Sam Zell, tycoon whose big newspaper venture went bust, dies at 81
Sam Zell, the real estate tycoon who specialized in distressed assets and acquired the Chicago Tribune, the Los Angeles Times and other storied but troubled newspapers in a widely criticized leveraged buyout of the parent Tribune Co. in 2007, died Thursday. He was 81.
His death was announced in a statement by Equity Group Investments, the firm Zell founded and of which he had been chair. The statement did not say where he died and attributed his death to “complications from a recent illness.”
In a career of spectacular deals celebrated mostly in boardrooms and financial columns, Zell’s venture into the publishing world as chair of the Tribune Co. proved to be a resounding failure, a five-year descent into a maelstrom of rancor, downsizing, management scandals and bankruptcy.
At the end of 2012, the Tribune Co. emerged from bankruptcy relatively intact but with half its value and with Zell gone, replaced by senior creditors, who installed new managers and planned to sell flagship newspapers and other assets. Zell’s personal losses were not heavy by his standards, but the episode was widely seen as a black eye for a real estate mogul out of his depth in newspapers.
The son of Polish Jews who fled to America in 1939 as World War II engulfed Europe, Zell, an abrasive and eccentric Chicagoan who reveled in testing the limits of business deals as well as motorcycles, amassed one of the nation’s largest portfolios of apartments, offices and commercial real estate, mostly by snatching up properties that other investors had snubbed as too risky or even moribund.
He called himself “the grave dancer,” celebrating his own sow’s-ear-to-silk-purse triumphs as a high-stakes speculator who found opportunities where others saw only stress.
A diminutive man with a raspy voice, a bald pate, squinty eyes and a white beard, he favored gold chains, bright sport shirts and jeans. He often rode a bright yellow Ducati to work at breakneck speeds, and he sometimes went on road trips with a leather-jacketed bunch he called Zell’s Angels. He could shock dignitaries with expletives and insults and lace his speeches with profanities. But he would also send hundreds of music boxes to acquaintances at Christmastime.
Unlike Donald Trump and Harry Helmsley, who used their names on trophy properties and as self-promotion, Zell was relatively anonymous for most of his career, known largely in financial and real estate circles as an audacious investor whose vision — to create a national brand — did not materialize because real estate sales are largely local.
Nevertheless, in 2007, the Blackstone Group bought Zell’s firm — then known as Equity Office Properties Trust — for $39 billion. His own fortune was estimated at nearly $5 billion, and with holdings in residential properties, drug and department stores, and energy and electronics companies — a lifetime of acquisitions that made him one of the nation’s wealthiest men — he might have retired comfortably in his mid-60s.
But seeing yet another inefficient market, he plunged into the unfamiliar world of newspapers, winning a bidding war for one of the nation’s premier media companies, the 160-year-old Tribune empire. Besides the Chicago and Los Angeles newspapers, it included The Baltimore Sun, Newsday, the Hartford Courant, 23 television and radio stations, the Chicago Cubs and Wrigley Field.
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A Deal Comes With Debt
Like many newspapers, the Tribune properties were hemorrhaging advertising revenues and readers to the internet. The company had been on the auction block for months when Zell — insisting that his interests were purely economic, not editorial — offered $34 a share in a complex transaction to take the company private under an employee stock-ownership plan.
He acquired control in December 2007 in an $8.2 billion deal whose financing required him to put up only $315 million, but that saddled the employee-owners with more than $13 billion in debt, including $5 billion in existing Tribune obligations. In that highly leveraged buyout, the debt was to be paid off almost entirely by cash generated by the company’s continuing operations.
The new corporation was exempt from federal income taxes, and the debt was reduced by the sale of Newsday, the Cubs and Wrigley Field. But employees, who had no say in the deal, assumed a crushing burden and stood to gain only if the company survived, while Zell, for a relatively modest investment, became chair and secured an option to buy 40% of the company for $500 million if it prospered.
Employees filed a barrage of lawsuits, but they had little effect, and the transaction was widely denounced by media commentators as lopsided — a potentially lucrative coup for Zell at the expense of thousands of employees, whose jobs, careers, pensions and futures had been mortgaged under a mountain of debt.
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