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THE MONDAY INTERVIEW

July 8, 2012 2:12 pm

Im the fastest No in the

west
By Hal Weitzman

Peter Wy nn Thompson

Two-thirds of the way through his interview with the FT, Sam Zells cool veneer is
starting to crack.
The source of his irritation is the FTs insistent questions about Tribune, the media
company that owns the Chicago Tribune and the Los Angeles Times, which Mr Zells
Equity Group Investments bought in 2007 in an $8.2bn deal.
Mr Zell is visibly rattled by the focus on what he has
described as the deal from hell. Eight months after he
took control of the company, Mr Zell took it private. A year later, Tribune filed for
bankruptcy, entering a legal quagmire from which it has yet to emerge.
His slow, soft but menacingly tones, punctuated with long, throaty, gravelly erms give
way to a rasping croak. This is supposed to be an interview about a bunch of things and
so far youve wasted most of the time we have allotted to the Tribune, he says.
When the FT counters that Tribune was a huge deal, the 70-year-old Mr Zell raises his
voice for the first time. For you, he barks. Youre a journalist. And what I learned is
that journalists like nothing better than to write and talk about journalism. And I have a
lot of other things in my life that Im doing. This was a very important investment for
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us five years ago. It didnt work out.

Mr Zell may be right to ascribe the intense focus on his ownership of Tribune to
journalistic navel-gazing, but it is also a case study in how the proven strategies of a
turnround specialist do not always succeed.
He was expecting Tribunes revenue to drop by 6 per cent a year, but in his first year it
fell by 30 per cent. There is no business in America that would survive that, he says.
This was an extraordinary period where national advertising stopped. And of course
the Tribune was no more or less affected than anyone else.
Many observers dispute the notion that Mr Zell was purely a victim of circumstance.
They point to his lack of experience in newspapers, his decision to bring in executives
with radio backgrounds rather than print and to load up the company with debt.
A damning article in the New York Times in 2010 accused Randy Michaels, a senior
executive installed by Mr Zell, of repeatedly using sexual innuendoes and profanity in
public, and of cheapening Tribunes historic boardroom with poker nights and juke
boxes. Within two weeks, Lee Abrams, the companys new chief innovation officer, was
sacked after sending out a company-wide email linking to a spoof video labelled Sluts
that featured nudity and profanity. Mr Michaels resigned a few days later.
Mr Zell calls the New York Times piece a disgusting example of theoretical journalism
a hatchet job, plain and simple that was dramatically exaggerated. He defends Mr
Michaels as among the most creative human beings that Ive ever met, although he
says Mr Abrams crossed the line.
Their strategy, however, was correct, he maintains. Tribune was stodgy and stale, radio
was dynamic and daring. We brought in a lot of very talented, very creative people and
the goal was to dramatically shake up this organisation, he says. I deliberately threw
grenades.
Many observers say the Chicago Tribune is a shadow of its former self, a great metro
voice weakened by bankruptcy, mismanagement, multiple redesigns and a lack of
leadership or business strategy.
Mr Zell disagrees. If you did a poll here in Chicago they would think that the Tribune
today compared with five years ago is night and day better, he says.
That is highly dubious. Chicagoans usually bemoan Tribunes deterioration. The
business section, for example, is a perennial target of complaints by the citys
executives.
Oh, the business section sucks, Mr Zell admits, retreating fast. But to me the
question is: whats happening with the editorials and is the Tribune doing investigative
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reporting? And for the first time in the Tribunes lifetime theyre doing a serious
amount of investigative reporting and they have a vibrant editorial page. And thats
what people want.
The CV
Born: September 28, 1941
Education: 1962 bachelors
degree, University of Michigan;
1965 law degree, University of
Michigan Law School
Career: 1961 Starts an
apartment management
business as University of
Michigan undergraduate
1966 Starts Equity Group
Investments, his primary
private investment firm
1984 Acquires majority
ownership of Anixter (formerly
Itel); expands it into a leading
global supplier of
communications and security
products, wire and cable
1993 Takes Equity
Residential public at a
valuation of $800m
1997 Takes Equity Office
PropertiesTrustpublic,valued
at $7bn
Feb 2007 Equity Office is
sold to Blackstone for $39bn
April 2007 Buys Tribune
Company for $8.2bn. Tribune
files for Chapter 11 bankruptcy
in December 2008
Interests: Skiing, riding
motorcycles, travel
Family: Married with three
children

