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  Still, what does Zell do exactly that sets him apart from other entrepreneurs? He is asked that question, oh, about once a day. That may explain why Zell’s favorite book is a tome titled What Makes Sammy Run, by Budd Schulberg, published in 1941, the same year Zell was born in Chicago. The book recounts the rags-to-riches-to-rags story of Sammy Glick, a charismatic Jewish boy born on the Lower East Side of New York, who early in life decides to escape the ghetto and climb the ladder of success, no matter who he has to clamber over on his way to the top.

  Zell often refers to this book in personal conversations and in the dozens of speeches he gives every year at business conferences and educational forums. Aside from having a derivative of his name in the title, to Zell, the story mirrors his own life in many respects, in particular the struggles associated with winning, and sometimes losing, along the way.

  “I am somebody who has been very fortunate to have had the opportunity to test my limits,” said Zell. “And I would remind you philosophically that my definition of a fool is somebody who has reached his limits. Almost by definition, whatever goals you set, you need to constantly readjust them so that at no time do you reach your goals before your time is up.”4

  Standing atop a pulpit built from equal parts ego and bravado, Zell maintains a larger-than-life public persona that is constantly seeking new goals. But he is intensely guarded when it comes to keeping his personal affairs, well, personal. Family life is something Zell rarely discusses publicly. He prefers seeking publicity only for himself.

  The immediate Zell clan includes his third wife, Helen; older sister, Leah; son, Matthew; and daughter Kellie from his first marriage and adopted daughter JoAnn from his second marriage. Of all the Zells, Leah is the one who has carved out her own business legacy. Together with her husband, Chicago businessman Ralph Wanger, she has run the Acorn International Fund, a mutual fund, for many years. Son Matthew is deeply ensconced in the family business as a managing director at Equity Group Investments, with his office just down the hall from his father.

  It is a tight-knit group, to be sure, but also one that is prone to coming under the occasional microscope thanks to Sam’s far-ranging and often very public exploits. When Leah started a new investment firm, Lizard Investors, in 2008, Zell was somewhat taken to task in the Chicago media for leasing her 7,500 square feet of space on the twenty-third floor of the Tribune Tower. The oak-paneled digs had a rich history, having once housed Tribune’s executive offices, but had sat empty for months in the aftermath of Sam’s takeover of the company.

  To Zell, it was a clear-cut business decision and one that would still drive revenue to Tribune’s bottom line. He cared little about the unintended publicity, but the move spoke volumes about his desire to push aside the status quo. The little blue pill was hard at work.

  2

  A “DIFFERENT” SORT

  THOUGH BORN WITH an innate sense that he was somehow “different” from his peers, Sam Zell freely admits that his relationship with his father was a primary influence on the development of his complex character.

  Only hours before the 1939 Nazi invasion that became the precursor to World War II, Zell’s Jewish immigrant parents and older sister, Leah, fled their native western Poland. They had warned other family members of the impending conflict, but their pleas fell on deaf ears. “He was right then and he was never wrong again,” said Zell.1

  Over the better part of a year and a half, Berek Zielonka, his wife, Ruchla, and Leah made their way eastward across Russia. They often posed as tourists and lived off Berek’s quick wits to avoid standing out in the crowd. They finally arrived in Tokyo, where they gained passage to the United States, traveling as many immigrants did at the time, aboard a cargo ship.

  The Zielonkas landed in Seattle with little more than the clothes on their backs and $430 in Berek’s pocket. Almost immediately, Berek decided to Americanize the family name, legally changing it from Zielonka to Zell. “Maybe Zell will ring the bell” he later joked about the new single-syllable moniker.2 He also changed his first name to Bernard and Ruchla became Rochelle.

  Back in his native Poland, Bernard had been a grain broker, and by all accounts a very successful one. Once in the States, he settled into the wholesale jewelry business, moving the family to Albany Park, Illinois, a community dominated by immigrant Jews just northwest of Chicago. There Sam was born on September 27, 1941.

