What properties would Sam Zell invest in next?
SAM ZELL called himself “the Grave Dancer”, even though, as he explained, his penchant for buying distressed assets “wasn’t so much dancing on graves as …raising the dead”. In the mid-1970s, when he coined this nickname, America’s property market was struggling. Mr Zell, who died on May 18th at the age of 81 and with a fortune of more than $5bn, had already made good money erecting and managing apartment buildings in small but growing cities. But after others cottoned on to the same opportunity, the market became saturated. Supply exceeded demand; property prices crashed. Undeterred, he bought flats, offices and retail space, often for pennies. As America’s economy boomed in the 1980s, their value soared.
He danced on more graves after Black Monday in October 1987. With rents and occupancy rates falling, indebted property owners needed money, and turned to capital markets. He created a fund with Merrill Lynch, an investment bank, that raised capital from investors to buy distressed properties. Such real-estate investment trusts (REITs), which own, run or finance properties, date back to the 1960s. But it was Mr Zell who helped usher in their modern version, says Michael Knott of Green Street, a firm of real-estate analysts.
Mr Zell was born to Polish-Jewish parents who narrowly escaped the Holocaust. He got his start in business early, buying Playboy magazines in downtown Chicago, where he went to Hebrew school, for 50 cents and selling them to classmates in the suburb where he lived for $3. He wore jeans to work long before office-casual was a thing, and took motorcycle-riding trips around the world with a group of friends, “Zell’s Angels”. He explained his business philosophy as “If it ain’t fun, we don’t do it.” His timing was impeccable. In 2007 he sold his office-landlord business to Blackstone, a private-equity giant, for $39bn. A year later Lehman Brothers collapsed—and the…
2023-05-25 07:59:02
Source from www.economist.com