Real estate billionaire lectures about international economic issues to MU business students

Sunday, April 29, 2007 | 12:20 p.m. CDT; updated 12:41 a.m. CDT, Saturday, July 19, 2008

The last time Sam Zell was in Columbia he arrived at 2 a.m. and slept on an uncompleted Interstate 70 overpass.

He was hitchhiking from Los Angeles to the East Coast for fun and got a ride from Kansas City to Columbia.

Forty-six years later the billionaire returned to Columbia to give the keynote address at the Jeffrey E. Smith Institute of Real Estate conference at the MU School of Business on Friday.

Zell reached a deal in March to buy Tribune Co., which owns the Chicago Tribune, the Chicago Cubs, the L.A. Times and other properties, for $8.2 billion. He also completed the largest private buy-out when he sold Equity Office Property Trust to Blackwell Group for $39 billion.

Forbes magazine ranked Zell the 52nd richest person in America in 2006.

During his speech, he didn’t discuss the Tribune deal, but focused on liquidity of real estate and private equity funds in the industry.

Harvey Eisen, CEO of Bedford Oak Advisors in Mount Kisco, N.Y., and a member of the School of Business Strategic Development Board, said speakers like Zell are one of the ways to validate the caliber of the business school.

“When I was here, there was maybe one lecturer of note,” Eisen said. “If I had heard some speakers of this prominence, I would listen to all of their messages.”

The conference attracted professionals from across the country, some as speakers, some as observers, as well as many MU students.

In an auditorium of 500 people in power suits and business blues, the only man in blue jeans and corduroy blazer was Zell.

Eisen said speakers like Zell are “worth their weight in gold” because they are speaking from business experience, not an academic standpoint.

Eisen is close friends with Zell and Jeff E. Smith, the man the conference was named after.

“Jeff is an old friend,” Eisen said. “Sam is a big shot. I took Jeff up on getting Sam to speak.”

Zell graduated from the University of Michigan earning an undergraduate and a law degree and returns there frequently to speak. He travels across the globe to give keynote speeches.

He began his speech at MU by telling a story.

He said whenever he goes back to Ann Arbor, someone from the development department chauffeurs him to the school and shows him new real estate developments along the way.

One time, the driver took him to see the new director of clinical psychology.

“I didn’t know anything about clinical psychology,” Zell said. “After a few seconds of staring at each other, I asked him ‘What’s new?’”

He said the psychologist replied that they replaced mice in their experiments with developers for three reasons: there are more of them, researchers don’t get attached to them and developers are willing to do things mice aren’t.

The crowd erupted with laughter.

Zell said the availability of financing, transformation of real estate into a liquid asset and reduction in capital gains taxes from 38 to 15 percent caused increased interest in the real estate market in the 1990s and the growing number of developers in the private market.

When two of Zell’s companies were included on the S&P 500 in 2001, real estate became a benchmark of people’s investment strategies, he said, instead of a far-out part of portfolios.

The real estate market also changes with changing demographics, he said.

“The single most important demographic change is the deferral of marriage,” he said. When he graduated from college, within a year 95 percent of his friends were married, he said.

Now people are waiting five to 10 years after college to get married and have more disposable income because they don’t have to support a family. He said the country is slowly becoming bicoastal because people and their disposable income are moving.

“You can be a productive player in a company without living on location,” he said.

Eisen said if students learn anything from Zell’s speech it should be to do business outside of America. Zell does business all over the world and came to Columbia directly from Abu Dhabi in the United Arab Emirates.

Zell has real estate in Mexico, China, Brazil and Egypt. He said the international markets are more bullish and returns are higher.

Eisen said Zell spends about 1,300 hours on his plane every year — more than 54 days — and keeps his hectic schedule without a Blackberry.

But Zell still makes time for fun. Eisen, Zell and eight others will travel to Italy next week for a 10-day “Zell’s Angels” motorcycle trip. Zell is also an avid skier.

Zell finished his speech with a 10-minute question-and-answer session. The last question was the only one that alluded to the Tribune Co. deal.

“What’s your opinion of the Cubs?” one of the audience members asked.

“Sell short,” Zell said. The room laughed, and Zell darted out the door and on to his next appointment.

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