0:00

You're listening to TIP.

0:03

On today's show, we have the honor of interviewing

0:05

legendary investor and entrepreneur Sam

0:07

Zell. He's the founder and chairman

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of Equity Group Investments, a leading

0:12

private investment firm. Sam began

0:14

his career in real estate in the 1960s,

0:16

but over time, Sam has made many bold moves

0:19

and investments, earning him a reputation as a

0:21

savvy and fearless investor. He

0:23

did this by founding Equity Office Properties

0:25

Trust in 1997, which became the largest

0:28

office REIT in the United States.

0:30

In 2007, he sold the company for

0:32

a record-breaking $39 billion.

0:35

And on today's show, he walks us through how the deal

0:37

unfolded. And of all the many

0:39

investment books that I've read, Sam's book

0:41

titled, Am I Being Too Subtle? might be

0:43

at the top of my list. In this episode,

0:46

we'll dive into Sam's remarkable career and discuss

0:48

his insights into real estate investing, entrepreneurship,

0:51

and what it takes to succeed in business. Joining

0:54

us today as a co-host is David Green,

0:56

an accomplished real estate investor and host

0:59

of the BiggerPockets podcast, which

1:01

is the number one real estate investing podcast

1:03

and always a top business podcast as well.

1:05

If you haven't already done so, I highly encourage

1:07

you to go check out the BiggerPockets podcast.

1:10

David will be joining us in the interview with Sam

1:12

Zell, bringing his expertise and experience

1:14

to the conversation. So to kick things off,

1:16

David and I are going to give a quick recap of our

1:19

conversation with Sam. So without further

1:21

ado, let's get to it.

1:25

You are listening to The Investor's

1:28

Podcast, where we study the financial

1:30

markets and read the books that influence

1:32

self-made billionaires the most. We

1:34

keep you informed and prepared for the

1:36

unexpected.

1:46

So excited to have you here, and

1:48

especially have both of us getting

1:50

to ask Sam Zell all the questions, all the

1:52

burning questions we've always wanted to ask him. We

1:55

just got off of the interview with him and

1:57

we were both, I think, pleasantly surprised. It just... the

2:00

amount of wisdom he was providing

2:03

to us and the generosity is really, I think,

2:05

the word that was coming to my mind with his time.

2:07

And he just seemed comfortable and giving

2:09

and open and transparent as he usually

2:12

is, but curious to get your initial feedback

2:14

on how it went.

2:16

It was so rare to hear a perspective

2:18

like what Sam shared with us. And

2:20

I'm known for analogies on my podcast. And

2:22

I was thinking as he was talking, most

2:25

real estate podcasts, interviews

2:27

that you hear involve a specialist

2:29

in one area of something like the human body.

2:31

They zoom in on a microscope and they tell you about this

2:33

fingernail or how this kneecap

2:36

works. And Sam zoomed out and showed

2:38

us the entire human body and how

2:40

all the pieces fit together. And that is one

2:42

of the ways that he avoids risk

2:44

or he sees angles that other people miss.

2:46

Like we all learn when it's too late, once

2:49

the market has crashed or once the opportunity is gone or

2:51

once you've lost. And Sam shared so much

2:53

wisdom on how to foresee these things coming.

2:56

And if you understand these basic fundamentals or

2:58

these principles, you won't get caught off guard.

3:00

And as he was talking, I just thought you never hear this.

3:02

This is so valuable to be able to hear.

3:04

And it was an awesome interview. What did you think

3:06

Trey?

3:07

You know, what stood out for me was

3:10

his balance between drive

3:12

and ego, right? Because it takes

3:15

an incredible amount of drive to achieve what he

3:17

did. And yet it seems like every

3:19

deal, every step of the way, his decisions

3:21

were never made by ego. It

3:23

was always sort of removing himself,

3:26

looking at it objectively, looking at

3:28

the numbers, either the risk reward or the

3:30

sale price or what have you, and

3:33

being able to override any

3:35

sort of sense of, well, this

3:37

is going to change who I am or this is going to, you know,

3:40

personalizing it in any way just to be able to remove

3:42

himself like that, but also

3:44

have an insane amount of drive, right?

3:48

And I think it's one of the things I just feel like you don't often

3:50

find completely separate like that or he

3:52

just didn't seem to have much of an ego at all.

3:55

No. And he also shared some really

3:58

specific details of how he...

3:59

he managed a huge sale with Blackstone,

4:02

like literal negotiation strategies.

4:04

I thought that was

4:05

brilliant that he found sort of a back

4:08

door that other people might've missed and how he leveraged

4:10

that same door several times

4:12

to increase the purchase price. And he

4:14

also had a phenomenally insightful

4:17

point when we were talking about supply and demand

4:19

and you and I had the perspective of assets

4:21

that we pursue. And he talked about the

4:23

actual supply and demand of capital

4:26

factoring into the way that real estate values

4:29

have changed and certain asset

4:31

classes have seen a rise as well as have

4:33

seen falls. And so make sure you listen all the

4:35

way to that because that's the perspective I haven't heard anyone

4:37

share before.

4:39

All right. So without further ado, here's Sam

4:41

Zell. Sam, did you do your

4:43

hair like that today just for me? I spent

4:46

an hour cool. Yes. Sam,

4:49

even though you're often referred to as a real estate investor,

4:52

I know that you're actually an industry agnostic investor

4:54

and entrepreneur, but you've really built

4:57

this massive fortune in real estate and people,

4:59

if you know, reference that quite a bit. And

5:01

you also pioneered the real estate

5:04

investment trust industry and

5:06

you predicted its growth to over a

5:08

trillion dollars, which is now done. And

5:11

we don't often cover REITs on the show,

5:14

David might on his, but in your opinion, I'm

5:16

curious, have REITs fully achieved

5:18

what they set out to in the form of liquidity

5:21

and transparency, and if not,

5:23

what would you do to improve the industry

5:25

from here?

5:26

The REIT concept was

5:29

enacted as part of the last thing that President

5:31

Eisenhower did

5:34

in 1958. There was something

5:36

called the cigar bill and they

5:38

had in the REIT clause to the

5:41

cigar bill. And that's how

5:44

REITs got created between 1958

5:46

and 1991. The

5:48

REIT industry grew from zero

5:50

to about 7 billion dollars. The

5:54

justification to the creation of the REITs was

5:56

a huge part of

5:57

the REIT. of

6:00

REITs was to let the

6:02

little old lady from Pasadena

6:05

have an opportunity

6:06

to own part of the

6:10

vast area called

6:13

commercial real estate. So, it happened

6:15

to that point, there was no way

6:17

that anybody who

6:19

could own part of an office building

6:21

or part of a major shopping center

6:25

or a big apartment complex because

6:28

in effect there was no

6:31

short pieces of it that were available

6:33

and the idea was to create

6:35

a liquid entity

6:37

that would provide that kind of

6:39

an opportunity. During that give

6:42

or take 30 year period, the rate

6:44

of growth of REITs

6:46

was inept to say

6:48

the least. And the reason

6:50

was frankly very obvious and

6:52

that is that

6:54

in terms of the attractiveness

6:57

of real estate as an investment,

7:00

the private market was dramatically

7:04

more attractive than the public market.

