"This Is Not A Time To Buy Anything" - Sam Zell Warns Retail Real Estate Market Is A "Falling Knife"

CNBC's cheerleading staff had a very difficult time finding the silver lining in retail investing this morning as they relentlessly pressed Sam Zell on the value of commercial real estate.  Asked to offer up his thoughts on where retail real estate is headed over the next five years, Zell highlighted the significant excess inventory in the U.S., 4-5x more per capita than Europe, and said investing in the space right now is like catching a "falling knife."

"Like a falling knife.  You start with the fact that the U.S. has 4 or 5 times the amount of square footage per person of retail as anywhere else in the world.  So we start with an enourmously large inventory of retail."

 

"3 years ago your could buy an 8% mall...you could buy a B-mall and it was probably an 8% cap rate.  The same mall, 3 years later, is now selling at 13% and 14%.  So you've seen enourmous erosion of value."

 

"When the knife falls there's going to be plenty of opportunities for people to step up and say 'what are alternate uses?'"

Pressed on whether now just might be the time to take a contrarian view on the collapsing retail space, Zell again was unable to satiate the desires for positive news from his eager hosts.

"An area that's in this much disarray, with so many weak players, is not an area where I would want to deploy capital at this time.  And I'm generally a contrarian but I think what we're dealing with here is very significant."

 

Of course, things only went from bad to worse for the CNBC hosts when Zell offered up some positive commentary on Trump's presidency. Per CNBC:

Corporate America is willing to invest money on a longer-term basis under President Donald Trump than the previous "anti-business administration" of Barack Obama, real estate mogul Sam Zell told CNBC on Tuesday.

 

"Bluntly, the only way I can square anything is I focus on what gets done, not what's said," the billionaire said on "Squawk Box." "On a measure of what's gotten done, I believe there's been very significant change since Trump was elected in November, and change that is positive."

 

Zell points to deregulation and promises of tax cuts and massive infrastructure spending as major positives for business.

 

"Just think that all of a sudden there are no industries that are pinata[s] of the president," Zell said, referring as an example to what he called Obama's campaign against fossil fuels.

 

"I'm more optimistic than I was six months ago. But I'm not ready to party," Zell told CNBC on Tuesday, adding the current business environment is not one of buy anything and win. Investors need to pick carefully, he added.

 

Meanwhile, the most shocking part of the interview segments above is that CNBC didn't encounter any "technical difficulties" as Zell offered up his positive comments on the Trump presidency while taking a shot a Obama.