Sam Zell Takes Manhattan--For Cheap
Sam Zell, the foul-mouthed Chicago real estate developer and much-derided owner of the Chicago Tribune and Los Angeles Times, is on a Manhattan apartment-building buying binge. Just days after one of his companies, Equity Residential, scooped up three apartment buildings at a 50 percent discount from distressed developer Harry Macklowe, it announced plans to construct 111 apartments and around 10,000 square feet of retail space at the southwest corner of 10th Avenue and 23rd Street in the heart of Manhattan's Chelsea neighborhood.
Zell, known by the sobriquet "grave dancer," earned his infamous reputation by preying on the real-estate errors of others. He began managing apartments as a student at the University of Michigan in the early 1960s. A decade later, he made his first killing, acquiring $3 billion in real estate after the market crash of 1973.Known chiefly in real estate circles for most of his career, Zell first made a splash in the media world in the late 1990s, when he sold the raucous radio broadcast group Jacor Communications to Clear Channel Communications for a highly inflated price. The purchase presaged a decline in Clear Channel's business.
Then in 2007, he bought the Tribune Company's media assets, including the Chicago Tribune and the L.A. Times. Shortly after, he made headlines for his profane, belittling newsroom tirades and relentless cost-cutting. In June 2008, the Washington Post published a story about Sam Zell titled "The L.A. Times' Human Wrecking Ball.'" The Tribune Company filed for bankruptcy protection in December 2008. Zell lost all $315 million he had invested.
At least Sam Zell is on familiar ground -- prime distressed real estate -- with his newest acquisitions. The new Chelsea project was acquired from an investor who had built the foundations for the structure but could not get financing to complete the actual buildings. And the price he paid for the three Macklowe apartment buildings, $475 million total, represents a remarkable half-price sale, according to the Wall Street Journal.
Perhaps more troubling is Zell's swift entry into the New York real estate market, traditionally the purview of a handful of comparatively genteel family dynasties. Since 2004, Equity Residential has acquired more than 25 New York-area properties with a total of more than 7,000 units. The notoriously unsentimental billionaire angered Chicagoans by nearly asphyxiating their hometown paper and trying to sell their beloved Cubs baseball team at taxpayer expense. One can only imagine the myriad ways Sam Zell might rub New Yorkers the wrong way.
Not that any imagination is necessary. On Feb. 18, Sam Zell attempted to enter Manhattan's Union League Club dressed in jeans and a shirt with a some buttons undone, revealing his ample chest hair and a gold chain. The club has a dress code that prohibits denim, athletic apparel, and "immodest attire." Aides quickly wrapped Zell in a long coat to facilitate his entrance. Zell was visiting the club to meet with real estate authority Peter Linneman at a breakfast presentation called "Real Estate Outlook 2010 and Beyond." Money talks, but so, apparently, does ample chest hair.