and you sell an old factory to China ....

[Delawaredave]

Sorry, I still don't get it. The phrase in the song is:

"The enormous monetization of hard assets has created a massive amount of liquidity"

What specific "hard assets" ? Whose assets ?

I thought liquidity changes were a function of central bank actions.

Here's a paper on the topic - not that I can understand it...

http://papers.ssrn.com/sol3/papers.c...ract_id=942737

[Ed_The_Gypsy]

Please correct me if I didn't get it right.

I think it means that people are paying more for businesses, etc., that produce constant (in the short term) income streams, which by definition is a reduction in yield.

It is a good time to sell your company to the Chinese.

But what are you going to do with the resulting cash?

[haha]

Quote:

Originally Posted by Delawaredave Sorry, I still don't get it.

A simple example is when you have a $25,000,000 apartment complex and you go to the bank and borrow $20,000,000 with that complex as collateral. You now have 1) your building and 2) a $20,000,000 deposit in your bank account.

You also have an offsetting liability of $20,000,000 owed to the bank; and the bank has a new asset of your $20,000,000 note. Where did that $20,000,000 come from? Out of thin air. Risk has been created for you and the bank, but the amount of money floating around has been increased by $20,000,000.

You can then go bid on anther hard asset, thus increasing the demand for such and the price pressure supporting these assets.

Ha