Sam Zell - The Biggest Real Estate Owner in America | Full Documentary

managing tens of billions steve schwartzman's blackstone is on the rise to become the biggest private equity firm in america but his empire will not be complete until he acquires equity office properties the largest real estate trust in america worth over 30 billion dollars in 2007 it's a collection of over 500 premium offices in every major city across america one man sam zell has built this real estate empire through calculated risk-taking the size of which none has ever seen it's an embodiment of one of the greatest real estate booms in america but as a market boom based on lies and speculation underneath the prosperity a financial storm is looming and semzell knows it while the rest of the market still lives in euphoria it's the perfect opportunity for samzel to exit with substantial potential profit not that i expected a sale to happen i thought equity office was too big to be acquired [Music] equity office stock is trading at around 40 a share but steve schwartzman believes it is undervalued he offers samsel 42 a share it was looking like the biggest real estate deal in history blackstone's 42 bit sent a signal to the street that equity office was undervalued now everyone wanted a piece expecting more bidders to come in samsara rejects blackstone's initial offer blackstone comes back with a shrunk price of 47.5 dollars a share the offer has become too good to ignore if it goes through semzel will make a fortune for shareholders and for himself but as an astute investor he questions why steve schwartzman will be buying real estate assets during the peak of the bubble steve schwartzman is a very risk-averse person he was not going to buy the real estate assets from samsel without having a guaranteed plan of generating profits his end game was that he was going to sell different buildings to different buyers the profit from some of the parts was going to be bigger than the entire market value of the reit samsung realizes that steve schwartzman will unload at least half of the properties for immediate profits it will be a shrewd business move but it will also dismantle the legacy samsung has worked his entire life for he now must find a different buyer that could exceed blackstone's offer vornado royalty is one of the biggest players in real estate it offers a shocking bid of 52 dollars a share and a promise to keep the real estates intact rather than breaking them up as blackstone plans to do the same zell and vornado may have underestimated steve schwartzman's resolve they are in for a war schwarzman raises the offer to 52.25 a share 24 higher than a market price when the bidding war started steve schwartzman has that competitiveness that sometimes comes from utter conviction that he and his company are just simply better than everyone sam zhao now has a tough decision to make whoever takes over their company will become the biggest real estate conglomerate in the world [Music] through consolidating broken real estate buying out failing properties and companies and returning them to profitability samsel has made himself the undisputed king of real estate [Music] [Music] it is the year of 1939. nazi germany and the soviet union just signed a non-aggression agreement poland is squeezed in the middle and will soon be divided and devoured it's alarming news for the jewish residents in poland sam's father bernard zell books his family the last train out of poland before the nazis bombed the railroad tracks my father looked at that treaty and said this is basically an agreement to split a poland and so my father got off he was on a train turned around went home got my mother and said we have to leave zell's mother is pregnant with sam while still on the run and they arrived in the united states may 18 1941. this was kind of the background and i was born september 28th so literally i was born 900 days after they came to this country by the time they arrive in the u.s they're nearly broke but bernard zell is more determined than ever to do whatever it takes to support his family in his new land they now call home when samsara turns 12 his father achieved the american dream and has built a successful jewelry business he moves his family to the upper middle class neighborhood in highland park illinois [Music] samzell has an unusual childhood even from an early age he demonstrates a distinctive entrepreneurial talent his first business is selling the playboy magazines this is the kind of magazine in those days wasn't sold in the suburbs i was limited to uh those under the tracks uh magazine store so i showed it to a friend of mine and he was enthralled and said geez you know can i buy it and i said sure he said how much and i said i don't know three dollars he said great so he paid me three dollars for something that i had paid 50 cents for uh and ps i'd gotten to read first um and and maybe for the first time in my life i really understood supply and demand uh you know and there was an unlimited demand for that product and so i started quote unquote importing playboy from my friends but in spite of his business acumen sam is mediocre at school his siblings are the top students in college consistently getting higher grades than their brother and sam is struggling to measure up samzell is not your typical ivy league educated investor he's a street