7:06

And the public REITs that

7:08

were created during that

7:11

period of time were generally

7:13

staffed by people who frankly

7:16

couldn't make it in the private market. So,

7:19

he had a lot of guys who retired

7:21

from insurance companies running REITs.

7:24

The REITs were very small. The

7:26

REITs had relatively little access

7:29

to capital. And to be honest, even

7:31

though the goal was to

7:34

quote unquote create an opportunity

7:36

for the little old lady from Pasadena

7:39

to own commercial real

7:41

estate, the reality was

7:43

there really wasn't a significant

7:45

demand and there wasn't significant

7:48

promotion to create that

7:50

demand. Then in the

7:52

80s came, the

7:54

Japanese came, the savings

7:57

and loans went broke,

7:59

the insurance came, companies in

8:01

the late 80s started

8:03

to go broke. And all

8:06

of a sudden, the accessibility

8:09

to the capital markets of real

8:11

estate disappeared. And

8:14

again, 1989, a

8:17

guy named Clark became

8:19

the controller of the currency.

8:22

And he basically went around

8:25

and asked all the banks, what's

8:27

your exposure to the R

8:29

word? Can the R word with

8:32

real estate? And the

8:34

beyond losing insurance companies

8:36

and

8:37

savings and loans, and

8:39

by the way, taking advantage of

8:41

the public to the creation of

8:44

public limited partnerships,

8:46

all of which were designed to enrich

8:48

the promoter and destroy the little

8:51

guy. All of a sudden, in 1990 or 1991,

8:57

there was no source of capital for the real

8:59

estate industry. And yet you had all

9:01

these real estate players, people

9:05

like me, people like

9:07

Mount Simon, people like Don Bren, and

9:10

I can go on and on. The people

9:12

who basically ran the real estate department,

9:15

a real estate world, were

9:17

basically in a position to make the real estate

9:19

market. Where

9:22

they had no access to capital. And

9:24

that led to, as

9:27

somebody says, you know,

9:28

convention is the, you know, the

9:31

necessities the mother really had mentioned, they

9:33

had the same kind of situation here,

9:36

where all of a sudden everybody looked

9:38

around and realized that the only

9:40

source of capital for the

9:42

real estate industry

9:44

was the public markets. Here at

9:46

the time, there was a guy named Richard

9:48

Salzman, who was head of real

9:50

estate for Euro Lynch. And

9:53

Richard took it upon himself to

9:56

create and begin what we call call

10:00

the modern era of real

10:02

estate, of the REIT business.

10:04

And all

10:07

of us, whether it was me or

10:09

Miles Simon or who or Taubman

10:11

or whatever,

10:12

felt that the only option

10:15

was to access the public

10:17

markets. I was very lucky in

10:20

that I had been involved

10:22

in the public markets

10:24

really for 10 years at that point.

10:28

So I had a perspective,

10:30

I had an understanding

10:33

of what I thought it took to succeed.

10:35

During the total

10:38

world of 1993, the

10:40

real estate investment industry,

10:43

the REIT world, invited

10:46

me to New Orleans to give a speech

10:49

on quote the Good Mirely REIT era.

10:51

I went to New Orleans, I gave

10:53

the speech, and basically

10:56

what I said to,

10:57

well, at that time,

10:59

was 1500 people in the room.

11:02

The previous year, I think it was 15

11:05

people in the room.

11:06

And I basically said, you

11:08

gotta stop screwing the public.

11:11

You gotta create a product

11:13

that the public wants to own that

11:15

solves the problems that the public

11:18

has.

11:19

You gotta create the environment

11:22

where it can grow.

11:24

During that speech, I basically

11:27

said that if you achieve

11:29

that, if you create

11:31

a positive

11:32

environment, then

11:35

there's no reason why Ford

11:37

Motor Company

11:38

can be a public company or

11:40

other big, CapEx,

11:43

asset-heavy

11:45

industries can be public companies.

11:47

There isn't any reason why

11:49

real estate couldn't be the same.

11:53

And there was little doubt in

11:55

my mind that there was an enormous

11:58

demand for cash. flow

12:01

emanating from real estate

12:03

if we delivered a product

12:06

to the public that in effect

12:09

met

12:10

the needs and objectives.

12:13

So the public

12:14

wanted liquidity, the

12:16

public wanted transparency,

12:19

the public wanted to

12:21

be able to differentiate

12:24

between the network and the

12:26

REIT that didn't, the analysts wanted

12:31

to be right.

12:33

And so you got to create an environment

12:35

where it affects you to

12:38

deliver enough information

12:40

so that you can in fact

12:42

be in a position to make

12:45

a conclusion. And in that speech

12:48

I predicted that in 10 years or 20 years I

12:51

remember how long that this industry

12:54

would be, you know, 250 million and ultimately

12:58

a trillion dollar industry and that's

13:00

of course what happened. So

13:02

that's kind of a little bit of a

13:06

history of how the REIT

13:09

era began, why

13:11

it began, and frankly

13:13

why it's continued to grow

13:16

because there's still an demand

13:19

for transparency, there's still

13:21

a demand for cash flow,

13:24

there's still a demand for

13:26

participation in an

13:28

area of the US

13:31

economy that's, I don't know whether

13:33

it's 20% or something like that, but

13:35

it's a

13:36

very significant part of the economy

13:38

that

13:39

wasn't really available on

13:41

the public markets until the modern

13:43

REIT era.

13:45

And there's a demand for yields. I'm wondering

13:47

with all this talk with commercial real estate if

13:49

there's sort of a ticking time bomb in a lot of these REITs

13:52

that maybe a lot of people are just passively

13:54

owning. I'd be curious, Sam, if you could weigh

13:56

in on the risks maybe involved

13:59

and how that might affect. the re-market currently.

14:02

Well, first of all, you know,

14:04

real estate is a business. It's

14:07

a business like any other

14:09

business, you know, and

14:11

businesses go through cycles.

14:14

We're sitting today in the situation

14:16

where parts of the real estate

14:19

business are in

14:21

big trouble. And

14:24

I sold equity office

14:26

in February of 1907, 2007.

14:31

I was the largest owner of office space

14:34

in the world. Boy, I wouldn't like to be

14:36

the largest owner of office space in the world

14:38

today. You

14:41

confronted with a whole bunch

14:43

of challenges.

14:45

First of all, prior to

14:47

entering the pandemic, we

14:49

had a very unusual situation.

