Billionaire real estate investor Sam Zell knows a thing or two about making money. What is his take on the future of real estate investing, and how is he adjusting his portfolio to profit from it?
The Legendary Real Estate Investor
Although not quoted quite as frequently as Warren Buffett, Sam Zell is listed as one of Forbes’ richest people in the world. He had an estimated personal net worth just shy of $5 billion in 2015. His companies have made multi-billion dollar real estate trades and deals, and he has often been credited with having the leading office, apartment, and manufactured housing REITs. Zell is the former owner of the Chicago Cubs, various household item companies, and has infamously bought up major newspapers.
Sam Zell Knows Best
It is clear Zell knows something about business, and especially real estate. Specifically, he has proven to know when to cash out and restructure his portfolios. He is famous for selling out his office firm to Blackstone in a record setting $39 billion leveraged buyout at the height of the market in 2007. And of course, values plunged shortly after that. The Wall Street Journal notes that Sam’s Equity Residential sold off a quarter of its apartment portfolio in October 2015 for over $5 billion.
Interest Rate Hikes
Zell has not been a fan of low interest rates. However, in December 2015 he told Bloomberg he believed the Fed acted far too late with their latest hike. In fact, he says its a hike that came six months too late, which might coincide with negative repercussions.
China
In a recent interview on global economic trends, Sam Zell spoke up about China. He clearly believes the Chinese (and European) economy has the potential to significantly impact the global economy and its growth. With such a high percentage of Asian buyers participating in the U.S. real estate market over the last few years, industry professionals and property owners probably want to keep an eye on them. Will it boost business for those serving international home buyers and real estate investors? Or will it cause substantial flight capital as overseas owners need to cash out their assets to fuel everyday living expenses?
Going Against the Herd
One of The Motley Fool’s 4 simple tips to invest like billionaire Sam Zell includes going against the herd. Starting with buying up large swathes of property and companies that owned real estate several decades ago, Zell has consistently bought when others have sold, and sold when others are buying. It seems to have served him well so far.
Affordable Housing
With interest rates heading up and warning signs going off about the future of the economy, Zell remains the most bullish about Equity Lifestyle; his manufactured housing REIT. He points to limited supply and high demand that could bolster affordable housing performance. Equity Lifestyle now owns around 400 communities across the U.S., with around 140,000 units under management. Sam says this company and niche have the best prospects of any that he owns.
Own the Media
Over the years, Sam Zell has owned radio and television stations, bought the Chicago Tribune and Los Angeles Times, and held a 25% stake in Comcast Sportsnet. Like Bloomberg, it appears pretty clear that Zell doesn’t believe in just reading the news, or letting others influence it; he wants to own it. All real estate professionals and investors need to wake up this power. The media is a tool that must be used. If you aren’t going to use it, I can assure you your competition will!
Summary
We don’t know what lies ahead for Sam Zell and his finances, but we do have some pretty clear signals as to where he thinks the market and economy are going, and some great tips about how to invest profitably for what is ahead. What will you invest in?
