Real estate


Am I Being Too Subtle? | Sam Zell

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Published in: 2017

Amazon | Goodreads

Sam Zell is the founder, owner, and chairman of Equity International, an investment company that focuses on real estate, primarily in emerging markets. Zell’s story starts in Poland just before WWII broke out, when his parents fled the country for the United States. Zell was born in 1941 and raised in Seattle, Chicago and Illinois. As a youth, in parallel with his law studies, he worked within property management. After his studies, he worked with small-scale property development and over time built up a broad portfolio of office properties. Later in his career, he started out investing in other sectors, most often in businesses in asset-intensive industries. Zell has an estimated net worth of $5.6bn and is ranked 529th on the Forbes list [2021].

THE GRAVE DANCER. Zell is a contrarian at heart and has been nicknamed “the grave dancer” because he appears after bubbles have burst. However, it is important to be careful, says Zell, if you dance near the grave there is a risk that you fall in. Zell’s analysis always starts with the downside. If he can understand it, and be comfortable with that outcome, he goes on to the upside. What kind of industry a company is within is irrelevant – the price is what determines if something is interesting.

“Sentimentality about an asset leads to a lack of discipline”

BUSINESS 101. Supply and demand, barriers to entry, margin of safety, limited competition, and good corporate governance – these are Zell’s cornerstones. By studying supply and demand, he times the market. He focuses mainly on demand and then moves to the supply side. He act very cautiously when he see that it is a record year in volume in any industry. He wants to either see an increasing demand combined with a stable supply or a stable demand combined with a decreasing supply. Zell only participates in auctions that he holds himself – if the interest is great, the price will be high.

”Frankly, there’s no substitute for limited competition. You can be a genius, but if there’s a lot of competition, it won’t matter. I’ve spent my career trying to avoid its destructive consequences”

BUY BELOW REPLACEMENT VALUE. The replacement value is what determines future competition. If you can set the rent based on a purchase price of $10k/apartment, new entrants are priced out if the replacement value is $20k/apartment.

THERE SHOULD BE TWO WINNERS IN A DEAL. Zell believes in leaving crumbs on the table. If a transaction does not have two winners, it is a bad deal. If you come out as the sole winner, no more business awaits in the future. If both parties are winners instead, everyone continues to play the game. This goes hand in hand with Zell’s view that a person’s reputation is his or her most valuable asset.

“Reputation is your most important asset. Everything you do, everything you say, is part of the permanent record. Your name reflects your character”

SIMPLICITY. Zell says that if you cannot formulate what you want to do with two sentences, you have not yet understood it. He has broken down his own work role as “the chairman of everything and the CEO of nothing”. He also believes that a simple solution is usually better than an advanced one. Everything complex can be broken down into something simple. It’s really just about organizing your thoughts.

POPULATION GROWTH LEADS TO HIGHER DEMAND. Zell believes that investing globally primary is about population growth. Europe is shrinking, there he is not investing: “you know cheese, castles and wine – it’s all terrific! But nobody works there!”. Emerging markets’ underlying population growth means that demand is high and is expected to rise in line with higher living standards. In addition, he likes when a country is close to reaching “investment grade” – then they behave as best they can. When it is obtained, the foreign interest increases, which both drives valuations and strengthens the local currency.

RELAX BUT DO NOT HOLD BACK. Zell believes that one should not take oneself too seriously. If you are really good at what you do, you have the freedom to be who you are. Zell wore jeans during the 1960s where everyone in the business world wore a suit and tie. On the other hand, he believes that it is one’s duty to maximize the opportunities one has been given. A successful entrepreneur must be indifferent to adversity and instead focus on problem solving. Zell is a voracious reader (one book a week and five newspapers a day) and an avid world tourist, which broadens his skill set and brings a steady stream of investment ideas.


Francis Greenburger: Perseverance and the Downturn Advantage

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Francis Greenburger, Founder and CEO of Time Equities Inc. (TEI), at the podcast Behind the Bricks. Since its founding in 1966, TEI has amassed approximately 31 million SF of CRE, across 30 states and 5 countries. He also has many other notable successes outside of real estate as literary agent, author, philanthropist, and founder of the Greenburger Center for Social and Criminal Justice.

The episode can be found here.


