NEW YORK CITY-Samuel Zell, chairman of Chicago-based Equity Group Investments, had some choice words for the commercial real estate industry at NYU Schack Institute of Real Estate’s 17^th Annual “Doing Deals in Volatile Markets” conference on Thursday afternoon. “In terms of scale and in terms of velocity, our industry is extraordinarily constipated,” he said, noting that escalating interest rates and heavy debt is burdening the market from moving forward.

“It is really simple,” he elaborated. “We extended and pretended our way five years forward. When you pretend and extend and nothing happens, you’re up the creek. As far as I’m concerned, I think it is going to take another three or four years for us to finally address the overleveraged scenario. My guess is, what will precipitate it will be rising interest rates. Right now, there is an awful lot of debt out there that’s floating over LIBOR. It’s allowing deals that wouldn’t able to be current, able to be current. The minute interest rates go up, the game changes dramatically.”

On Equity’s potential acquisition of a piece of apartment giant Archstone, Zell quipped, “maybe it is an opportunity,” adding, “obviously you’re not going to get much out of me.” Previously, GlobeSt.com reported in March that Lehman Brothers filed an amendment to block the rest of the sale of Archstone – a 26.5% share – to Equity Residential. (And Zell isn't done with Archstone. See today's Chicago Story.)