14:52

And by the way, everything, whether

14:55

it's real estate or automobiles,

14:57

whatever you want to talk about, everything

15:01

comes down to supply and demand.

15:04

When supply and demand is

15:06

in balance, the investor

15:08

gets a return. When supply

15:10

and demand are out of balance,

15:13

somebody gets hurt.

15:15

In the period prior to the pandemic,

15:18

we had a very unusual

15:21

situation where companies

15:23

like WeWork and

15:26

other providers of

15:29

workspace were

15:31

taking down huge

15:35

amounts of office space

15:37

in anticipation of

15:39

demand coming five

15:43

and seven years forward. So

15:46

we began the pre-pandemic

15:49

period with office space

15:51

being in oversupply, but

15:54

nobody or not enough

15:57

people understood that we

15:59

would dealing with a class of

16:01

an asset class where

16:05

oversupply already existed.

16:09

But since these companies took

16:11

down the space, the statistics

16:14

said that there was no oversupply.

16:18

Then in fact, there was a shortage.

16:20

When there's a shortage, you know,

16:23

it's you developers

16:25

will build buildings. So

16:28

in the pre pandemic period,

16:30

we all of a sudden saw

16:33

significant growth in

16:36

the amount of space available,

16:38

because the perception was

16:41

that everything was full.

16:43

But in fact, because

16:45

of we work in other workspace

16:48

businesses, the reality

16:50

was just the opposite.

16:53

And if there was a significant oversupply,

16:56

but the oversupply was being eaten

16:58

by these companies, as

17:00

opposed to being eaten by

17:02

the market. So when

17:05

you then went into the pandemic

17:07

period, you had all these

17:10

new office buildings going up,

17:12

whether it's cut in yards in New

17:14

York, you know, we ended up in

17:16

the added I think six million plus

17:19

square foot office buildings in Chicago,

17:21

in

17:22

almost every market in the country,

17:25

because this two six said

17:27

the markets were sold, and

17:29

therefore, needed new supply.

17:32

So new supply was added

17:35

to a market that was already

17:37

oversupply. And the

17:40

results were obviously predictable.

17:43

Now, it was then hit by the pandemic,

17:46

the pandemic created this work

17:49

from home

17:50

that I don't endorse that I

17:52

don't think is any kind of a

17:55

long term species,

17:57

nor do I think 10 years from now.

18:00

Now, we'll be

18:02

relevant in terms of

18:05

the definition of office

18:07

space use. But

18:09

during the pandemic, work from

18:11

home became the way

18:13

in which companies addressed the

18:16

issue. And that, of course,

18:19

made office space a lot

18:21

less valuable. If you were

18:24

a student of office space or

18:26

an investor in office space, you

18:29

would have recognized what

18:31

was going on and would have avoided

18:34

being in any way, shape, or form

18:37

part of the problem.

18:39

Unfortunately, a

18:41

lot of people

18:42

didn't pay attention. I

18:45

mean, we owned one

18:47

office building. We used

18:49

to own a couple hundred of them. That

18:52

one office building is our home office. And

18:55

we own it for different reasons

18:57

and just yield and

19:00

appreciation. For us,

19:02

it was a relatively

19:05

simple analysis, understanding

19:09

the supply and demand, understanding

19:11

what was going on, understanding

19:14

that the Fed has created

19:17

a scenario of tree money

19:19

that skewed

19:22

people's understanding of

19:24

what opportunity was. We

19:27

took over a recall of equity

19:29

commonwealth in, I think, 13, and

19:32

it had 145 assets, $7

19:37

billion worth

19:40

of assets. And

19:42

that's the last of them office

19:44

buildings. Between

19:45

then and now, we sold everywhere, except

19:48

the two we needed to maintain our read

19:50

status. I

19:53

can't remember a time in my life where

19:56

I've sold 140-some odd assets.

20:00

and don't rule one

20:02

transaction. Don't rule

20:05

in saying, God, I wish we hadn't

20:07

sold that one. I was

20:10

thrilled and delighted at everyone

20:13

we sold. Frankly, I'm

20:15

not very sympathetic to the people who

20:17

wore them because they were

20:20

drinking the Kool-Aid. And unfortunately,

20:22

they're gonna end up paying a

20:25

pretty heavy price

20:26

for being overly optimistic and

20:29

not doing their homework

20:30

during that period of time. But

20:33

from our perspective, and this is

20:35

a perfect example of

20:37

doing your homework and make

20:39

decisions accordingly. Retail

20:42

sales on the internet are

20:44

another example. How, I

20:47

mean, if you looked at what was

20:49

going on, then you

20:51

know, and I remember when you were watching

20:54

sports programming in the

20:56

early 19, whatever, 2008

20:59

or 2009, and

21:03

companies would list WTCW

21:06

or what their URL number was. And

21:11

I'm looking at it and saying, Jesus,

21:14

this is, it's gonna take the commodity

21:17

side of retail

21:20

out of the picture. And it took a while

21:22

and took a while for

21:25

people to get adjusted. But

21:29

the entry was obvious. You

21:31

know, maybe you nearly

21:33

wanted to buy a fancy dress. You

21:36

wanted to go feel it and touch it. And that's

21:39

fine, but the vast majority

21:41

of retail sales were not

21:44

fancy dresses. There's socks

21:46

and underwear and shoes

21:49

and all kinds of stuff that could easily

21:51

be bought over the internet. And

21:53

as a result, you know, you go

21:55

from Madison Avenue, New York at 56th

21:58

Street. to 87th

22:01

Street, which used to be the prime

22:04

retail in America. Jim,

22:07

all you guy are vehicle stores. He

22:10

had 28% of Michigan Avenue in Chicago

22:12

vacant, Union Square

22:15

in San Francisco. And these were, these

22:17

were the citadels of retail

22:20

sales. These led

22:23

and set the tone for the entire

22:26

retail industry. And

22:30

the owners of my real estate owned

22:33

a lot of making real estate. And

22:35

you say to yourself, well,

22:38

didn't they see this? And

22:41

apparently not, because they

22:43

continue trading these kinds

22:45

of properties

22:47

with relatively short term

22:49

leases left to go

22:51

at prices that reflected,

22:54

you know, they

22:57

jack in the bean sock, and the bean sock

22:59

will just kind of keep growing.

23:01

And instead they're settled with

23:04

your own dramatic losses. So

23:06

those are two examples of, if

23:09

you did your homework, if you really

23:12

understood supply and demand, if

23:14

you really maintain

23:17

a level of fear, and

23:20

by the way, you know, I think that

23:23

maintaining the level of fear

23:26

is an incredible element

23:30

in the creation of wealth. Anybody

23:32

who ain't afraid, they're gonna

23:34

end up pulled in the bag. Let's take

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All right, back to the show.