  The product of a strict and conservative religious family, Zell vividly remembered his father’s influence on his young life. “I think the environment I grew up in, having the kind of father that I had, somehow or other dramatically impacted who I ended up being,” recalled Zell. “There’s this Yiddish word, derechertz, and it means respect. My father and mother, particularly my father, brought us up with the premise that respect was nonnegotiable. Love was optional. I’m not saying that in a bad way. It was, ‘I want you to love me, but you have to respect me.’ My dad was very, very strong, and very confident. I had to be very confident and strong to succeed in his shadow.”3

  TAKING PLAYBOY TO THE ’BURBS

  As Sam was turning twelve, the Zell clan moved north to the tony confines of suburban Highland Park. Their new community lacked the proper facilities to continue young Sam’s Jewish studies, so his parents sent him back into the city every afternoon on the Chicago North Shore Railroad to attend yeshiva, or Hebrew school. For Zell, the trip was akin to journeying to another world. Every afternoon, five days a week, he experienced a life that his Highland Park school chums could scarcely fathom. He made friends with the conductor. He befriended a group of much older girls from Wilmette High School. These encounters stuck with him, helping him feel at ease with women colleagues as he grew older. “I lived a kind of unique, separate life, because I went to school like everyone else, and then I got on the train,” said Zell.4

  Even at the tender age of twelve, it was no stretch of the imagination to see that Sam Zell had “entrepreneur” written all over his psyche. During his daily train rides into Chicago, Zell’s inquisitive mind often worked in overdrive. One day in 1953, he was scanning the magazines on sale at the train station. There he found the first issue of a brand-new Chicago publication unlike any he had seen, or should have seen at his tender age. The magazine was aptly titled Playboy and founded by a little-known Chicago entrepreneur named Hugh Marston Hefner. At the time, Playboy was not the mainstream media product that it would become years later. In fact, it was considered so nefarious that its circulation was limited only to certain sections of the inner city.

  Zell acted on his impulse, sensing an untapped commercial aspect to this exotic commodity. He bought Playboys for fifty cents a copy and sold them to his suburban chums later in the day for three dollars. A salesman was born.

  For many of today’s most successful entrepreneurs, there is a seminal point in life, a time of discovery, if you will, when they get the equivalent of an epiphany, the eureka moment. Zell’s came when he seized a golden opportunity to give a sermon on leadership and “taking chances” to his youth group. He was only twelve but he wowed the crowd with his powers of persuasion.

  Zell found himself in the right place at the right time, able to marry his inborn salesmanship trait with the “you can make it in America” grounding derived from his immigrant roots.

  His salesmanship served him well through his high school years, when he continued to display his entrepreneurial bent by selling photos taken at school events. He was also a standout student known for his unusually confident and forceful manner. The caption under his 1959 Highland Park High School yearbook photo says much about those formative years: “I’m not asking you, I’m telling you.”5

  COLLEGE LANDLORD

  Early in his childhood, Zell learned the basic nuts and bolts of buying and selling real estate from his father, thanks to frequent dinner table banter and many a “father knows best” fireside moment. Zell described his father as a predictable, conservative investor, never overextending his reach, preferrin
g safe plays to risky endeavors. At first, he was fascinated by the deal-making aspects of each transaction. But young Sam quickly became more interested in problem solving and finding solutions to prickly challenges. He developed a unique ability to quickly ascertain the hidden value of any investment by dissecting its fundamentals and measuring them against a supply-and-demand equation. This aptitude would be particularly important when it came to turning around distressed real estate that formed the early foundation of his would-be career.

  When it came to a college education, Zell settled on the University of Michigan in Ann Arbor, a small college town. It was not too far from his native Chicago, yet distant enough to give him the independence he craved. There he majored in political science and received his BA and law degrees in 1963 and 1966, respectively.