smart hustler who is very grounded in the real world but at the time his parents especially his father were a little concerned that sam didn't meet their expectations in terms of school to prove to his father that he can succeed elsewhere semzell becomes fixated on finding a business idea and taking a shot at the time a real estate developer is building a 15 unit student apartment samsel immediately realizes that this could be an opportunity for him to make money we didn't know how to manage for rent departments we had no clue what it entailed it just never occurred to me that i couldn't do it so he created a simple brochure and went to pitch the owners his audacity pays off in spite of his lack of experience the landlord decides to hire him to manage the new apartment zell knows something that other real estate managers don't he knows the customers as a student he understands the kind of housing the students like the most zell and his classmate redesigned the entire interior removing outdated furniture and making the apartment more vibrant he had an insight that other professional apartment managers didn't have he knew that the young people did not want environment like home they wanted something more fun and exciting so at the time the scandinavian style was very popular among the younger generation so sam and his classmates remodeled the interior and bought furnitures with clean and modern designs and it's a huge success his apartment becomes highly sought after by the students after finishing two more apartment buildings the same landlord gave them all to sam zell to manage by the time he graduates from college he has already made a consistent income for managing apartments but he knows this kind of money will never make him rich he needs to start buying his own properties and so i went to law school not because i wanted to practice law i went to law school so i had a degree and that if i didn't work out at whatever it is i was doing i would be able to in effect still practice law and make a living semzell also feels an obligation to his parents to get through law school he enrolls in michigan law although he finds a subject boring and uninteresting but deep down he knows to truly make his own decisions he needs to become financially independent to do that he will own income generating properties he has made enough for his job as a property manager it is time to start looking for apartment building to buy he bought a threat unit apartment building for nineteen thousand five hundred dollars with savings and loans from the bank he remodeled the interior in a way that appealed to students that allowed him to double the rent a few months later the rents it collected become enough for a down payment for another apartment building by the second year of law school semzel owns more than three apartment buildings and also has a management contract for eastern michigan university i graduated from law school in 1966 i was 24. i had 250 000 in the bank and i made about 150 000 that year that was an income of about 1.1 million in 2016. i had established a solid foundation for my family but even with that kind of money sam zell still decides to become a lawyer and treats his real estate business as a side hustle his parents escaped nazis so they had this very risk-averse attitude that got passed on to sam zell he thought he could do both having a stable job as a lawyer was an insurance policy just in case his real estate business failed it's a perfect plan except it won't work in the real world as samsao is about to painfully find out [Music] after earning his law degree samsel starts applying for a job in every law firm in chicago [Music] he believes that his impressive resume of real estate deals will easily help him land a position at the best law firm in chicago i included in the resume you know all the business i started and all the things i had done and along with my gpa and everything else and i then had 44 interviews i had 43 rejections you know i i was in the top quarter of my class i knew this didn't make any sense and now and finally i was interviewing with the head of of one of the law firms and the guy looks at me and he says tell me about your deals and i tell you about my deals i want a job he says oh we would never hire you you'd be here you know three months and you'd be leaving and going into the real estate business so we would never hire either with anybody else he was right although he eventually finds a job through his family connections the circumstances force him to rethink his career choice as a created big picture thinker he realizes he's never built to be a lawyer a job that requires him to be detail driven and meticulous he quits in just four days and decides to do real estate full-time but samsel isn't about to risk his own fortune alone he learns that to succeed in a business he needs to scale that also means leveraging other people's money by now he had quite a bit of success by owning properties in college towns so he started researching he found out that universities in smaller cities across america were growing like crazy so that was going to be his focus in 1966 he raises enough capital from 20 wealthy investors including his father until now the property he owns are small-time apartments but with a large sum of money he's ready to go back samsel's first building is a massive 99 unit