26:57

You mentioned earlier this dynamic

26:59

of supply and demand and understanding

27:02

that will reveal the angle

27:04

that you're looking at. I thought that was

27:06

very insightful as well as simplifying

27:09

this overall cost. The people that bought these

27:11

bad assets that you said you could

27:13

see coming from changes in industry, do

27:16

you feel that that's a reflection

27:18

of a monkey see monkey do approach

27:20

to real estate investing or business in

27:22

general where people listen to podcasts or

27:24

read blogs and say, oh, this person did it, so then

27:26

I should go do it as well?

27:29

Well, number one, all of the above,

27:31

all of the above. But number two,

27:34

the word supply

27:37

and demand also reflects

27:40

supply and demand of capital. This

27:43

all occurred not in a period

27:46

of a shortage of capital, not

27:49

in a period of difficulty in

27:51

getting a bank loan,

27:53

not in a period of difficulty

27:56

in getting a mortgage, just the

27:58

opposite.

27:59

It was as easy as that. easy as possible.

28:02

And the result was that we flooded

28:04

the market with money. We kept

28:06

lowering the cost of the

28:09

money. So until

28:12

we, in the United States, almost got to

28:14

negative interest rates in a lot of

28:16

parts of the world. We got to literally negative

28:19

interest rates.

28:20

And then all of a sudden everybody

28:22

says, well, what do I do?

28:24

What do I do with the money?

28:27

All of a sudden I've gotten more money than I

28:30

ever had. At the castle, I got access

28:32

to all kinds of capital

28:35

and I've got to find ways

28:37

to use it. The institutions

28:39

that were idling

28:40

up money, looking

28:42

for places to invest, and

28:46

we're all subject to, you

28:48

know, changing and flows.

28:50

I mean, when I first,

28:53

in 1989, it was the first time

28:55

that I quote unquote tapped

28:58

into the institutional market

29:01

to raise money for real estate.

29:04

Imagine how shocked I was

29:07

to find out that 80% of

29:09

the institutions

29:11

that I called upon did not

29:13

have an allocation

29:16

for real estate. They didn't have

29:18

an allocation for stocks,

29:21

bonds, municipal

29:23

bonds. Real

29:25

estate wasn't a quote unquote

29:28

investable class. Fast

29:31

forward 20 years, you

29:33

couldn't find anybody who didn't

29:35

have a real estate allocation.

29:38

So they men had a real estate allocation.

29:40

And the question is, how do they fulfill

29:43

their allocation

29:44

by more real estate? And they

29:47

did. And then the trade new

29:49

hand, we started. So

29:51

on that note, in this current environment

29:54

of high inflation with low unemployment,

29:57

how is that impacting or informing your

29:59

current? current investing approach? Well,

30:03

I think that I'm 81 years old. So

30:07

that means that I was

30:09

around in the seventies. I

30:11

remember in 1978, you know, we

30:16

closed the loan on an apartment project.

30:18

We had just bought in the inflation

30:20

rate. That day was 13 and

30:23

three quarters,

30:24

13 and three quarters

30:27

was the inflation rate.

30:29

So I was forced to learn

30:32

how to navigate a

30:34

very, very difficult and treacherous

30:37

environment,

30:38

even though it also was an environment

30:40

that created opportunity to

30:43

do really, really well. I

30:45

haven't forgotten that experience. And

30:49

so despite all of the

30:52

excitement and

30:54

stuff that has occurred over the last 30

30:56

years, I haven't

30:58

forgotten what it meant.

31:01

I hadn't forgotten what it took

31:04

to generate that kind of inflation. I

31:06

looked at what the fed was doing and I looked

31:09

at what they were, you know, what they, what I saw

31:11

in the, in the fact the interest rates

31:13

were going significantly below

31:16

the inflation rate. You

31:18

don't need to see, all you need

31:20

to know is that if the

31:23

cost of money is four

31:25

or 500 basis points less than

31:26

the inflation rate,

31:31

you know, things are going to get turned upside

31:33

down. I don't think they needed PhD

31:36

to figure that out. That's

31:38

just another example of supply

31:41

and demand.

31:42

And we're all of a sudden the supply

31:44

became excessive. The

31:47

result is that here

31:49

over the last 10 years, we

31:51

sold a lot of real estate. We

31:54

bought very little and

31:56

I'm waiting and hoping that Bell is me

32:00

an opportunity to reload

32:02

and buy a bunch more

32:05

stuff. But

32:08

I made a fortune buying real

32:11

estate below its replacement

32:13

cost, which therefore

32:16

guaranteed me that the guy couldn't

32:18

build something across the street

32:20

at less than my basis.

32:23

Everything today is still

32:25

being priced in

32:27

dollar numbers that

32:30

are above. In fact, that

32:32

would allow somebody

32:34

to build and compete with me at

32:36

a lower cost. That doesn't make

32:38

sense.

32:40

I love this point about the supply and demand of

32:42

capital. You've got banks parking money

32:44

with the Fed. You've got depositors going to

32:46

money market funds. I was telling David, I was

32:48

at this dinner with a top four bank that

32:51

the other night, and I asked him, what are you going

32:53

to do to discourage depositors

32:55

from moving money markets? What

32:57

incentives are you providing? It was like this hush fell

32:59

over this 20 person dinner. They

33:01

were like, we don't really have an answer for it. That's

33:04

a huge issue. You're seeing the capital

33:08

dry up and you're seeing even smaller

33:10

banks becoming at risk of losing

33:12

depositors. Have

33:15

you ever witnessed anything like this? It's different

33:17

from the savings and loan crisis to green in

33:19

the GFC. I'm just curious

33:21

how you see this playing out where the liquidity

33:24

eventually does enter back into the markets.

33:28

Why is it different? Only

33:30

then, no

33:32

census, the Silicon Valley

33:34

deal

33:35

occurred three or four weeks ago.

33:38

We've had a run in the banks. We've

33:40

had an enormous amount of deposits

33:43

taken out of the banks and either taken

33:46

out of the mid-sized banks, then

33:48

put into the to lead to failed

33:50

banks or put into money market

33:52

funds. That's not a solution

33:56

to anything. That's just moving

33:58

the, you know, moving the penny. of the game.

34:01

I know nobody's solving a problem.

34:04

They're just finding temporary ways

34:06

to overcome what

34:08

is it, you know, a significant

34:11

challenge of not being

34:13

able to, you know, safely put

34:15

their money away today. I

34:17

wouldn't be surprised if nearly,

34:20

and I'm not particularly honest, but I wouldn't

34:22

be surprised if the next thing we

34:25

see is

34:26

some big money market fund getting trouble.

34:29

Why supply and demand?

34:32

All of a sudden, they got so much

34:34

supply. All of a

34:36

sudden, they got so much demand

34:39

for their quote, unquote services

34:42

that they can't have heard enough

34:44

to justify it. So they'll come

34:47

up with subprime loans

34:49

or some other, you know,

34:51

new methodology to in

34:54

effect cause themselves their own problems.

