Sam Zell, Legendary and revered billionaire real estate investor has left a legacy that will live on through younger aspiring entrepreneur real estate investors. Famously nicknamed ‘The Grave Dancer’ for his ability to resurrect long-forgotten distressed assets from the abys, his investment philosophy and ‘sam-ism’s’ continue to pave a path for future generations. The son of hard-working Polish immigrants, he learned many valuable lessons at an early age that translated to early success in the business world. Here are just a few of the many principles and ideas that we’ve taken from studying the great investment mind who founded Equity Group Investments one of the largest private equity firms in the world.
When everyone is going left, look right. – Sam Zell
Being a law school graduate and having had early success in business, he was fortunate to be introduced to Jay Pritzker, co-founder of the Hyatt Hotel Chain, and who was instrumental in teaching Sam how to understand and analyze risk “the downside”. He famously said that his father taught him how to be a man, law school taught him how to think, and Jay taught him how to analyze risk. They were great friends even though Jay was much older, they were very close and did many deals together. Sam learned from the best, how to see what the downside was in a deal and it allowed him to become more aware when acquiring deals that were distressed and how to focus on the main thing that would make a deal work out.
Shem Tov, ‘a good name’ in the Jewish community was drilled into Sam as a young boy. In today’s world that would be described as keeping your word (word is bond). This is a valuable lesson not only relating to real estate but life. When you have the trust and confidence to do what you say you will do it not only allows others to trust you but it allows you to trust yourself.
In Sam’s book ‘Am I Being To Subtle? – Straight Talk From a Business Rebel’ he talks about how important barrier to entry is. When getting into other businesses he would look for companies that had a patent or a sure-fire head start in the industry so he wouldn’t need to compete with others making the same product/service. This is often very overlooked as some people might start a new business, only to find out how difficult it really is to compete with all the other similar businesses because there is no big entry point monetarily (meaning anyone can get started).
Tzedakah (Sed-Akh-Ah), is another very important lesson taught to Sam by his father. He was shown how important charity is – and it is. Again, not just in real estate or business but in life it is a very important and fulfilling act to give to others and in some cultures it is even mandated.
“I have always believed that every day you choose to hold an asset, you are also choosing to buy it. Would I buy our buildings at the price Blackstone was quoting? Nope.” – Sam Zell
In 1976, he wrote an article called the grave dancer, which stuck with him, as he explained how he would find these distressed deals and resurrect them from the dead. An entire industry has been created from that very idea, where syndicators look for “value-add” properties where they can acquire at a discount and improve the property and income thus creating value for investors. When he felt there was no opportunity to buy because of too much over-bidding, he honed in on his management and raised capital in order to go on a buying spree in the 1980’s.
With today’s landscape in real estate and the largest players in the industry like Blackstone, Brookfield, and others defaulting on their debts, choosing to give their properties back to the banks instead of putting more equity into the deal, it brings up a question.. is this a new era of the grave dancer.. to be awakened from his slumber… as one body rests only to bring about a new one… with a mission to fulfill what the other before him has set forth.. the Grave Dancer 2…
For more questions or concerns, please reach out to matthew.guerra@principlequalityinvestments.com.