apartment building next to the university of toledo it's a one million dollar investment and he has calculated that the worst case outcome is an eight percent return but the upside is a potential 19 percent but all i looked at was the fact that i was able to buy one of the few apartment buildings in town so i didn't have any competition he believes that there's an under supply of quality apartments for students after redesigning the interior based on his acute understanding of what young people want he raises the rant the asset immediately starts generating cash flows and it makes a 20 return within a year so that deal was one of the most successful deals that i had ever done simply because there was no competition and therefore where there's no competition you can produce exceptional margins impressed by samzel's ability to profit the same investors double down and write them bigger checks for bigger apartments by 1971 semzel has become a rising star in the local real estate scene at the age of 30 he has already become a millionaire but tazell is just the beginning opportunities are boundless he put up 10 million dollars to buy the broadway plaza in los angeles half the investment business is about raising money so every time senzel had a successful investment he used that as a marketing tool to raise more money to him scales everything scale was how he would become the biggest player in finance but unbeknownst to zell his investment success has an unintended consequence he now has a target on his back [Music] the 1970s is a decade of drastic economic change in spite of the political turmoil and the failing vietnam war america is still the most prosperous economy on earth a revolution is underway in one of the biggest sectors in america is the invention of the real estate investment trust capital from all over the world is flooding into reits creating an unprecedented boom semzel joined the industry after quitting his job as a lawyer writing the real estate boom he has built a portfolio of residential and commercial properties worth hundreds of millions he may be on top of the world but he has no idea that the rs is gunning for him [Music] semzel's brother-in-law roger basks has been his tax turning on many real estate deals roger a harvard trained lawyer with an impeccable reputation was my go-to person on real estate deals with tax implications in the mid-1970s samjoe was working on acquiring a high rise hotel from reno nevada with very complicated taxes he was trained as a lawyer but he didn't want to get bogged down by the details so he hired his brother-in-law to take care of the taxes for him but a few years later writer's law firm becomes a target of an investigation by the rs both sam and rogers are indicted on the charges of tax fraud samzell's real estate empire is now more vulnerable than ever if convicted he'll lose everything he has spent his last 15 years building ultimately semzell is dismissed without being charged but his brother-in-law basks is not so fortunate getting indicted by the rs will forever leave a mark on samzel's record but he vows to overcome it he will build a business so large and so powerful that no one dares to hurt him again to grow his real estate business semzel needs to raise more money for bigger projects but his brush with the rs has made potential investors skeptical and to make matters worse by the mid-1970s the real estate market has become overly saturated making it difficult to find profitable investments zell then does the unthinkable he stops buying any properties cold turkey as he realizes the real estate market may have been oversupplied and overbuilt everyone thought i was nuts after all occupancies were still over 90 absorption was high companies were hiring it was one of many times i would hear people tell me that i just didn't understand i didn't listen i just stepped aside while the music was still playing sam zell has always been an audacious risk taker he's also very practical investor who knows real estate from hands-on experience but what really sets him apart is the ability to have conviction on his own views sometimes against the rest of the world [Music] by the time the real estate market crashes sam sales immediately goes on a buying spree acquiring distressed properties on the verge of default with just one dollar down payment a majority of them between 1974 and 1977 samsel purchases roughly four billion dollars in assets his bold action and his clever financial scheme pay off and investors become eager to join him again by the mid-80s samsel has built a real estate investment powerhouse making hundreds of millions of dollars a year investing in distressed real estate properties has been a stroke of genius but sends out wonders if he can turn around bad properties can he also turn around back companies and there's only one way to find out he is about to join the corporate takeover business [Music] [Applause] the decade of 1980s belongs to the corporate raiders as the cuts interest rates and lowers corporate taxes companies are flooded with easy money the age of excess is here led by coral icon many wall street titans have amassed unparalleled fortune by taking over corporations they raised the stock price by temporarily firing the management cutting costs and with fancy promises after two decades of opportunistic deal-making samzell has become