34:57

We've criticized the Fed and what they've done

34:59

to date. I'm kind of curious if, if Sam Zell

35:02

was sitting at the helm of the Fed right now, what would

35:04

be the next move you would make?

35:06

Raise interest rates. We had to raise

35:08

interest rates 3 or 4 or 5%. I mean, we

35:11

have to, we have to make it

35:13

painful. Everybody's so

35:16

worried about whether we're going to have a soft

35:18

landing.

35:19

I'm worried about what kind of landing

35:21

we're going to have. Because if we

35:23

don't stop the inflation

35:26

is a very, very deleterious

35:29

thing. I mean, it robs purchasing

35:32

power of everybody. And you

35:34

know, you for until 1971,

35:37

the world was protected from

35:40

inflation by the fact that

35:42

we didn't have fiat currencies.

35:45

We had currencies that were heading

35:47

to the price

35:50

of gold. In 1971, we in effect converted

35:53

it from

35:55

caged currencies to fiat

35:57

currencies.

35:58

And today, you, there's

36:01

nothing back in the US dollar. We've

36:04

increased, we've increased our

36:06

debt, seven, eight trillion

36:09

dollars in three or four

36:11

years. How does that

36:13

work? I don't know how that works.

36:16

I know what's going to happen

36:19

because I think that we just can't,

36:21

just can't you know, again, supply

36:24

and demand. You just can't

36:26

create that much new

36:29

supply and you have to

36:31

work. And you might

36:33

be concerned for the last five

36:35

years has been

36:37

loss of the US as the

36:39

reserve currency of the world.

36:41

You think that they probably

36:43

were able to result in

36:46

a 20 or 25% reduction in the

36:48

standard of living in the United States. We

36:51

have this extraordinary benefit

36:54

of being able to issue paper.

36:57

If we couldn't issue that paper or

37:00

we had to pay the real price of issuing

37:03

that paper, it's unlikely we

37:05

different. All you have to do is look at

37:07

what happened to, you know, England after

37:10

World War II, up until

37:12

that time, Sterling was the reserve

37:14

currency of the world. And then

37:16

it wasn't. And then all

37:18

of a sudden, you and we came, you know,

37:21

Carter, the sick man in the euro, as

37:23

opposed to full leading economic

37:27

player in the world that set the

37:29

standard as opposed to having

37:31

come up with people to meet the standard. It

37:34

would appear that this ridiculous

37:37

inflation we've seen paired with

37:39

fears of more inflation coming, because I agree

37:42

with you. I would love it if you were the head of the Fed because

37:44

we could put an end to this. But

37:46

most likely it's not the way the

37:48

American populace votes. We tend to vote for the

37:50

least. I'm not really available.

37:55

I went to the University of Michigan and

37:57

I took Econ 101. And

38:01

I will never forget walking into that

38:03

first classroom of that first day

38:06

and on the blackboard,

38:09

the professor had written supply

38:12

and demand.

38:14

I've never forgotten that lesson and

38:17

everything comes down to supply

38:19

and demand. There is little question

38:22

that the lowering of

38:24

cap rates, the increase

38:26

in the price of real estate, and

38:28

by the way, the increase in the price of a lot

38:30

of things, not just real estate, hard,

38:33

any kind of hard asset,

38:36

is all then related to there's

38:38

more supply of

38:40

money than there is demand. And

38:43

I'm critical of Fed and I'm critical

38:46

of the leadership of our country

38:48

because they have in effect, bent

38:51

over and allowed themselves to

38:54

become the victims of too

38:56

much supply. And therefore

38:58

the deterioration

39:01

of the values of everything,

39:04

because in effect, everything is measured

39:06

in terms of dollars. As

39:09

to the question of, are there places

39:11

that I think are better,

39:14

true, and less than others?

39:16

Well, obviously, you know, I'm

39:18

not really in long-hanging slums

39:21

as inexcusable, but my

39:23

whole philosophy of investment

39:26

has always been that I've

39:28

never tried to identify

39:30

the market or a particular

39:33

opportunity as being

39:36

the quote unquote, right place.

39:38

During the 70s, from about 1973 until

39:41

about 1978, I bought about $4 billion worth of real estate.

39:53

Getting $4 billion worth of real

39:55

estate at that time was a staggering

39:57

amount of real estate. And I bought

40:00

most of it had a dollar down and

40:02

a whole certificate because the real estate

40:04

industry at the time was suffering

40:07

from massive lower supply in fear

40:10

of demand. And at

40:12

the end of that period, I appeared on

40:15

a panel and when

40:17

we got to the question and answer period,

40:19

this guy from one

40:21

of the insurance companies

40:23

raised his hand and he

40:26

you know, Mr. Zell, you

40:28

bought real estate

40:30

everywhere in the country.

40:33

And where did you do

40:35

the best? Where

40:38

was the risk reward highest?

40:42

Nobody ever asked me that

40:44

question and so I thought about

40:46

it. I looked at him and he

40:48

said, Toledo, Ohio,

40:52

should the guy look at me? I

40:54

had lost my mind. He

40:57

said, Toledo, Ohio?

40:59

I said yes. He

41:02

said, Toledo, Ohio

41:05

is losing population. Toledo,

41:07

Ohio was the third pit of the

41:09

nation.

41:10

Toledo, Ohio was full of all

41:13

these rustbo companies that were going

41:15

broke. She doesn't make any

41:17

sense. She said, well,

41:20

if you sat on the board of

41:22

an insurance company

41:25

in 1975, should

41:27

somebody brought the apartment

41:29

building or an office building

41:32

or do some real estate

41:34

activity

41:36

before the board to approve a law,

41:39

you would sit there and say, I

41:41

don't want to put any money in Toledo,

41:43

Ohio. I don't want

41:46

to be dependent on the

41:48

car companies or

41:51

a part of the country that's growing.

41:54

And so you turned down the law. So

41:57

the result was that what

41:59

I did buy. I until you know, I

42:02

had built competition. And

42:05

that's another thesis that

42:07

I very strongly believe.

42:10

Who you and I all went

42:12

to high school, we all grew up

42:15

and we're all told how wonderful

42:17

competition was. Competition

42:19

kept prices low, competition

42:23

created, a competitive

42:25

zeal. And by the way,

42:27

the competition is terrific

42:30

for you. Me, she

42:32

liked a monopoly. I couldn't

42:34

have a monopoly, at least

42:37

a monopoly. So when

42:39

I bought two or three projects

42:43

into little Ohio, she

42:45

didn't have any money to compete with. She

42:48

could raise rates, change the

42:50

deal. I could find myself

42:52

in a position where I didn't

42:55

have to worry about what the guy did across

42:57

the street. Cause there was no guy across the

43:00

street. So rather than

43:02

say, gee, I want to own

43:04

stuff in Phoenix cause Phoenix

43:07

is growing. Well, there's a lot of

43:09

people who bought a lot of real estate in Phoenix

43:12

who wish they hadn't because

43:14

there's some limited

43:16

ability to demand, to create demand. Places

43:20

like Atlanta and Dallas and

43:23

Houston, they grew developers. They

43:26

grew people who wanted

43:28

to build. They grew savings

43:30

and loans. They wanted to

43:33

say, you know, wanted to, you know, lend back all

43:35

of those were wonderful things.

