Yosef Meystel knows that America is the land where dreams come true. Millions of immigrants have come to this territory following their dreams and hoping for them to come true. It may due to the lack of employment, studying whatever you want to study or maybe because war is on its way to your city and you need to escape from it. This last scenario was what happened to the family of the multi-billionaire real estate investor Sam Zell. Back in 1941, his Jewish family needed to run away from Poland as Hitler was about to arrive with his army and bomb their city. They traveled all the way to the United States and made it to the land of the free four months before Sam was born in Chicago.
It could be because his life started in such a particular way or maybe because since a your age he proved to have a keen eye for businesses that in time Sam Zell became an iconic for being able to gain profit from distressed-asset investing in a varied range of industries such as energy, finance, healthcare, communications, hospitality, and transportation. His ability for making money out of businesses seen as lost causes gave him the nickname of the Grave Dancer. Also, it allowed him to found Equity International, a prolific investments office headquartered in Chicago and become the owner of important media properties like the Chicago Tribune.
How it all began
Being a Jewish boy born in Chicago, Sam Zell always had a positive attitude towards businesses. His first entrepreneurial action was to buy copies of Playboy Magazines and resell them to neighborhood teens at a six times their price. It may sound hard to believe but, they day Sam Zell entered the real estate business he started applying the same principles to his investments, making profits that exceeded six times the real value of the properties. The way he could do this was after earning a bachelor degree in law and talking himself into a role that so far was strange to him: property manager. This way he started buying properties in distress and fixing them up to rent them to students.
By 1969, Zell wanted to invest in a different business, believing in the importance of diversification and opportunity. This is how this Jewish businessman from Chicago decided to partner up with Robert Lurie and created Equity Properties Management Corp as a tool to centralize Zell’s quickly diversifying investments in a different type of properties. A year after founding the Equity, the business expanded and formed an umbrella, having different types of business under it, such as Equity Office Properties Trust (EOP) for office space and other Real Estate Investment Trusts (REITs).
Having an umbrella structure allowed Sam Zell to reduce the amount of payable taxes, exploiting the REIT tax structure. On the other hand, one thing that has always helped this Jewish Chicagoan in business are his abilities as a salesman. He has always been very persuasive and by the 1970’s he was able to convince numerous businessman to entrust their money to him.
The growth of an empire
The Equity business went pretty well in the 1970’s, but it was until the 1980’s that it actually became an empire. Sam Zell saw his opportunity of becoming a very influential real estate mogul and he took it. During the mid-80’s U.S. real estate crashed dramatically, and Zell saw the opportunity to enter and buy numerous properties –including both residential and offices. This way, he could buy pretty much every property at a sale price and resell after the marked stabilized for at least double its price. Besides, during this prolific decade, Zell started to get involved in the manufactured-home industry, making in time another branch of the Equity business out of it.
Once the real estate business had made him a wealthy man, he decided to start investing in other industries, like Anixter, a computer, and Ethernet cables manufacturer. At first, it was an almost anonymous company he bought for $600 million, today, it is worth at least eight times its original price. Of course, these new investments never affected his real estate portfolio and worked quite well.
The shortfall of the business
Zell vision was always to offer residential and commercial properties to customers at various income levels. He wanted to turn every branch under the Equity umbrella into a strong brand renown nationally. So far, the only real estate mogul that could be compared to him was Donald Trump, and his aspirations pretty much differed one from another.
In order to make his brands stand out, was to offer all the Equity’s office space to corporations, so they could buy them all at the same time. However, this didn’t prove to be a good idea, since corporations tend to buy office space based on various facts, including price and management, not on differentiators such as a famous brand name.
This twist on the plot made Zell offer and sell some office space for considerably less than what he had paid for it. However, this didn’t cost him his empire and he still is one of the richest men alive.