a prominent real estate investor he owns a portfolio of residential and commercial properties that generate him hundreds of millions a year but saint zell has a bigger ambition if he can turn back property assets into profitable ones he believes he can also turn around back companies in distress if we've been as successful in real estate as we have been are we really just good businessmen and if we're a good businessman then why wouldn't the same principles that apply to real estate apply to buying anything else sam has the skill and the capital all he needs now is just an opportunity by 1983 the predator finds his prey [Music] to become a great investor is to become a lifelong student at all my life i've basically focused on reading and digesting information because the well educated up-to-date you are the better you are to be able to assess judgment and assess risk finance is a field that rewards mostly on the quality of your decision making rather than based on the hours of work you put in decision making is a science and also skill that can be taught and learned brilliant.org is a great place to learn probability game theory and systems thinking which are all the basis for becoming a great decision maker what makes brilliant stand out from the conventional lectures is its emphasis on interactivity it makes a learning process fun and more effective sometimes even with a simple understanding of probability and logic you can easily distinguish between nonsense from real facts to start it for free visit brilliant.org phineas the first 200 people will get a 20 off brilliant annual premium subscription after testing his thesis on smaller companies samzel then says his vision on one big conglomerate itil founded in 1969 ital is a leasing company that owns aircrafts rail cars and shipping containers but after his early success the company's management starts draining the company's resources by throwing lavish parties and paying hefty bonuses to themselves the company filed for bankruptcy in 1981 and emerged from chapter 11 and 1983 with his future still clouded with uncertainty after working real estate for so long samsung developed the strum preference for physical assets and itil was a company with a lot of tangible assets after buying five percent of the company samzell asked the board for a seat at the table but as a newcomer on the scene no one takes zeal seriously the board proudly dismisses the offer samsel isn't the one to back down from a fight he immediately buys up to 22 percent of the company and it starts a hostile bit after a year of back and forth with a board and a proxy fight he successfully takes over the company and becomes the chairman and ceo [Music] as an outsider semzel is now welcomed by the board and the shareholders the only way to prove himself is by delivering tangible results his first job as ceo is to cut costs by selling underperformed divisions and reducing redundancies he had a simple plan find the most profitable business the company owns and double down on that after cutting costs and liquidating underperformed assets samsel has accumulated 50 million dollars of capital the amount needed to invest in a main business one that has a competitive edge for ital is the railcar business in a single year 1979 the industry had built over a hundred thousand rail cars the railcar industry had succumbed to easy money for building that bubble burst in 1981 during that same period 65 percent of the existing rail cars in the country were scrapped on the demand side loadings were flat but stable supply was going down at some point those two lines were going to intersect and when they did anybody with rail cars was going to make a lot of money anticipating a price hike sends up concludes this is the perfect opportunity to buy as many road cars as possible at a steep discount it proves to be a slick business move since the company requires abroad cards at a discount it beats the competition at a wide margin and the company's revenue immediately skyrockets what do most big companies do when they have a lot of cash they acquire other companies it's a great way to diversify the business but sam had a different agenda [Music] sam jello has made a killing by cornering the railcar leasing market successfully turning itil around it is however not a growth market samzell is never content with past successes he needs to elevate itel to a higher level to me it's always what's next and i think that's what drives most very successful people it's never about the money i mean that's a way of keeping score it's about achievement and it's about winning a game and it's about upping the ante turning around a bad company versus growing a company often takes a completely different leadership styles but sam knows as long as they stick to the fundamentals and logic he will find a way he acquires a wiring and cable distribution company in 1987 called anexter brothers with a consistent cash flow generated from itil's rail car rental business samsung will invest them back to expand annexed around the world it's a risky move that goes against what zell has learned about only investing in bargains but if the business exceeds it has the potential to become a unicorn enterprise that will continuously print money for the years to come and it's a huge success anexter experiences an explosive growth and it becomes itil's fastest