43:37

Unless you're an investor. Now,

43:40

if you're a flipper, it's a different

43:42

story altogether. Then you're not an investor.

43:44

Then you're just saying, okay, can I help you? Then

43:48

you're just saying, okay, can I catch

43:50

the minute when the market

43:53

is very, very strong? Can

43:55

I can buy something and sell

43:58

it quickly and quote, make a price. That's

44:01

very different than being

44:03

an investor whose real

44:05

goal is long-term appreciation.

44:09

You know, people like

44:11

Bill Gates and Microsoft or

44:13

Bennett, Google, all

44:16

of these people made great

44:18

fortunes, Jeff Bezos.

44:20

But the real reason they made

44:23

fortunes,

44:24

the real reason they're billionaires

44:27

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were Bill Gates and I owned Microsoft

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stock, the stock could double

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and I didn't have to pay any tax

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47:47

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47:49

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47:51

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47:53

All right, back to the show.

47:56

I'm really curious about the selling aspect. One

47:58

of my favorite quotes.

47:59

from your book is that you

48:02

said, every day I own something, I'm

48:04

choosing to buy it. I'm begging the question,

48:06

would I buy it at today's price?

48:09

And I think investors are often sold on this

48:11

idea on buy and hold and you are even just

48:13

again, reaffirming the merits of

48:15

doing that kind of thing and

48:17

taking a passive strategy to a

48:19

degree. But

48:20

when does buy and hold make sense?

48:23

And when do you consider the daily price as

48:25

that, would I buy it at today's

48:27

price enacting a decision to sell?

48:30

Well, you know, you always

48:33

ask yourself the question, you

48:35

know, would I buy it at this price? Would

48:39

I sell it at this price? You

48:41

have to consider the tax invocations

48:44

until Sam takes a big bite

48:47

of everything you sell.

48:49

So you need to be keenly

48:51

aware of what your after tax

48:54

yield is, not

48:56

your pre-tax yield. And

48:59

what you paid for is much

49:01

less important than how much

49:03

you get left with after you

49:05

satisfy your uncle's seed.

49:08

Sam, you sold the equity office rate

49:10

to Blackstone for 39 billion in 2007,

49:13

speaking of selling. And that was one of the most

49:15

insane bidding wars in history.

49:18

Looking back on that transaction and your decision

49:21

to sell, what memories or lessons have

49:23

stayed with you?

49:24

Well, you're right. It was quite an experience.

49:28

And what was interesting was that I

49:30

had a bunch of really, really

49:33

smart guys on the other

49:35

side. And in

49:37

the beginning, maybe

49:39

six months before the transaction,

49:42

someone approached me and wanted

49:44

to buy equity office.

49:46

And I was really surprised

49:49

because I thought that

49:51

equity office was

49:53

just too big

49:55

for anybody to buy. And then I

49:58

really, at that time, fucked. that we'd

50:01

probably own this company forever. And

50:03

we'd be passed on to other generations

50:06

of investors because it's just the

50:08

scale was

50:10

so large that

50:12

it just didn't fit anybody

50:15

doing a buyout of it. In

50:17

that particular offer, our

50:20

inquiry, was there a price

50:22

that frankly, I didn't think

50:24

was attractive even.

50:27

If I wanted to sell or could sell

50:30

and sell, didn't

50:33

do anything about it, I said no, and that was

50:35

the end of it. Give or take. And

50:37

by the way, as with all

50:40

of our companies, we continually

50:42

have looked at our

50:45

companies and done

50:47

an analysis of what they thought

50:49

that they were worth so that

50:51

we never were in a position where

50:54

we weren't prepared

50:57

to understand what we owned and

50:59

what we thought what we owned was worth.

51:02

About six months later, Blackstone

51:05

approached us and as

51:07

opposed to giving us an offer,

51:10

they said, what would

51:13

it take for Sam to sell

51:15

equity office? And I

51:17

remember my response being,

51:20

yes, it would take a

51:22

bad father offer, which

51:25

is from the Mario Puzio story

51:28

of the godfather. And I said, it would

51:30

take a godfather offer for

51:33

me to consider selling equity office.

51:36

And I remember responding to

51:38

the broker and saying, that's

51:40

what it would take. And much

51:43

to my surprise, they

51:45

came up with one and I was

51:47

extraordinarily schlider

51:50

by what they thought the company was worth.

51:53

And I said,

51:55

well, I said, I

51:58

was willing to consider it. But

52:00

I would only consider it if

52:03

the breakup fee, which

52:06

is the fee that was paid

52:09

to a loser if there was a competitive

52:11

bid, was small

52:14

enough that it would not

52:16

discourage anyone from

52:19

competing. Because obviously,

52:22

anytime there is a sale, it's

52:24

nothing more

52:26

than price discovery.

52:28

And I wanted to make sure to

52:31

protect my investors, to protect myself,

52:34

that I could say that I had

52:36

just, you know, gone through and identified

52:40

what I thought the real value was.

52:42

And so we ended up concluding and

52:44

feel it was $936 billion with

52:46

a $200 million dollar breakup

52:50

fee. There normally

52:52

a breakup fee in a deal

52:54

like that would be to protect 3%. So

52:58

normally that breakup fee should

53:00

have been a billion two

53:03

or something like that. Instead

53:05

the breakup fee was $200 million, which

53:08

gave me comfort in that and

53:11

no one would be discouraged

53:13

from bidding based on the fact that

53:15

there was a humongous breakup fee

53:18

and that the price of playing, of this

53:21

playing

53:21

was so high. So that

53:24

was one of the first things part

53:26

of the strategy involved

53:29

in the sale. And by the way, you know,

53:32

I'm a great believer that there's

53:34

always significant strategy

53:37

in

53:38

everything you do,

53:40

whether you're selling or you're buying,

53:43

there's a strategy involved in

53:45

a thought process that's involved.

