We have been huge fans of Sam Zell for decades – even before he entered the mobile home park business in the 1990s. We believe that Zell is the cause of many of the benefits that all mobile home park owners share today. But even more importantly, his focus on risk and downside is what made the “Grave Dancer” unique among his peers.
In this video tribute, we delve into what we've learned from Sam Zell over the years and why he was truly America's greatest real estate investor. You'll gain valuable insights from my experience and observations, which we hope will inspire and educate fellow enthusiasts in the industry.
Thank you for your continued support, and we hope this tribute to Sam Zell will resonate with you as much as it does with us.
A Tribute to Sam Zell: America’s #1 Mobile Home Park Owner - Transcript
You have probably heard by now the sad news that Sam Zell passed away on May 18, at the age of 81. Sam Zell was a great visionary in the world of real estate, the greatest real estate investor of all time. I was a huge admirer of Zell and read virtually everything he ever said, including his most recent book, "Am I Being Too Subtle", which was released a few years ago. So that was share some of my insights into the life of Sam Zell and things that you can learn from reading about Zell and his various quotes.
The first thing you learned about Zell is he was built from scratch. He was a guy who got into the real estate business at the very bottom, managing apartments while the student in college. He did a fantastic job of managing those apartments. He ended up owning some apartments. Later, he went to law school, he got out of law school hated being a lawyer, but the partner in the law firm decided he would co-invest with Sam Zell. And Zell then started acquiring more apartments, as you probably know, as l went on to become the largest department under in the US. Then he ventured into office buildings. And he built that into the largest office building portfolio in America. And then starting the 1990s with the same time that Dave and I got the business he started buying mobile home parks, and bought his way all the way up to the number one largest owner under the Equity Lifestyle brand on the stock exchange as a REIT.
So what makes Zell so special? How was he able to become the largest investor and not one, not two, but three different real estate sectors in one lifetime? Well, what makes Zell so unusual is his focus, specifically on risk. Zell was obsessed with risk. His famous quote was, if the deal has high risk, low reward, never do it. low risk, high reward always do it. High risk, high reward those are the only times you should debate the topic. He always was very pessimistic, which I admired because so many real estate people are focused only on the upside, only on the big picture. That's why so many developers and real estate folks go broke is they're always taking massive gambles. Zell was the reverse. He hated gambling, he hated taking big risk. And so he was very big a prophet of the idea that you should not get involved in deals that are risky. And if you did, you need to mitigate those and you sure as heck need to get compensated for taking on that risk.
Another thing that was that was famous for was his fundamental belief in liquidity. Zell knew from suffering through multiple recessions all the way back to the 1970s that when times are tough, liquidity is key. You can't make a go of it if you can't cover your mortgage payments, and your utility bills and he always liked to have a plan B to mitigate risk. And that's why he was called the "Grave Dancer". Because he seemed to defy the laws of gravity, he kept building and growing, yet nothing ever brought him down.
In fact, his most genius stroke of all time was when he unloaded most of his office building holdings to Blackstone in 2007 for around $39 billion right before the crash known as the Great Recession. He made such a great deal there. Blackstone suffered through many of those properties going into foreclosure. I'm sure they regretted making that purchase. And Zell certainly never regretted making that sale.
Zell is also the guy that really brought the mobile home park industry into its own, he gave it credibility at a time when trailer parks hadn't done. When I got the business back in the 19 1990s, as to Dave. You could not get a loan on a mobile home park. That was the hardest thing about the whole business model was finding any available lender because nobody wanted to get involved. And there was Zell started buying them. Suddenly lenders thought, wait a minute, it can't be that bad. Sam Zell is doing it. I think you have to credit Sam Zell for the modern mobile home park industry. He didn't invent the product, be sure as heck brought it into the 21st century and brought with it the ability to get such things as Fannie Freddie debt, and just general respectability and an industry that, unfortunately had suffered from a lack of respect for decades.
So if you have time, I would urge you to read the book. "Am I Being Too Subtle", which was the last thing Sam Zell ever wrote. And you can watch various interviews and read various articles and many publications. There was a good write up in Forbes, I think back in 2013, in which Zell, I think I have a good quote here. The quote was, "the key to my success is that my focus is never on how good it's going to get. My focus is on the percentage that it doesn't work out". That's what makes zelfs so unusual. Most people who can grow portfolios into giant sizes, have to have some degree of optimism. If you read almost anything about Zell you'll see he never was optimistic. He would look at properties if he thought that it made sense from a risk reward perspective. He thought it'd be profitable, that he would buy it by He never really had dreams of granduer. He was always just amassing more properties. I don't think he ever really cared about being the largest in three different sectors. He only cared about making really good profitable deals for his investors.
Another thing I noticed about Zell that I really always admire is he never changed as he got older. And more successful, if you read a lot of biographies is always depressing, because the person in their early days when they're at their best, they give you one philosophy of life. And then later editions, they change it. If you read books, for example, on Warren Buffett, who I think is a fantastic investor, but in the early books, he despised private aviation, he said that you should basically short companies where executives fly in private planes. Today, Warren Buffett owns a private plane, in fact, is very active in the private airline industry. Zell, on the other hand, never really shifted. His viewpoints remained consistent from when he got to the business in his early 20s, all the way to the end in 81. He never changed, he never altered.
He was also very, very loyal to people. His business partner, when he first started out was last name of Lurie, it was his college roommate. And later when he became more successful, he invited Lurie to go back in business with him. You rarely see a negative article on Sam Zell, I don't know how he pulled it off. But he really apparently offended nearly nobody. So I really liked that aspect. He was always loyal, treating people fairly. You never really see bad press.
Probably the only fault is l had was he didn't like public speaking. I went to an event that MHI held years ago where he was the speaker, but he didn't speak much. He didn't go up to the podium and deliver a speech as we know it. He simply sat in a wingchair and answered questions from the audience. And he often would answer your questions in just a few words, much shorter than the actual questions that were asked.
The bottom line to it is I highly urge you to read the book. "Am I Being Too Subtle?" You can buy a copy on Amazon for probably $20. It's an absolutely terrific read. Zell is a man to be admired he's needed needs to be admired very much by all mobile home park owners. If it was not for Sam Zell, many of the things that we find to be just a standard of the industry, particularly debt components, that that was trailblazed by Zell and in his absence, those things would not have happened. He's probably the most important person in modern mobile home park history. The other one being Warren Buffett, who stepped in when the industry was also at a real bottom back in the early 2000s and brought it back to life.
So again, it's sad that Zell is no longer with us. I'm not sure the future of Equity Lifestyle, but I'm sure it will be fine. He was not an active CEO of it when he died anyway, it was already the helm has been taken over by somebody else. But certainly it's up to everybody to respect what he did read his accounts, become a fanatic of his principles on risk versus reward and you will definitely be a better person for it. This is Frank Rolfe. I hope you enjoyed this and I'll talk to everyone again soon.