OG Gold Mine Series: Who is Sam Zell?

OG Gold Mine Series: Who is Sam Zell?

A self-proclaimed business rebel, Sam Zell is the pioneering mind of the modern-day REIT industry. He is a first generation American and a self-made billionaire who has been listed as one of the greatest living business minds. How did he develop the wisdom and the trait of being an unrelenting opportunist, of seeing what others don’t and trusting his instinct? 

He attributes much of his independent thinking to his parents, Jewish refugees from World War II.

Seeing Opportunity In the Presence of Destruction

Sam Zell’s father was a Polish grain merchant who realized Europe was taking a turn for the worst, especially for Jews, in 1939. He took his wife and daughter and fled the country, and despite his return to plead with his extended family to also leave Poland, they refused. Just after he left his hometown from the failed attempt, it was bombed by the Germans and the rest of his family tragically died at Auschwitz.

Zell believes that having immigrant parents had a huge impact on his approach to entrepreneurship. Key to this is appreciating the value of opportunity, the effect of hard work done well, and a patriotic love of country. He is known for his independent thinking and trust of his own instincts, and how that practice has made him wildly successful.

Making a Fortune with Undervalued Properties

“I spend almost my entire day listening. I ask questions, I probe, I raise possibilities.”

Zell made his fortune by recognizing the potential in properties that were selling for less than they were worth. He purchased them, improved them, and held them long-term. Zell entered the world of real estate investing and management in college, when he managed student apartments for landlords and spent time learning to improve the distressed properties. After graduating from law school and passing the bar, he did a huge pivot and entered the world of real estate investing by founding what would become Equity Group Investments. He foresaw and prepared for the 1973 market crash, which ultimately gave him the opportunity to obtain high-value properties at low cost, and he utilized the monthly rental income they generated to pay off debt. This was incredibly innovative at the time, and set the foundation for our modern-day REIT industry.

The early days of REITs were not so spectacular. In fact, Zell says that the 1991/1992 REIT version is the first one designed to actually work, whose premise is offering a fair deal to both sides.

So, what’s a fair deal according to Zell, the forefather of modern REITs? It has a few characteristics. 

How Zell Qualifies a “Fair Deal”

“The very important basic premise of what really is a fair deal is a deal where everybody makes money, both the sponsor and the stockholder.”

A fair deal possesses a few key characteristics according to Zell: 

  1. Low debt to equity ratio
  2. Straight deals that sell reality instead of futures
  3. Self-managed REITs whose management is incentivized to grow shareholder value
  4. Investing in quality properties

Zell not only paved the way for and outlined the principles of successful REITs, he also guides investors at the highest levels on strategy and the future of the industry. His admonition to them is this: in order for the industry to prosper, they have to be the best at what they do and create a long-term growth business that provides access to capital and rewards those providing capital. 

A Billionaire Rebel Nurturing the Next Generation of Entrepreneurs

The legendary Zell not only chairs his own investment company, but five other public companies including one of the nation’s largest REITs. He moved beyond investing in properties to investing in companies, and earned the nickname “grave dancer” for describing his strategy as "dancing on the skeletons of other people's mistakes.” 

"I made my fortune by turning right when everyone else was going left. In the late '80s and early '90s, I was buying office buildings at 50 cents on the dollar. I kept looking over my shoulder to see who my competition was, but there was no one. I could not help but question whether I was wrong. Fear and courage are very closely related.”

He comments that he loves what he does, and at 79 years old, he is still first in the office and last to leave. He credits much of his success to a dynamic company culture, whose guiding principles of accessibility, transparency, and alignment mitigate the opportunity for problems and lack of collaboration or interest. Being laser-focused on equipping the next generation of entrepreneurs, Zell furthers entrepreneurship education at various universities through the Zell Family Foundation, and unifies those students and alumni through the Zell Global Entrepreneurship Network (ZGEN). 

In 2017 he published the book, Am I Being Too Subtle? Straight Talk From a Business Rebel, touted as “...an indispensable guide for the next generation of disrupters, entrepreneurs, and investors.” He was recognized by Forbes in 2017 as one of the 100 greatest living business minds, and he currently lives in Chicago and is worth $5.2 billion.