The two men gave their opinions on investment opportunities and the future of the commercial real estate market, which both characterize as heading in the right direction due to an almost complete lack of construction and improving confidence. "Occupancy across the board in all markets will get much higher, and the single-family housing market, notwithstanding areas like Las Vegas and Miami, should get better," Zell said. "That should give the US back its mobility, historically one of our country's strengths, that if you need to move to a job you must have liquidity in your home to be able to sell."

Fascitelli said he sees occupancy rising because new construction won't happen for a few years. "Rents may lag for the next 18 months, but they should go up. I think you're going to see a good market for real estate in two-to-five years," he said.

While both agreed that job growth is a demand driver, Zell said the lack of supply will be what helps the market right itself. "You've got basically nothing built since July 2007. All non-obsolete properties should start to fill up in 18 months, though likely at 20% to 30% lower than the peak we saw before that. However, I'm not sure what's going to happen with those obsolete properties, those enclosed retail centers that really shouldn't have been built."

The two also ruminated about the recent senate panel grilling of Goldman Sachs, with Fascitelli having a personal tie as a former executive at the firm. Zell said it's unfair to make Goldman a scapegoat for the financial industry, but said Goldman should be acting to a higher ethical standard. "It's become an attitude that it's okay to cross lines," Zell said.

On the various real estate schemes' success rate, Zell and Fascitelli said that REITs proved themselves as being able to weather a storm, and CMBS investing should return. Securitizing real estate got too complex, Fascitelli said, and should return to the Keep it Simple, Stupid model. "It was never intended to be so complex; CMBS was doing best when it began. Where there were problems, the solution is, every one of those firms needed adult supervision," Fascitelli said.

Both men were asked where they are investing today. Zell said he's a "wild bull" on Brazil. "I'm buying distressed debt in the US and equity overseas, with Brazil being my biggest target, as well as China and Egypt. The reason I like Brazil so much: There's 180 million people, they're growing at 6% every year, they're energy and food independent, they have an established executive class, a leftist leader we approve of and they are excited to grow." He says entrepreneurs should focus on community bank portfolios, which are priced cheap but a lot of work to extract profit.

Fascitelli said he's more apt to stay with large US markets. "We're going to stick to New York and Washington, DC. Even Chicago, we're not making any money here, you trade in and out of Chicago, it's like Dallas," he says.

Instant Insights /

Zell, Fascitelli See Market Return by 2012

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