  During his senior year as an undergraduate, Zell decided to attend law school. He cared little for becoming a lawyer, but he felt that a formal legal education would be useful when it came time to do deals in his business career. He needed a place to stay for another two years, and by a stroke of happenstance, he stumbled into his first major real estate venture. When he heard that a developer was building a fifteen-unit apartment building on South Division Street near the University, he and a classmate pitched the idea of managing the property in exchange for free room and board. It worked. The developer then hired Zell to run another building around the corner, and soon he had more business than he could handle while attending school at the same time.

  Zell had pledged to Alpha Epsilon, a large Jewish fraternity, and struck up a friendship with Robert Lurie. This quiet, thoughtful engineering student was quite the polar opposite to Zell’s rambunctious persona, and yet the two clicked. Maybe it was their short statures, as together the two barely measured ten feet tall.

  Lurie joined Zell in his fledgling apartment-management business, and Sam started looking for buildings to buy. With only $1,500 in savings, Zell parlayed the meager sum to purchase a land contract on a small apartment property. After a fresh coat of paint and some new furniture, he doubled the rents and went in search of more buildings to buy.

  That’s when local developer Don Chisholm gave him a huge break. Zell approached Chisholm to take over the management of his apartments across Ann Arbor. Again, his salesmanship worked. Chisholm was taken aback by Zell’s brash, no-BS style and by his understanding of what his fellow students demanded. Soon Zell had grown his apartment management portfolio to some five thousand units.

  By his last year in law school, Zell came face-to-face with his future. He had helped arrange the sale of a fellow law school friend’s house near the University campus to Chisholm. Just as Chisholm was leaving for a stint in the Army Reserve, Zell decided to try his hand at assembling several houses on the same street so that a larger building could be developed on the site. The only problem was he lacked the funds needed to close on the property purchases.

  Enter Zell’s father, Bernard. After visiting Sam and Chisholm and listening to their plans, he was convinced to help them finance the deals. At that point, Sam seemed to have everything he wanted. But developing a project of the magnitude that Zell and Chisholm envisioned would take years. That meant a long-term commitment. To Zell, the prospect of graduating from law school and hanging around Ann Arbor was not so appealing. “I decided that I had to find out how good I was, and that I’d never be happy if I didn’t really understand what I was capable of. I didn’t think that I could really test that in Ann Arbor,” he said.6 His course would take him back home to Chicago. He sold off the apartment business to Lurie, graduated from law school, and headed west.

  When Zell returned home, he learned another valuable lesson from his father—that geography and where properties were located had a big bearing on financial rewards. For example, his father’s investments were generating a 4 percent return, while Zell’s experience in Ann Arbor had delivered his investors 16 percent on their money.

  Zell’s first and only stab at full-time gainful employment came when he worked as an attorney at Chicago law firm Milberg Weiss. Surprisingly, he had few options. He could not figure out why he was having a hard time finding a job. Soon he had his answer. A senior partner at a major law firm pointed to Zell’s deal-making history as the culprit. His entrepreneurial efforts signaled that Zell would not last three months as a lawyer, and no firm wanted to invest in training a short-timer.

  That was a dead-on observation. But instead of three months, Zell lasted for all of one week before becoming bored with the whole legal profession. Once he learned he had to pay his dues, the jig was up and he took a chance on a brave tactic. He told the firm’s senior partner he was going off on his own to do deals.

  Remarkably, instead of unceremoniously tossing Zell out on his ear, the partner rewarded his bravado by agreeing to invest alongside him. One of Zell’s first deals was the purchase of an apartment project in Toledo, Ohio. Over the next six years, he cast a wider net, acquiring apartment buildings in Madison, Wisconsin, in Lexington, Kentucky, and in Tampa, Orlando, and Jacksonville, Florida. All were secondary markets shunned by most major investors, but, ever the contrarian, Zell was happily pocketing big returns. Ultimately, Zell’s experience in understanding the broad spectrum of investment options meant he would have little trouble raising money in the future.

