Sam Zell passed away last year. The week he died, I researched him and learned that he was known as the real estate investor and deal maker who sold Equity Office REIT to Blackstone in 2007 for $39 billion. I purchased his autobiography. After having read the biographies of Summer Redstone and Wayne Huizenga, I wanted to learn more about deal-making entrepreneurs. I began reading Zell’s autobiography Am I Being Too Subtle?: Straight Talk from a Business Rebel.
Sam grew up in an upper-middle-class family in Chicago, but his home environment reflected his parents’ experiences. They escaped Poland on the last train before the Nazis invaded later that night and spent the next twenty-one months trying to get to the United States. They arrived in May 1941, and Sam was born a few months later.
Sam's parents were disciplined and made hard work and high achievement their priorities. Sam’s father couldn’t find a job in his field, so he reestablished himself as a jewelry entrepreneur. With this work, he provided Sam and his siblings’ upper-middle-class lifestyle and set an example for Sam.
At age 12, Sam bought Playboy magazines during trips to downtown Chicago and sold them in the conservative suburbs. He learned that for scarce items, price is no object. Capitalizing on supply-and-demand imbalances would be the central theme throughout his career.
By the time Sam left for college, a commitment to learning, an understanding of how to apply his learnings to real life, and a desire to challenge conventional wisdom were instilled in him.
During a summer break, Sam hitchhiked across the country for two weeks and learned a valuable lesson: you learn the most about people when you see them in their natural environment, so get out and see people; don’t have them come to you. He did door-to-door sales one summer but eventually found his calling. He pitched a real estate developer to let him and classmate Bob Lurie manage his building. This led to contracts to manage two other buildings.
Sam went to law school to please his parents but hated the attention to detail it required. During his second year in 1965, he used his money from property management to buy his first building for $19,500. He also bought the building next door and a large single-family house, which he converted into four apartment units. He was 23 years old.
Sam and Bob landed a large property-management contract, making them relevant market players. They started getting inbound deal flow, which resulted in an opportunity to buy a dozen adjected homes. They structured the $20,000 deals as individual purchases with $1,000 down and deferred closing, partnering with Sam’s dad to raise the equity portion of the deal. The elder Zell drove a hard bargain, demanding a 50/50 partnership.
They assembled the largest block of land held by one owner and sold it for a profit to an apartment complex developer. The entire process taught Sam valuable lessons:
- Tenacity – Always assume there’s a way to overcome any obstacle, and focus on finding it.
- Listening – The heart of any negotiation is listening. Listen to figure out what’s important to the other party.
- Scale – Scale has exponential value. The aggregate site was more valuable than the individual parcels.
This successful deal led to Sam learning about his father’s other real estate deals and to the two of them doing deals together.
In 1966, Sam graduated from law school. He was 25 with $250,000 in the bank and had made $150,000 that year. He’d built a solid financial foundation for himself and his wife. He was ready to leave Ann Arbor, Michigan, and move back to Chicago and start his law career.
Sam’s parents and their journey to the United States significantly affected Sam. His parents instilled in him a curiosity, dogged work ethic, and ability to think for himself. Sam honed these traits in school in a small market, but they were about to propel him to another level when he deployed them in a big city.
Prefer listening? Catch audio versions of these blog posts, with more context added, on Apple Podcasts here or Spotify here!