But did the Tribune debacle tarnish his reputation as the

saviour of distressed assets? I dont think so, Mr Zell
says, leaving a silence that suggests we should move on.
It is a frosty moment in an interview that had begun
inauspiciously 40 minutes earlier. Mr Zell had made it
clear he had no time for small talk. Clad in a brown
sweater, jeans and loafers, the founder and chairman of
EGI greeted the FT at his Chicago office with a cursory
smile and a businesslike handshake before settling into an
easy chair armed with a box of Tic-Tac mints, a bottle of
water and an expression that suggested the interview
should begin immediately.
Such down-to-business straightforwardness characterises
his approach to deals. We have always sold speed and
certainty for price, the property magnate says. If you
want to sell something, Ill sit across the table from you
and tell you Ill close next Thursday. The price, though, is
X instead of Y. In business, were capable of making a
decision much more rapidly than most.
Im also the fastest no in the west, he continues.
Thereve been people whove worked for me who will
spend an inordinate amount of time before they conclude
not to do something. One of the skills I have is the ability
to look at something and rapidly make a risk-reward
analysis as to whether its worth doing.

Mr Zells love of speed goes beyond dealmaking. He still rides his yellow BMW
motorcycle to work every day. He also rides all over the world with a group of friends
and admirers known as the Zells Angels. He is a keen skier, too. I like to go fast, he
says.
In business, operating rapidly has enabled Mr Zell to swoop while others dither. In
1976, he penned an article describing how he had bought $3bn-worth of distressed
property across the US by dancing on the skeletons of other peoples mistakes. The
piece was titled The Grave Dancer, a name that has stuck with him.
The nickname points to what drives Mr Zell. It is not money. Somebody whos been as
financially successful as I have been quickly reaches a point where money per se is not a
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motivating force any more, he says. We could tick off four or five preposterous
luxuries that somebody can have with a miniscule amount of my net worth.
That net worth is estimated at $4.7bn, making Mr Zell Chicagos richest resident, no
mean feat in a city that boasts many billionaires, including talk-show host Oprah
Winfrey; Ken Griffin, head of the Citadel hedge fund; the Pritzker family, the Hyatt
hotels heirs; Ty Warner, the Beanie Babies magnate; William Wrigley, the chewing-gum
heir; and Eric Lefkofsky, an early backer of Groupon.
Making money may no longer matter, but being on top does. Mr Zell is fiercely
competitive, a trait he traces back to his relationship with his father, who fled Poland
with his mother and sister just before the Nazi invasion and escaped to the US via
Japan, arriving four months before Mr Zell was born.
The relationship between Bernard Zell (who Americanised his name from Berek
Zielonka) and Sam was more one of rivalry than parental care. The competitiveness
was mutual, Mr Zell says. In some respects, he was more competitive with me than I
was with him.
Often the relationship was strained, and they did not talk for months on end. There
were times when things were tough between us, he says. Some of it was competitionrelated, some of it was stubbornness, some was principle, but in the end I always gave
in, which is what the son is supposed to do.
In business terms, though, Mr Zell was not prepared to let his father win. It took him
about a decade from launching a property-management firm while a student at the
University of Michigan to overtake what the old man had achieved financially.
Mr Zell had displayed an early aptitude for entrepreneurship. As a boy, he would buy
Playboy magazines downtown for 50 cents each and sell them on to his school mates in
the wealthy suburb of Highland Park at a hefty mark-up.
He bristles at the suggestion that he is addicted to dealmaking, before promptly
reiterating the same metaphor. Am I a deal junkie? Probably.
The most remarkable deal of his career one he would much prefer to dwell on than
Tribune was the 2007 sale of Equity Office, then the USs biggest office landlord, to
Blackstone Group, the private equity firm, for $39bn, at the time the biggest leveraged
buy-out in history. The timing was remarkable coming shortly before the US
property sector was plunged into crisis.
History may well judge that deal to have burnished Mr Zells reputation more than
Tribune tarnished it. He clearly hopes so. These days Mr Zell is more reflective and
complex than his ball-busting reputation. He says he has been thinking a lot about
legacy. I want to have on my tombstone he was a man of his word, he says. I think
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Ive done a pretty good job of living up to that.

Mr Zell recently created a succession plan, placing two long-time executives
immediately below who are now in charge of all recruiting. We made that
announcement to set the record, he says. It was time to make sure that everybody
knew that there was an EGI after Sam.
He stresses that he has no plans to retire. I cant imagine it. What would I do? Play
golf? That is clearly not an option for a dealmaker still operating at high speed.

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