53:48

And so when

53:50

we concluded a deal, I think it was,

53:52

I

53:52

think the first price was $48 a share,

53:56

$200 million breakup fee, then

53:58

they were various

54:01

people who expressed

54:04

an interest or theoretically expressed

54:06

an interest. One never knew, you know,

54:08

until you see the color of their running. So

54:11

the Blackstone people, John

54:13

Gray in particular, you know, looked

54:16

at the situation and said, you

54:18

know, we're vulnerable. Somebody could

54:20

easily, you know, outbid us. And

54:23

we didn't want to be outbid. And

54:27

so he came back to us even

54:29

before we had a second bid. He

54:32

said, you know, we'll

54:34

raise the price if you

54:37

raise the breakup fee. He,

54:39

you know, we'll, we'll pay

54:41

a little more if you'll

54:44

make it a little more expensive for

54:46

anybody to compete with us. We

54:48

agreed. And so then the price went

54:51

down. He remember exactly

54:53

where they went from 48 to 51. And

54:57

then there was some discussion

55:00

and speculation that

55:02

there was another group that was, I

55:04

was about to get involved

55:08

and put that other group had a problem.

55:11

And the problem was that the

55:14

banking system had

55:16

been piled up by

55:19

Blackstone. And one of the

55:22

ones subtle affection or another

55:25

suggested that almost

55:27

everybody could play and

55:29

nobody wanted to quote, be

55:32

on the wrong side of a deal. So

55:34

literally a potential competitor

55:37

couldn't finance competing

55:40

bid. So then it became my

55:42

responsibility to

55:44

sit down with Blackstone, which I did. And

55:48

in a nice, you know, comfortable

55:50

fashion, explain to them that

55:53

how we did have antitrust laws,

55:56

you know, turning

55:58

up all of the sources of capital. know, for

56:01

a potential competing bid didn't

56:03

really yet set the definition

56:05

of what was quote

56:07

acceptable behavior. And

56:10

they ultimately agreed in that,

56:13

let go a whole bunch of

56:16

financing sources that ultimately

56:18

became the financing sources for

56:21

a competing bid. We're

56:23

applying the Blackstone people then looked

56:26

at their situation and said, gee,

56:28

and maybe we ought to raise the bid

56:30

a little more. We could get a

56:33

higher break of fee and

56:35

more important than

56:37

a break of fee was that

56:39

the original provision did

56:41

not allow Blackstone

56:45

to have any contact

56:48

with any potential buyer

56:51

of the assets

56:53

of the OP that Blackstone

56:56

didn't want. So they came

56:58

back to us with still a higher bid

57:01

with a higher break of fee, but

57:03

most important allow with

57:06

us agreeing that they could

57:09

engage in conversations with

57:12

potential buyers who

57:14

wanted to buy pieces of the OP

57:17

that they didn't want. That's

57:19

how we ultimately made the

57:21

deal where they

57:23

were given the right to

57:26

negotiate with potential buyers

57:29

for parts of a portfolio.

57:31

We increased the breakup fee to $700 million.

57:34

And

57:35

then we closed the deal February 7th.

57:38

It was a great day. I'm

57:40

still smiling. Interestingly

57:42

enough, Blackstone, to

57:44

their credit,

57:46

was able to liquidate

57:48

almost two thirds of the portfolio

57:51

at prices above

57:54

what they were paying us for the whole.

57:57

So the net result was that from

58:00

From our perspective, the

58:02

deal is an enormous economic

58:05

success. From Blackstone's

58:07

perspective, because they had scolded

58:10

two-thirds of the portfolio kind

58:12

of previous, their

58:16

measurement of how they did, they

58:18

did extraordinarily well. The

58:21

unfortunate part of the story was that

58:24

almost every single buyer

58:27

who bought anything by

58:29

any core part of the portfolio

58:32

from Blackstone ended

58:34

up losing because

58:37

they had basically crossed the line and

58:39

paid too much. So

58:42

that was my experience with that

58:44

particular transaction. I

58:47

learned a lot of lessons from it. Most

58:50

significant lesson is, you know,

58:52

to fear a seller, create

58:55

competition. Students

58:57

who don't create competition don't

59:00

get the highest price. And at the

59:02

same time, being the last

59:04

guy on the totem pole to

59:07

buy something also

59:09

doesn't likely produce

59:12

a positive result. My

59:14

question that comes up, I

59:17

have a couple. One is, you know, I'm curious how

59:19

you

59:19

celebrated on that day. And I remember hearing

59:22

that you bought at your partners

59:24

or maybe it was the Blackstone folks. There

59:26

were some watches that were engraved,

59:28

timing is everything. And I just,

59:30

I thought that was such a great little

59:32

anecdote from that transaction. And

59:34

you're right that timing was everything. And of course

59:37

that was right before the great financial crisis.

59:39

And everything, the only thing to ruin with your story

59:42

is that

59:42

the watch has went to the losers

59:45

in the bidding war. Ah,

59:48

I see. Gotcha. It's not subtle

59:51

at all, right? Yes. To Barry

59:53

Sterling, to watch, to Steve Rott,

59:56

to John Gray. That's

59:58

right. Okay.

59:59

that correction. I figured you didn't remain enough

1:00:02

on the deal that he could buy us on

1:00:04

water. That makes

1:00:06

so much sense. It's not uncommon for

1:00:09

people to get a sense of a lack

1:00:11

of purpose after something like that. And

1:00:13

you were already a very successful man, even before EOP,

1:00:16

but I'm curious how much of your identity

1:00:19

was wrapped up in that

1:00:21

group and that sale. And were you ever

1:00:23

fearful of, you know, oh my gosh,

1:00:25

what is my purpose going beyond this transaction

1:00:27

or in any point in your career? Have you ever

1:00:29

experienced anything like that?

1:00:32

You know, I think it's a very interesting

1:00:34

question. I don't think I've

1:00:36

ever tried to answer it, nor

1:00:39

do I think I've ever really

1:00:41

thought about it. Next Monday,

1:00:43

I'm closing another

1:00:45

transaction where

1:00:48

I'm the

1:00:51

majority beneficiary of

1:00:53

the transaction. And

1:00:56

I'm getting $500 million and

1:01:00

I never thought about it as anything other

1:01:02

than part of the goal

1:01:04

and the flow of what I do.

1:01:07

That numbers are bigger. I

1:01:09

don't think that I got smarter

1:01:11

because the numbers got better here or dumber

1:01:14

because they didn't. I'm

1:01:17

challenged by the opportunities

1:01:19

that are, you know, given to me. I'm

1:01:22

blessed by the fact

1:01:24

that I have the still sense

1:01:26

in the credibility to

1:01:28

be able to achieve the objectives.

1:01:32

But I don't really

1:01:34

think I've ever really thought about it

1:01:36

as the competition between

1:01:39

me and somebody else. I've

1:01:41

always thought about it as, well,

1:01:44

this is what I do.

