EPILOGUE
CERTAINLY THE ECONOMIC crisis that began in earnest in late 2008 had a variety of impacts on Zell’s businesses. The credit crunch stalled his sale of the Chicago Cubs for a time, but he still managed to tiptoe through the broken bodies on Wall Street to close a record-setting deal. Pressure mounted on the entire publishing industry’s advertising revenues, including Tribune’s, but at least its status as the “lead dog” in the race to bankruptcy offered some measure of protection from the wolves at the door.
At the same time, the subprime residential mortgage mess seriously stalled the American appetite for home ownership, which fostered a burgeoning renter’s market that would benefit Zell’s Equity Residential apartment firm. His Equity Lifestyle Properties also saw gains as more Americans took to the road in their RVs and found mobile-home communities more affordable. Having a diversified portfolio of investments helps mitigate the inevitable peaks and valleys of business cycles, and Zell never keeps many of his eggs in any one basket for too long.
There were still periodic glimmers of hope for the flagging newspaper business. Apparently what newspapers need more than anything else is a presidential election every year. Though Zell was anything but a staunch Obama supporter—his political leanings tend to be more conservative Republican than Democrat—certainly his Tribune enterprise was rewarded by Obama’s big U.S. presidential win. The Chicago Tribune ginned up the presses to distribute hundreds of thousands of extra copies of the inauguration edition, while the Los Angeles Times sold a hundred thousand more copies than it did on a normal Wednesday. Single copies of papers were selling for as much as $50 each on the auction site eBay.
The Tribune bankruptcy did little to stem the tongue-in-cheek style of Tribune’s parade of press releases, and Zell is not likely to abandon his trademark addiction to self-deprecation and humor. Nor is he likely to stray far from his grave-dancing real estate roots. Considering the magnitude of the worldwide economic downturn and the levels of distress in the real estate markets, Zell is easily capable of launching large-scale opportunity funds, along the lines of the Zell/Merrill Lynch funds of the 1980s, to take advantage of market conditions. After all, banking relationships are most easily mended when the promise of profits is at hand.
Deep into the financial crisis in mid-2009, Zell was buying up distressed loans from banks and troubled companies alike. It looked a lot like the 1970s and ’80s all over again. And the grave dancer, with money in hand, was once again buying while others were scrambling.
Despite the Tribune bankruptcy, Zell will also maintain his status as an arbiter of sage investment advice. Bloomberg, CNBC, and countless other media outlets trot out the “exclusives” anytime Zell deigns an interview. Apparently the Tribune experience added to his mystique and fostered his popularity as a generator of “good copy.”
One favorite topic is what led to the global downturn in the first place, the housing crisis. “I wasn’t shocked by the extent of [the residential real estate collapse] because there was absolute unequivocal blind faith in the value of a house and the belief that it would just keep going up forever,” he noted in late 2008. “Part of what we’ve all lived through in the last year and a half is breaking the holy grail of housing. The truth of the matter is we’ve had numerous housing slides in the past. The only difference is, except for the Depression, you’ve never had a country-wide reduction in housing at the same time.”
1While many commentators hemmed and hawed about where to place the blame for the housing crisis, Zell laid the responsibility for the mess squarely on the back of the American ideal of home ownership. “Look at history. I’ve been in the real estate business for almost fifty years. During that period of time, the government has three or four times attempted to move the percentage of owned housing above sixty-two percent. And every time we have a government program or a government encourage an increase in housing ownership beyond sixty-two percent, we have a disaster. The latest one took it to sixty-nine percent. The other ones only took it to sixty-six percent. And each time, total disaster. It’s a wonderful goal; everyone should own their own house. But the reality is we keep seeing over and over again that only sixty-three percent of the people who want a home ever can afford it.”
2Ever the optimist, Zell reasons that positive mental attitude, coupled with a healthy dose of pragmatism, will always win the day. “The biggest issue overall is to focus on confidence, because if people have no confidence, they will not make commitments. And if they make no commitments, for sure our economy will suffer. Despite the stock market going down, a lot of people fornicated last night and are producing children. And a whole bunch came across the border. The net result is household formations are growing at over a million a year right now.
3“See, I didn’t say ‘fuck,’ I said ‘fornicate.’ Don’t I get points for that?”