Zell on avoiding ‘la-la’ land

Sam Zell is the chairman of Equity Group Investments, the private investment firm he founded more than 40 years ago. EGI’s investment portfolio spans multiple continents and industries, including real estate, hospitality, energy, transportation, media and health care. Zell has also been chairman of the Tribune Company since 2007, when he purchased the media conglomerate and took it private. And he’s launched three of the largest REITS — Equity Office Properties Trust, which was sold to Blackstone in 2007; Equity Residential; and Equity Lifestyle Properties. The Real Deal‘s Avihu Kadosh caught up with him recently.

What markets do you find exciting right now?

We are very big investors in Brazil. We’re the largest home builder and we have the most shopping centers there. I’m very excited about what’s happening in Brazil, but am less excited about what’s happening in a lot of other places.

Like where?

You have the European crisis … and you’ve got a U.S. administration that is clearly not business-friendly. That means that you have to add political uncertainty to every business decision you make.

Equity Residential recently purchased three Macklowe properties and a development site in Manhattan. What do you expect from these properties in years to come?

We bought those four different assets because we like the market here in New York and we have a significant presence here. We were always willing to add to it, if the right opportunity came along. In the Macklowe case, the fact that the deal was so big significantly limited the competition. That’s not the case in small deals. Today, a $20 to $30 million deal has 40 bidders from all over the world.

And what about your purchase of developer Shaya Boymelgreen’s development site on the High Line?

To be perfectly honest, that deal would not have been attractive to us if the developer had not made such a mess of it, and had not turned the owner and the neighborhood crazy. By virtue of the disaster that resulted, we had a malleable landlord who was willing to adjust the conditions and terms to meet our needs.

Should the New York real estate industry be concerned about competition from you because of these purchases?

Come on! Who? Mort Zuckerman? LeFrak? Steve Roth?

Does the nickname “Grave Dancer” bother you?

I created it! That was a headline I gave for an article I wrote in 1975. I was doing a lot of distressed buying back then. The title was perfect.

Some people find you too tough, even unpleasant. Is that image something you use for business?

I don’t know what the word “tough'” means. I run my businesses and make my decisions based upon my best interest, and the interests of my shareholders. It’s never in my best interest to either offend or antagonize anybody, and I don’t think I do. On the other hand … maybe “tough” is sticking to your guns.

What does money mean to you?

Primarily, it gives me power. It gives me an opportunity to use my skills and creativity. It gives me a way of measuring myself against others. The truth of the matter is that I’m in a financial position where I don’t really have many limitations as to what I can or cannot do.

Is that a liberating feeling?

For sure I would add the word “freedom” to the answer. But it’s also a responsibility. If you’ve been very successful, you have a tzedakah [Hebrew word for charity] responsibility. And if you have been as successful as I have been, your tzedakah becomes a job of its own.

How are you trying to improve your Tribune deal [the 2007 leveraged buyout of the newspaper company]?

The Tribune has significantly reduced operating costs, almost equal to the amount of loss-revenue. It was dramatic, but it had to be. Also, the management team has made tremendous progress in establishing a more efficient business model and more effective online presence, because all this industry was operating in la-la land.

You don’t like publishers that take over the editorial page. Why is that?

This is my view: I think Rupert [Murdoch] is involved in almost every editorial. I did not do the Tribune transaction so that I could have a voice. I don’t have great desires to superimpose my views.

What will be written on your tombstone?

Someone asked me that about 40 years ago, and I still have no hesitation in the answer: “He was a man of his word.”