SAMUEL ZELL has made millions off of other people's misery.
The Chicago real estate tycoon, who calls himself "the grave dancer," is known for swooping in and buying troubled companies at bargain prices and then turning them around.
It doesn't matter if it's an empty apartment building, a cash-strapped pharmacy chain or an ailing department store chain, Zell is always on the hunt to find the next best deal.
These days, he's most excited about real estate, which was battered in the late 1980s and early 1990s. The industry has risen from the ashes and is ripe for investment, he says.
"We are in a great transitional period," Zell told about 500 real estate executives and analysts at a conference last week in Baltimore held by BT Alex. Brown Inc.
The transition involves the way real estate is financed. In the 1980s, banks, insurance companies and savings and loans threw money at commercial real estate projects only to suffer when they failed years later.
But the real estate industry is being revived by real estate investment trusts, otherwise known as REITs, Zell said. The REITs are being fueled by investors, mutual and pension funds.
He contends that REITs are one of the best ways for investors to own apartments, skyscrapers and land without directly owning and having to maintain a property.
The REIT is "giving the investor the ability to buy and sell real estate at the flick of the button," Zell said in an interview.
There are about 240 publicly traded REITs, and Zell is chairman of three of them: Manufactured Home Communities Inc., Equity Office Properties Trust and Equity Residential Properties Trust.
Equity Residential is the largest apartment REIT in the country with a $6.7 billion market capitalization, 102,000 apartment units, and 350 properties.
It agreed last month to buy a Phoenix-based REIT, Evans Withycombe Residential Properties Trust, which will add another 15,000 apartment units.
Equity Residential went public in August 1993 at $26 a share and now trades at $50.75.
Manufactured Home owns planned communities in more than a dozen states, including Florida, California and Arizona. It went public in March 1993 at $25.75 a share and then split two shares for every one about a year later. It trades in the $25 range.
Equity Office Properties Trust owns about 90 office buildings across the country and 15 parking garages. The REIT is acquiring another 21 office buildings. It issued stock to the public in July at $21 a share, which since has risen 43 percent.
Evelyn Leon-Infurna, a securities analyst with BT Alex. Brown Inc., said Zell's REITs are a "market leader" anchored by strong management teams.
The Zell name carries plenty of weight, too, she said.
"He is a visionary. He is a provocative guy. He is always pushing the edge of the envelope," she said.
Zell is 55, about 5-feet-6, balding and has a salt and pepper beard. He loathes suits in favor of jeans and sweaters. He was among Forbes's 400 wealthiest Americans with a net worth of $1.2 billion in 1996.
He's had a penchant for making money since he was a kid.
As a teen-ager, he reportedly bought copies of Playboy for 50 cents each and sold them to friends, but only after marking up the magazine to $1.50.
While attending law school at the University of Michigan in the mid-1960s, Zell started his own business refurbishing and managing apartment buildings to pay for his rent. He sold the business and later started another specializing in buying troubled apartment buildings.
He loves to scoop up companies on the cheap. He invested in once-ailing Revco D.S. Inc., the drugstore chain, which recently sold to CVS Corp. In the 1980s, he bought Itel Corp. of Chicago shortly after it came out of bankruptcy because he liked its railroad business. He said both deals have been good ones.
"He is the embodiment of the word entrepreneur," said A. B. "Buzzy" Krongard, vice chairman of Bankers Trust New York Corp., the parent of BT Alex. Brown.
Zell is a director of about a dozen companies, including Jacor Communications Inc., which owns and operates 61 radio stations; Quality Food Centers Inc., a supermarket chain; and bedding maker Sealy Corp.
But it is in real estate where he sees opportunities.
Zell expects massive consolidation among the country's REITs in the next two years. He sees 10 to 15 REITs dominating the business because they keep their costs low and operate profitably. He's confident his three will thrive.
Pub Date: 9/08/97