Sam Zell: Didn’t Know Him, Wish I Had…

Every now and again someone comes along who changes the status quo and has a grand old time doing it. Someone liberated from societal constructs who truly doesn’t give a shit about what is thought or said of them. Or, as Steve Jobs once described in 1997, “the crazy ones, the misfits, the rebels, the troublemakers…the ones who see things differently…[and who are] not fond of rules…crazy enough to think they can change the world” and sometimes do. From all accounts in this terrific article in The Real Deal by Hiten Samtani (link here), Sam Zell was one such man. Like a montage, the article captures certain highlights of a life well lived and leaves out many that no doubt live on exclusively in the memories of those who knew him best where they will likely stay forever. If you haven’t already, consider giving the article a full read or adding Sam Zell’s 2017 memoir “ Am I Being Too Subtle?: Straight Talk From a Business Rebel” to your Amazon cart as I just did. Below are fragments from the article and life of Sam that resonated most with me:

A life that almost never was… Shmuel Zielonka

Bernard Zell, the father of Sam, purchased a newspaper at one of the stops while traveling on business by train from Sosnowiec, Poland to Warsaw on August 24, 1939, when he read the Soviets and Germans signed the Molotov-Ribbentrop Pact, a non-aggression treaty between the two countries. To Bernard, this was an ominous sign for Poland which he realized would become “scraps for both superpowers” and undoubtedly a horrid fate for Jews in Poland where anti-Semitism was increasingly on the rise at that time. With time running out, Bernard canceled the business trip and escaped a week later, as it turns out, in the nick of time just before the Nazis invaded Poland. By 1941, the family settled in Chicago where Sam Zell was born in September of that year. An amalgamation of good fortune, wisdom, and perhaps divine intervention, the United States is gifted Shmuel Zielonka later known as Sam Zell.

Learning early the business of arbitrage and the law of scarcity…

Though Sam lived in Highland Park, his parents sent him by train five days a week to Chicago (about 25 miles away) to get a Jewish education at the yeshiva where he would roam the streets after class. At the time, the first issue of Playboy hit the newsstands in 1953 with Marilyn Monroe on the cover (as an aside, the photos were actually taken four years prior not by Playboy but by pinup photographer Tom Kelley in exchange for the $50 Monroe needed to make a car payment). Zell purchased the magazine for 50 cents and sold it for $3 to one of his friends in Highland Park who, it is believed, was enamored by the well-written articles. A magazine import business was born and, as Zell tells it, a lasting business lesson: “Where there is scarcity, price is no object.”

Know a path is a dead end before you get there…

After graduating from law school, Zell worked for about a week as an attorney negotiating “a contract for linens.” Of his brief legal career, Zell wisely surmised very quickly that “working is all about having a comparative advantage against other people” and he didn’t see his “comparative advantage in grunt work.” How many practicing attorneys today are working soul-sucking painful hours and not loving an ounce of it—at least in part—because a friend or family member suggested it was a prestigious profession and path to great wealth? I have no idea how many but I do recall and agree wholeheartedly with the words of the late Supreme Court Justice Antonin Scalia who responded to a question in 2009 stating that he was “disappointed that so many of the best minds in the country were being devoted to [lawyering].” I digress but many of us would do well to get off the path we are on immediately upon realizing it is the wrong one. Thanks for that Sam.

Great ones don’t need a boss but valuable partners and maybe a mentor…

Zell managed apartments for a landlord while in college and bought his first building during his second year in law school for $19,500. After the brief detour as a lawyer, Zell devoted himself to real estate investing picking up multi-family properties in states like Ohio and Nevada. In 1969, the billionaire real estate investor, Jay Pritzker, attempted to persuade the 28-year-old Zell to come on board and work real estate deals with him. Zell took the meeting but declined the offer as he was determined to never have another boss. Zell suggested the two partners instead and they did on many deals with Pritzker mentoring the young Sam Zell as to how best to structure these deals.

The deal that exemplified a master of his craft…

In 2006-2007, Zell was looking to sell Equity Office Properties, a 543-building, 103 million-square-foot portfolio at the highest price possible as one does. Blackstone Group headed by Jon Gray had agreed to buy the portfolio for $36 billion, or $48.50 per share, but Zell wanted competition from viable suitors to drive the price. To do so, Zell persuaded Gray to accept a relatively nominal breakup fee of $200 million, which allowed other suitors to enter the fray. Zell wasted little time in engaging Steve Roth of Vornado Realty Trust with the following email (which must be some sort of mating call between real estate tycoons…I wouldn’t know):

Roses are red
Violets are blue
I heard a rumor
Is it true?
Love and kisses,
Sam

Picking up on the suggestive chirping from the potential lovebird, Roth responds in kind:

The rumor is true
I do love you
And the price is $52.
To see if this poem will rhyme
We should talk at a set time
While talking like this is nifty
We should really talk at three fifty.
Forever yours,
Steve

Zell had what he needed: a bidding war ensued with Vornado and Blackstone going toe-to-toe. In the end, Blackstone paid $39 billion, or $55.50 a share, in what at the time was the largest leveraged buyout in American history. Vornado’s leaders and their partner on the bid were not overlooked by Zell. He sent along Franck Muller watches that retail in the tens of thousands of dollars with the pithy (or obnoxious depending on how you see it) inscription: “Timing is Everything.”  Mission accomplished for Sam Zell but if this isn’t a man having fun, then it’s hard to see what it means to love what you do.

A few nuggets from Sam Zell himself…

• Regarding risk: “My goal is to be right seven out of 10 times” and “what I [must] do…is assess the scale of the risk. I start by saying, ‘Can I afford to lose it all?’”
• On development: “This has always been a fatal flaw in U.S. real estate: the volume of development has been related to the availability of funds, not to demand.”
• The rush from a big deal: “If you do deals for a living, you know the energy that a big one generates…It’s intoxicating; the air crackles with the energy of anticipation. You are bouncing on your toes all day, every day. It is, quite simply, really fun.”
• On retirement: “Retirement from what?… I don’t understand that, because I’ve never worked in my life. I’ve just done stuff that turns me on.”

Summarizing a man’s life—especially one of Sam’s stature (proverbially speaking as he stood a mere 5’5”) is a tall order and ultimately a fool’s errand. There seemed to be nothing perfunctory or artificially polished about Sam Zell. What you saw is what you got and from the many interviews I watched, this comes through. I didn’t know Sam Zell but he strikes me as a guy who did it his way—saying the things he truly felt—with few regrets.