1:01:46

I'm very lucky that society

1:01:49

places a very high

1:01:51

value on the

1:01:54

peculiar skill set that

1:01:56

I was born with. And I'm

1:01:58

thankful for the opportunity. friendly, but

1:02:01

I've never really thought about

1:02:03

it as climbing a mountain. And,

1:02:05

you know, this transaction or that transaction

1:02:09

represents, you know, some

1:02:11

kind of a peak. I've done a lot of transactions

1:02:14

in my life. Most of them

1:02:17

from a numerical point of

1:02:19

view are real estate transactions,

1:02:22

but I've done non real estate transactions

1:02:25

that are significantly

1:02:27

smaller than, say, the

1:02:29

EOP sale, that I'm equally

1:02:32

as proud of and equally

1:02:35

as satisfied with because

1:02:37

they represent, you know, a challenge,

1:02:41

a challenge that I've overachieved. I

1:02:43

think historically, I've always,

1:02:45

you know, believed that I

1:02:47

have a responsibility

1:02:50

to society, to everything

1:02:53

that I do to be

1:02:55

the best at what I can possibly

1:02:57

be the best at. Yes,

1:03:00

society has rewarded me with

1:03:03

enormous financial rewards.

1:03:06

I think that's wonderful, but

1:03:09

it's not what drives me. What

1:03:12

drives me is, can

1:03:14

I do it? Can I achieve

1:03:16

the injection? Can I do

1:03:19

so legally and with

1:03:21

pride that I consider

1:03:24

today and describe a transaction

1:03:26

to you and feel very comfortable

1:03:29

that I tested my limits? Why

1:03:32

not you? Could I do it? And

1:03:35

by doing it, I'm in

1:03:37

great satisfaction. I certainly

1:03:39

have made more money than

1:03:42

I could ever spend. But money was

1:03:44

never really the driver.

1:03:47

Other than money creates freedom,

1:03:50

money creates an environment where

1:03:53

you can do what

1:03:55

you want to do, maybe

1:03:58

without asking permission. So

1:04:00

I guess I'll look at what I do

1:04:03

differently than maybe

1:04:06

somebody who's, you know, at a

1:04:08

very early stage in their career

1:04:10

and, you know, an opportunity to,

1:04:13

you know, make a hit is a real,

1:04:16

you know, real satisfaction.

1:04:18

And I'm both sympathetic and

1:04:20

appreciative to that position

1:04:23

of just not in that position today

1:04:25

and haven't met him for a long time.

1:04:27

Do you mention that money

1:04:29

equals freedom? You've also said liquidity

1:04:32

equals value. Can you explain that philosophy

1:04:34

and how that's led your investment decisions throughout

1:04:37

your career?

1:04:38

You know, I, as a sport,

1:04:41

there is a hobby.

1:04:43

I ride motorcycles.

1:04:45

And when you ride

1:04:47

a motorcycle, then you feel

1:04:50

a wind come

1:04:52

through your helmet. Do you realize

1:04:54

that you're in total control

1:04:57

of what you're doing? There's

1:04:59

a sense of freedom that's

1:05:02

irreplaceable. In the same

1:05:04

manner, having the resources

1:05:07

to not start a reconversation

1:05:11

with, can I afford it?

1:05:13

Whether I want to do it? Hard

1:05:15

to worry different things. There's

1:05:18

nothing more important to me than

1:05:20

freedom.

1:05:22

I'm a great student. I

1:05:25

read enormous amounts.

1:05:27

I'm very understanding

1:05:30

and knowledgeable about

1:05:32

loss of freedom to all

1:05:34

kinds of people, you know, from all

1:05:37

kinds of different situations.

1:05:39

Many of them,

1:05:40

frankly, you know, very negative.

1:05:43

So I guess what I would say to

1:05:45

you is that I

1:05:48

review money as

1:05:50

a way of eliminating

1:05:53

a step to achieve

1:05:56

my objectives, but not

1:05:59

be constrained.

1:06:00

by limitations

1:06:02

in the same manner when it

1:06:05

comes to liquidity equals value.

1:06:07

You know, that's something that I coined

1:06:10

for my own bathroom to

1:06:12

remind me of the fact

1:06:14

that I'm constrained

1:06:18

only by the exterior events

1:06:21

that occur around me to

1:06:24

the extent that I

1:06:27

have a liquidity,

1:06:29

I can make choices. If I

1:06:31

can make those choices,

1:06:33

can you sell without

1:06:36

the constraints of

1:06:38

liquidity? You know, I don't have to

1:06:41

start

1:06:42

by saying, well, where am I going to get the money?

1:06:45

But I'm going to start by saying, how do I want

1:06:47

to spend the money? What

1:06:49

do I think is important? I

1:06:52

think those are criteria

1:06:54

that define what

1:06:56

I call freedom

1:06:57

in a certainly a big part of my life.

1:07:00

Sam, we are so privileged to get to

1:07:02

talk to you today. I really appreciate

1:07:04

all the wisdom you shared with us. Thank you so

1:07:06

much for coming onto our show and sharing all

1:07:09

of this with our audience. We really appreciate

1:07:11

it and we wish you well and I

1:07:13

hope to do this again someday soon, but appreciate

1:07:16

the time today. Thank you.

1:07:18

Well, thank you very much. I'm glad

1:07:20

that you chose to make me part

1:07:23

of this process. I've tried

1:07:25

to answer you as

1:07:27

unsettling

1:07:29

as possible. I mean, you made

1:07:31

reference to the fact

1:07:33

that I wrote a book. And as you

1:07:36

know, when I got

1:07:38

to the point where I was

1:07:39

attempting to

1:07:41

describe or come up with a name

1:07:44

for the book, and I had a lot of

1:07:46

potential names, there

1:07:48

was only one that really made sense.

1:07:50

And that was in my being

1:07:53

to several because all my

1:07:55

life,

1:07:56

the one thing that's governed the

1:07:58

way I act.

1:08:00

because I want people

1:08:02

to know where I stand.

1:08:05

I don't ever want anybody to

1:08:08

leave a meeting with me and

1:08:11

saying, what do you think he meant?

1:08:14

And so, I've always been

1:08:17

very direct, and I've tried

1:08:19

to be very direct today, and

1:08:21

it's certainly been a pleasure. Thank you very

1:08:23

much for the privilege. Thank

1:08:25

you, Sam. David.

1:08:27

Sam, this was a fantastic interview. I've

1:08:29

interviewed lots of real estate investors, and I think

1:08:31

you gave the most unsubtle,

1:08:33

direct, and still valuable advice that

1:08:36

I've maybe ever heard. There

1:08:38

is a shortage of people in our space

1:08:40

that have been through several different market cycles

1:08:42

that have such a broad perspective that

1:08:45

you have. So many people are trying to be gurus

1:08:47

after doing two or three deals and raise

1:08:49

this money that's very easy to raise and giving bad advice.

1:08:52

So, thank you very much for taking some time out of a very

1:08:54

busy day to share some wisdom and hopefully

1:08:57

prevent some other people from getting hurt. It was an honor.

1:08:59

Truly my pleasure. Thank you, gentlemen. Good

1:09:02

night.

1:09:03

All right, everybody, that's all we had for you this week. If

1:09:05

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