It’s been two months now since commercial real estate investment legend Sam Zell passed away.
But his legacy burns as brightly as ever.
Brad and billionaire investor Sam Zell in Zell’s office in 2021
Zell – a man who inadvertently mentored me well before I met him – famously made his billions by buying distressed assets and turning them around.
That’s why he’s known as the Grave Dancer.
Here at Intelligent Income Daily, we make a point to study the greats: what they did, where they did it, how, when and why. That way, we can pass their fortune-making secrets on to you.
And the Gravedancer was certainly one of the greats.
Consider his 2013 takeover of Archstone, a Colorado-based landlord. Not only did he buy it for $6 billion less than its going price six years prior…
He did so with the help of thousands of other investors. He used a real estate investment trust (REIT) known as Equity Residential REIT (EQR) to seal the deal.
REITs – my favorite investment category – pay out at least 90% of their taxable income to shareholders. In exchange, they pay no income taxes whatsoever.
So the fact that Archstone’s official buyer wasn’t Sam Zell, but Equity Residential, means the purchase was even more profitable than its bargain-basement price tag suggests.
And it was a great investment for Equity Residential shareholders, too. Including stock splits and dividends, it’s up 102% since then.
Today, I want to share three of Zell’s particular secrets for success. Together, they can help you become a successful grave dancer in your own right, making money and enjoying life for all it’s worth.
Investment Advice From the Grave Dancer
The following tips from Sam Zell are so impactful, I recommend you print them out and put them somewhere you’ll see every day. Maybe on your fridge door or office desk.
Whatever you do, make sure to refer back to them often, starting with a commitment to:
Diversify. As I stated earlier, Zell is famous for investing in real estate. He chaired three different REITs during his lifetime and is considered the creator of the industry’s contemporary model.
Yet he wasn’t obsessed with the category. He also had money in energy, retail, and media.
One sector Zell was fond of is farming, and he took a position in a farming REIT to further diversify his holdings (outside of apartments, marinas, and manufactured housing).
Zell made mistakes along the way, to be sure. But his diversification practices helped ensure that those missteps were far from fatal.
Never overpay for anything. Be a value investor, searching for strong companies that aren’t selling at strong prices.
A company may have fallen out of favor for some irrational reason, possibly because there’s a market panic and investors overreacted. Or perhaps it has, in fact, been mismanaged; but there are clear signs of a turnaround up ahead. Either way, you don’t buy a company unless it’s selling for less than it’s worth – with every indication of gaining sustainable ground from there.
Back in 2021, Zell was pursuing industrial REIT Monmouth Real Estate. His firm offered to pay $3.4 billion in stock and cash, or $19.40 per share.
However, Industrial Logistics Properties (ILPT) moved in with a larger all-cash offer of around $4 billion. Zell responded by dropping out of the bidding war (which also included another top industrial REIT, Starwood).
Since ILPT closed on Monmouth Real Estate, shares have fallen over 81%.
Zell was smart for not overpaying. Otherwise, he’d be stuck with a losing investment he bought at too high of a level.
Have fun! Live life to the fullest. Don’t get bogged down in business. Business is important, but stressing out about it can reduce your profits immensely.
That’s why Zell, despite his busy schedule, was riding his motorcycle straight ‘til the end. He told me about how much he enjoyed taking his Ducati out for high-speed spins. And he even started a motorcycle club called Zell’s Angels – which pretty much tells you all you need to know about the man right there.
The Man, the Myth, the Legend
Trust me. If you internalize these timeless pieces of investing wisdom, I guarantee you’ll have a better shot at making life-changing gains as an investor.
I know that last lesson might sound like a copout, but I’m telling you…
Start trying all three of these strategies out today – together – and see what a difference they can make.
Then let me know how it goes! Grave dancing and all.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily
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Source: Wide Moat Research