growing division by 1992 generating close to a billion dollars in revenue a year the success of annexure convinces samsel to unload the railcar business in order to free up more capital to acquire better assets by selling 70 000 rail cars to general motors he reaps 2.3 billion dollars [Music] but with all that success samsel once again does the unthinkable by 1992 he steps down from the ceo position at itil [Music] i think the biggest strength that makes sam zell a great player in finance is his understanding of the public market he is exceedingly good at finding investment opportunities and more importantly raising the necessary funds that match them he's a master at getting equities together in a way that benefits everyone but also more profitable for him in the 1990s samzell seized an opportunity to make real estate investment trusts go public was no visibility into markets or assets and there were no metrics brokers held all the cards and they weren't telling the simple genius of public rates is that they turn bricks and mortar into transparent and predictable liquid assets as the biggest real estate investor in the country samzell becomes a board member of n a reit in an effort to make a complete publicly traded real estate asset he raises additional 3 billion in 1997 after acquiring the largest collection of premium office buildings across the country he packages them all in a reit what he doesn't know is whether wall street will buy it [Music] by the time samsel's reit goes public it's the biggest real estate portfolio in the world comprising more than 32 million square feet of commercial offices what made this read on a very attractive investment was at the predictability of cash flows the tenants were majority companies with average lease term of seven years it allowed samsel to offer a 5.7 dividend equity office properties eventually turns into one of the most sought after stocks as u.s is entering a housing boom by 2006 equity office properties becomes a target of a bidding war by many wealthy wall street firms it's a huge complement to samzel's accomplishment it certifies his position as one of the most powerful forces in finance but even titans make mistakes and semzal is about to face the toughest challenge of his career by 2006 tribune is 159 euro media conglomerate that is a majority owner of chicago tribune the la times and various news networks due to the evidence of the internet the news industry is struggling to adjust after several attempts to sell the company to private equity firms the board of tribune turns to an unlikely buyer the grave dancer samzell we looked at the performance of the tribune for the seven years prior to the time we bought it uh during that seven years average revenue declined three percent a year when we underwrote the deal we underwrote it at six percent decline each year going forward the risk reward of the transaction was extraordinary both ways samzell realizes that these media brands hold long-term value with his magical touch this value could be unleashed he proposes a leveraged buyout deal that will take the company private future of this company is currently right out there in front of us and if we keep operating the way we've been operating in the past there is no future samzell's approach is simple cutting costs by removing redundancies and use the savings from them to opportunistically invest in growth opportunities his approach worked before and may continue the work if only the market conditions stayed the same the timing he took over tribune couldn't be worse it was the beginning of 2008. one point samsel dubbed himself the gravedancer for turning a profit on troubled asset his 8.3 billion dollar buyout of tribune ended in bankruptcy for the publisher in december [Music] the 2008 housing crisis has brought the entire newspaper industry to his knees as businesses are struggling they cut their advertising budget first over the years of corporate battles samsel has become accustomed to getting what he wants but this time he's going against a force more powerful than he has ever encountered even after receiving a 650 million dollar rescue loan from jp morgan the company still struggles to stay alive it's a time of great change for the world samsel suddenly finds himself as a member of an old guard the tribune failure is a reminder that the market can make even the smartest of men look like foals i did the tribune company i lost 300 million dollars if it had worked i would have made 5 billion i liked that risk reward ratio would i do it again yes because the risk reward ratio was appropriate the error of samsel may have come to an end yet at the age of 80 he refuses to retire tired from what i mean i haven't worked since the fourth day that i was in that law firm samzell is a no bs goal getter i think he's probably the most representative of the older generation of investors samzell's rise to the top also coincides with the prosperity america has enjoyed since the 70s [Music] sometimes my team argues with me they can't believe we're leaving money on the table but i want to create an environment where everyone wants to keep playing as an opportunistic capitalist samsel indeed plays the game of market better than anyone [Music] [Music] you

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Length: 35min 23sec (2123 seconds)

Published: Sat Apr 09 2022