A Zell of An Owner: But Who Is He?

RSS
Follow by Email
Facebook
Facebook
Twitter
Visit Us
LinkedIn

By:

Seemingly fearless in the face of risk, Sam Zell once acknowledged riding his motorcycle as fast as 145 mph on a trip across the South American pampas.

That same boldness and willingness to defy conventional practice helped him amass one of the world?s largest fortunes, trusting his instincts to snatch up distressed properties that others didn?t touch.

Zell now is set to take on a significant new risk with Tribune Co., which the billionaire investor moved in on after watching the struggling media conglomerate draw only tepid interest elsewhere.

Tribune said Monday that it agreed to a complicated transaction in which Zell would invest $315 million and become chairman when the buyout is completed later this year.

The deal to buy Tribune Co. is valued at $8.2 billion. Zell will be able to buy 40 percent of the company and an employee stock ownership plan will be created, which will own all the shares.

Chief Executive Officer Dennis FitzSimons will remain CEO and will be on the board, Tribune said. The Chandler family, which became the largest shareholder after their 2000 sale of Times Mirror Co. to Tribune, agreed to approve the transaction, the company said.

As with past purchases, Zell is counting on having gained undervalued assets near the bottom of a cycle.

?His instincts seem to be right ? buying at the bottom in many cases, and selling at the top,? said Morningstar Inc. analyst Arthur Oduma.

Bearded and blunt-spoken, the 65-year-old Zell long has shown a fiery entrepreneurial passion for what he does.

He grew up in Chicago and nearby Highland Park, where his father was a wholesale jeweler who dabbled successfully in real-estate investment and the stock market. He took pictures at his eighth-grade prom and sold them, and later took to buying Playboy magazines in downtown Chicago and reselling them to his classmates in Hebrew school in the suburbs for a 200 percent markup.

His first successes in real estate, the foundation of a fortune estimated by Forbes magazine recently at $5 billion, came as he was a student at the University of Michigan. After managing the building where he lived in exchange for free rent, he moved on to managing other properties, ultimately incorporating an apartment-management business, and then selling it.

After working briefly at a Chicago law firm, he teamed with his Ann Arbor fraternity brother Robert Lurie, and they began buying distressed properties from developers who were bogged down by high interest rates. That practice continued through the recession of the mid-1970s, with great success.

Zell?s reputation grew, and in 1976 the contrarian investor talked about his penchant for spotting and pursuing opportunities in an article that he entitled ?The Grave Dancer? ? a nickname that stuck.

?He?s been a pioneer in many ways,? said analyst Oduma, who follows real estate. ?Not necessarily as a developer, but as a financier. He really understands the capital markets.?

Continuing to buck conventional wisdom, Zell went on a buying spree of properties after the savings and loan crisis of the 1980s, when S&Ls severely were out of favor.

He encouraged institutional investors to pool their money for commercial real estate in the early 1990s, when it was on the outs.

He also embraced the real-estate investment trust, causing the investment community to view the once-questioned REIT model much more favorably.

Some have called the real-estate magnate a predatory investor, but Zell uses a different term.

?I?m a professional opportunist,? he said in a March 20 interview with The Associated Press.

His biggest deal ever was this year?s $23 billion sale of Equity Office, the office-tower company he spent three decades building up. But he said he did not rank his deals or spend much time thinking about them once they are in the past.

?The truth is that I have been economically very successful, but I was never really driven by accumulation,? he said. ?I was much more driven by achievement.?

Zell described himself as ?an opportunist? rather than someone interested in acquiring a newspaper company for other reasons.

?I?m interested in [Tribune] as an investment,? he said. ?I?m not interested in becoming op-ed editor or publisher or anything like that.?

Zell?s love of motorcycles caused him to form a group called Zell?s Angels years ago, consisting mostly of business tycoon friends who would go on rides with him around the world. He has been an avid skier, racquetball player, paintball enthusiast and sports fan over the years, having bought stakes in the Bulls and White Sox.

Just as Zell eludes the easy characterization as a real-estate investor, with 75 percent of his holdings in other areas, he defies labeling politically. The nonpartisan Center for Responsive Politics said Monday that Zell was a rare ?double-giver,? contributing generously to Democrats and Republicans.

Zell has given $181,500 to federal campaigns, parties and PACs since 1990 ? 49 percent to Democrats and 47 percent to Republicans, the group said. He gave $2,000 each to John Kerry and George Bush in 2004 and also has given money over the years to most of the 2008 presidential races front-runners.

Leave a Reply

Your email address will not be published. Required fields are marked *