  By this point, Zell’s business was taking off, but he yearned to spend more time selling and less time managing. He immediately thought of his old college colleague Lurie. The two easily reconnected, but little did they know that their business partnership would last the next twenty years. Together they formed Equity Finance and Management Co. in 1968. Using tax-advantaged investing tactics, along with some heavy borrowing thanks to Zell’s salesmanship and close ties with several prominent lenders, they quickly developed into a major force in the real estate industry.

  Ultimately their success was based on an unusual level of trust and compatibility, as well as a simple yet highly effective business strategy: buy distressed apartment properties, fix them up, and sell them for a healthy profit. While they were certainly not the only ones doing it, they leveraged their connections and track record to the hilt, making nonstop personal visits to the deep-pocketed sources of money—commercial banks, Wall Street investment banks, and institutional investors, including pension funds. The two also tested and discovered just how far they could push the envelope when it came to developing tax advantages to shelter their investments in the 1970s, at a time when the market was down and other investors were looking for the exits.

  There was no question that both Zell and Lurie were driven to succeed. Years later, Zell recounted a humorous moment that embodied his philosophy during the era. “We were flying across the United States, and I said, ‘Bob, come over to my seat.’ I said, ‘Here we are over Nebraska. Look down there. Do you realize how much real estate we don’t own yet?’ ”7

  3

  GRAVE DANCER

  FOR THE NEXT ten years, the odd yet tight-knit couple of Sam Zell and Bob Lurie snatched up distressed and bankrupt companies, riding out the ugly mid-1970s U.S. economic recession. They shunned the high-risk, high-debt development game, which saw many real estate titans, even the legendary Trammell Crow in Dallas, teeter on the brink of bankruptcy. In doing so, the duo garnered a national reputation for seeing trends that others could not. And Zell remained the front man for the business.

  By 1978, editors at the Wharton School of Business’s quarterly magazine, Real Estate Review, were certainly impressed with Zell’s ability to harvest gold from the darkest despair—as well as the increasing depth of his pocketbook. He had donated $35 million to the university to start a new real estate management school, and they felt he was a worthy candidate to write a column for an upcoming issue. Rarely one to shirk an opportunity to tell everyone exactly how he feels, Zell agreed. It was the veritable win-win. His reputation would be cemented in one of the leading journals of the day, and he also was given the type of national platform he craved.


  A respectable writer with a flair for blending matter-of-fact candor with a healthy dose of contrarian opinion, Zell thoughtfully penned his ode to the state of the markets. In a bit of sanguine fate, just before his deadline, he concocted the cryptic title “The Grave Dancer.” It seemed only fitting, as he prominently boasted in his discourse that he often “danced on the skeletons of others.” As the last line in the column noted, “You gotta’ dance around the edge. But you don’t fall in.”

  The headline became a moniker that would become forever synonymous with Zell, his mantra for the remaining chapters in his business life. And Sam approved. After all, Zell is a true believer in capitalism and the wealth of riches the system can bestow on those who take reasonable risks to achieve reasonable rewards. He is often characterized as a value investor, someone who sees value where others do not or cannot. Rolling up distressed businesses into newly frocked entities and then cashing out when market conditions are appropriate is his pragmatic, free-market approach.

  Sensing the changing winds that would soon blow over the real estate industry, Zell and Lurie did something that left most of their investor peers scratching their heads. They closed the spigot on their property investments in the early 1980s. In 1981, they reaped some of what they had sown on their way to cashing out. For example, they sold Chicago’s landmark Field Building for $94 million, making a hefty $42 million profit in just three years.

  Zell described the real estate industry at the time as “a really shitty business,” meaning that it had become crowded with investors looking to emulate his strategy. While imitation may be the sincerest form of flattery, Zell eschews copycats and competition.

  As partners, as always, Zell and Lurie huddled for hours at a time, discussing the pros and cons of continuing with the new status quo they had set into motion years earlier. They had made millions on property over the past decade, but they wanted more. Ultimately they decided to turn their backs on real estate, for the time being at least. Instead, they would try their hand and test their business mettle in the corporate world. The idea was to diversify, to go outside their comfort zone, so as not to have all of their investment eggs in any one basket.