The Human Barometer

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You have a long and successful track record for picking up distressed assets, turning them around and pocketing big returns. Do you anticipate a glut of distressed assets out there in the near future, given the problems in the credit and debt markets?

I don't think there's going to be any massive amount of distressed assets. I believe that at the moment the most interesting opportunities in real estate are outside the U.S., where the level of growth is significant--a multiple of maybe two or three times the growth rate in the U.S. And so we've been looking at and investing in various countries around the world--particularly the emerging markets.

Which countries?

Mexico, Brazil, India and China, to start. Our focus so far has been primarily in the low-cost-housing area, where we're actually building houses. But we're involved in the shopping-center business and the office-park business as well.

You said you see two to three times the growth in these countries. Are you referring to demand? Rents? Rental growth?

I'm talking about the growth of the economy. In other words, China is growing at double-digit--we're growing at 2%. Last time I checked that compiles to 5 to 1. India is growing at 8% or 9%. Mexico is growing at 6%, Brazil is growing at 8%. So all of those places are growing much more rapidly than we are. And that creates demand and therefore creates opportunity. In many of those countries, they have a very, very limited real estate supply because of the historical unavailability of capital.

Do you see M&A activity slowing down?

We will continue to see mergers and acquisitions. Now, to a large extent, they've been derailed by virtue of the fact that you've had such an active public-to-private market--and I've just said that I think the public-to-private market is going to take a hiatus. But that will lead to more M&A transactions among public companies going forward.

I know that you send out a New Year's e-mail message to friends each year giving your thoughts and predictions on the market. Care to share this year's theme?

All I can tell you is this year's going to be real neat.

Can I get on your mailing list?

Absolutely not. [This article contains charts. Please see hardcopy of magazine.]