‘i’m the fastest no in the west’ - ft

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/11/12 Im the fastest No in the west - FT.com

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THE MONDAY INTERVIEW July 8, 2012 2:12 pm

Im the fastest No in the

westBy Hal Weitzman

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 hasdescribed 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

Peter Wy nn Thompson


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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 seniorexecutive 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 metrovoice 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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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

1984Acquires majorityownership 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 2007Equity Office is

sold to Blackstone for $39bn

April 2007Buys Tribune

Company for $8.2bn. Tribune

files for Chapter 11 bankruptcy

in December 2008

Interests: Skiing, riding

motorcycles, travel

Family: Married with three

children

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.

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 interviewshould 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-gumheir; 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 competitivenesswas 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 competition-

related, 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 promptlyreiterating 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 thanTribune 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.

‘i’m the fastest no in the west’ - ft

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