Zell: scale of debt opportunity won’t be ‘gigantic’

The co-founder of Equity Group Investments said borrowers will extend loans as much as possible even if they have no chance of paying them off. It will be a “gigantic example of extend and pretend”.

Sam Zell has cautioned that the scale of the debt opportunity in US real estate won’t be as “gigantic” as many predict – insisting extend and pretend will see many borrowers try to hang on to assets.

Interviewed by PERE magazine at the 4th annual Kirkland & Ellis Real Estate Private Equity Forum in New York yesterday, Zell said many borrowers had been given a “hope certificate” by financial institutions, which are willing to extend maturities when debt service payments are current.

He said that instead of seeing a “gigantic” opportunity from loans in need of refinancing or recapitalisation, real estate investors would be faced with “a gigantic example of extend and pretend”.

To read the full interview with Zell, see the November issue of PERE magazine.