Risk Game | Francis Greenburger

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Published in: 2016

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Francis Greenburger is an American real estate developer, author and philanthropist. Since 1966, his Time Equities has built up a portfolio consisting of over 2.8m sqm of commercial properties (residential, office, retail and industrial) mainly in North America, but also in many places around the world. The portfolio was by 2018 valued at over $4bn. This book is Greenburger’s biography, describing his life from a 12-year-old bookkeeper to a real estate mogul, and the many ups and downs in between.

SORTS OUT HIS FATHERS BUSINESS AS A TEENAGER. Greenburger dropped out of school during his early teens and began working for his father’s publishing company. There he took care of the bookkeeping. His father was not a strong businessman and the publishing house had basically been run at break-even since the start during WWII. When his father died, Greenburger took over the business and sorted out the messy financial situation with debts and receivables in all possible directions. Greenburger quickly forced through substantial price increases and made the publishing house profitable. Thereafter he turned his focus to his latest interest, the real estate market.

FINDS A NICHE WITHIN PROPERTY LEASING. When you stumble upon something difficult to find, and it shows to be a profitable business venture, you likely have found a lucrative business niche. Greenburger learned this when he, as a 16-year-old, rented out half of his rented office for the same amount he paid for the entire rent. His tenant had had difficulty finding an office and once they found one, they were willing to pay up for it. After that, Greenburger started signing leases on large, and difficult-to-rent, premises and divided them up and sublet them at higher rates.

THE CO-OP KING OF NEW YORK. With the profits from the subletting, Greenburger began to buy up rental properties in dilapidated areas. After some renovation and focus on security in the area, he divided them up and sold them as “co-ops” to the tenants. He gave the tenants a discount on the expected market value of the apartments so that they made a nice deal immediately upon purchase, regardless of whether they resold or stayed. By the 1980s Greenburger’s company had become market leader in New York within the conversion of rental housing to co-ops.

CHANGED THE SKYLINE OF NEW YORK. In 1993, Greenburger bought land to build a skyscraper in Manhattan. However, the 64-storey skyscraper on 50 West Street was not completed until 2018 because the financial crisis in the 1990s, as well as again in 2008, temporarily put a stop to the plans. The total cost of the project was $600m.

BECOME THE BEST IN A NICHE. Anyone who spends a lot of time in a certain market, or a certain niche, will ultimately be very good at it. If you look at all the objects in a niche over a long period of time, you will learn what is good value and what are risk traps. In the early years, Greenburger walked up and down Manhattan and built a mental map of all the streets and its properties, getting better at his game than most of his opponents. 

PERSEVERANCE – STEP BY STEP. Greenburger never had any grand plan of building a real estate empire. He just took one step at a time, looking at what at the time made most sense and then pursued that. He had grown up with parents who struggled with money and had a strong urge for security and independence, which gave him great perseverance in pursuing his real estate ventures.

LONG-TERM VIEW AND REFI-EXITS. Nowadays, Greenburger generally takes a longer-term view than most in the industry. He does not “flip” properties quickly just to get a great IRR. If there is stable cash flows an “exit” could always be made through re-financing. There is also a tax benefit being a long-time investor, releasing cash through refinancing instead of exits. Time Equities is happy holding properties for 20+ years if the cash flows are stable.

HAVING CASH CAN BE AN EDGE. When Time Equities entered Holland, they bought in at a time where no banks were willing to finance properties outside A locations in Amsterdam. Time Equities was however financially strong and were able to pay all cash. Being one of very few buyers, the acquisitions were done at bargain prices. Later, in a better market, they counted on being able to refinance the assets.

BEING GLOBAL OFFERS OPPORTUNISTIC DEALS AS WELL AS LONG-TERM STABILITY. In the real estate business, things are cyclical but not on a national basis; they are cyclical on a market basis. To be able to ensure strong cash flows regardless of the economy, Time Equities invests in multiple markets and property types, as well as all from development to conversion to management. Real estate companies entirely focused on development on one type of properties in one market inevitably get into trouble when the market disappears – as it now and then always does.

HARDSHIPS GIVE YOU THE ABILITY TO EMPHATIZE WITH OTHERS. You do not build character when things are good. Everybody can have good character in positive times. It is when adversity hits that real character gets defined and built. When you run into problems you should face up to them, embrace them, and do what you can and then move on. Greenburger says that you need to have confidence that the future is going to heal the wounds of the past, whether they are personal or economical. He believes that those that have not experienced tragedy really do not understand it.