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Sam Zell Remembered: Jon Gray, Stephen Ross Among CRE Leaders Reflecting On Death Of A Titan

Sam Zell, the legendary investor who pioneered the modern real estate investment trust and has been a leading voice in commercial real estate for decades, has died. He was 81. 

Sam Zell

The multifamily REIT he founded, Equity Residential, announced Zell's death in a press release Thursday. The company said Zell died at home due to complications from a recent illness.

Equity's board has appointed David J. Neithercut, its former CEO and a board member since 2006, to replace Zell as chairman. 

“The world has lost one of its greatest investors and entrepreneurs,” Equity Residential President and CEO Mark Parrell said in a statement. “Sam’s insatiable intellectual curiosity and passion for deal making created some of the most dynamic companies in the public real estate industry. He was a generous philanthropist and an incredible mentor and friend and will be missed by all who were lucky enough to be part of his extraordinary world. We extend our deepest condolences to Sam’s family and loved ones.”

Zell founded the predecessor to Equity Residential while he was a student at the University of Michigan, according to the release, and he took it public on the New York Stock Exchange in 1993. 

The company today owns or is invested in 301 properties totaling more than 79,000 units, and it has a market cap of more than $23B. Zell had a net worth of $5B, according to Forbes. 

In addition to real estate firms Equity Residential, Equity Commonwealth and Equity LifeStyle Properties, Zell founded Equity Office Properties, a company he sold to Blackstone for $39B in 2007, still the largest real estate deal in history.

Blackstone President Jon Gray is one of several commercial real estate leaders who looked back on Zell’s legacy Thursday. 

“Sam was a legend in every way — a brilliant investor, entrepreneur and business builder,” Gray said in a statement provided to Bisnow. “I loved his uniquely direct style and the example he set on how to live life to the fullest. We will miss him.”

Related Cos. Chairman Stephen Ross, who like Zell is a University of Michigan alumnus, said in a statement that Zell “was a visionary and force in the real estate industry.”

“Perhaps the most entrepreneurial individual in the country, he helped shape how our industry grew and evolved over the last 60 years, and I’m grateful for his many contributions,” Ross said. 

Zell was also a founder of the National Multifamily Housing Council, and the group's former chair and CEO David Schwartz, who is also the chairman of Waterton, said in a statement that Zell was "the epitome of the great American story."

“Sam really was the godfather of the modern REIT era with the creation of Equity Residential, Equity Office and Equity Lifestyle,” Schwartz said. “Not only that, but he also pioneered casual dress in the office, being one of the first CEO’s to wear jeans.”

Jonathan Litt, a high-profile activist investor with a focus on public REITs, said in a tweet that Zell was a “guru, mentor, and friend.”

“Sam was more than a famed investor, he enjoyed educating the industry and newcomers alike on how to succeed,” Litt said.

Peter Linneman, a commercial real estate veteran who served as director of the Zell-Lurie Real Estate Center at the University of Pennsylvania's Wharton School, tweeted that Zell was a “wonderful friend of 33 years.” 

“His impact on business, especially real estate, is hard to overstate. He was the embodiment of 'entrepreneur,'” Linneman said in subsequent tweets. “He was the founder of the original real estate private equity fund as well as a leader in taking real estate to Wall Street. A tireless crusader for good governance and transparency with investors, his impact on the industry is ubiquitous.”

The tributes to Zell, a Chicago native who based his businesses in the Windy City, also came from elected officials such as Illinois Gov. J.B. Pritzker.  

Zell was known as “the grave-dancer” for his ability to make money off distressed assets.

That strategy goes back to the 1970s, when he acquired discounted apartment assets after owners defaulted on loans in the wake of the 1973 market crash. In the 1980s, Zell began investing in companies and other assets outside real estate with the goal of diversifying his portfolio. 

Zell’s Equity LifeStyle Properties has become the largest owner of mobile homes in the U.S. with more than 400 parks. The firm has received criticism for its treatment of tenants and the conditions on the properties.  

During the pandemic era, Zell shifted away from buying distressed properties. Equity Commonwealth in 2021 reached a deal to acquire industrial REIT Monmouth Real Estate Investment Corp. for $3.4B, but that deal later fell through and Monmouth sold to Industrial Logistics Property Trust. 

Sam Zell at NYU's Schack Institute of Real Estate's REIT symposium in 2017.

Zell, whose Jewish immigrant parents fled Nazi Germany in 1939, was born two years later in Albany Park, Illinois, where his father operated a wholesale jewelry business. 

He received his bachelor’s and law degrees from the University of Michigan in 1963 and 1966, respectively. While a law student, he met the developer of a nearby 15-unit apartment building and was hired to manage the building. The developer soon hired Zell to run a second building, and from there his management portfolio grew to thousands of units.

After graduating, he briefly worked as a lawyer before beginning to invest in apartment buildings, purchasing assets in Toledo, Ohio, Madison, Wisconsin, and Lexington, Kentucky. 

In 1968, he founded Equity Group Investments. The firm has expanded into a wide range of real estate assets and other investments. After growing his portfolio for years, Zell became a pioneer in the publicly traded real estate investment trust space. 

The REIT structure was enacted into law in the 1950s but didn’t become popular until the early 1990s, when Zell and other entrepreneurial real estate investors broke into the space, a period Zell referred to in a podcast interview this month as the beginning of the modern real estate era. 

“There was little doubt in my mind that there was an enormous demand for cash flow emanating from real estate if we delivered a product to the public that in effect met, that met the needs and objectives,” Zell said on the podcast. “The public wanted liquidity. The public wanted transparency.”

When Zell was first approached in 2006 about selling Equity Office, he was surprised because he thought it was too big for any one firm to buy out, he said on the podcast, and he said he would only sell to Blackstone for a "Godfather offer."

“Much to my surprise, they came up with one,” he said on the podcast. “And I was extraordinarily flattered by what they thought the company was worth and why.”

The acquisition came at an unfortunate time for Blackstone, as it closed on the deal shortly before the Global Financial Crisis tanked the markets, but it ultimately was able to turn a $7B profit on the deal after selling off the buildings over the next 12 years. 

Zell said on the podcast that the deal was a big win for both him and Blackstone, but the investors who later bought the buildings from Blackstone didn’t see the same success. 

“The unfortunate part of the story was almost every single buyer who bought any part of the portfolio from Blackstone ended up losing, because they had basically crossed the line and paid too much,” Zell said. “So that was my experience with that particular transaction. I learned a lot of lessons from it.

“The most significant lesson is … create competition. Sellers who don’t create competition don’t get the highest price. And at the same time, being the last guy on the totem pole to buy something also doesn’t likely produce a positive result.”

Zell is survived by his wife, Helen; his two sisters, Julie Baskes and Leah Zell; and his three children and nine grandchildren, according to a release. Zell’s company posted a five-minute video honoring his legacy. 

UPDATE, MAY 18, 5:30 P.M. ET: This story has been updated with comments from commercial real estate leaders and additional background on Zell’s career.

CORRECTION, MAY 22, 12:50 P.M. ET: A previous version of this story incorrectly described the outcome of the Monmouth deal. This story has been updated.