Skip to comments.Sam Zell’s Empire, Underwater in a Big Way
Posted on 02/13/2009 5:26:09 PM PST by Lorianne
In 2007, Sam Zell, the billionaire Chicago investor, sold a portfolio of 573 properties he had assembled over three decades, Equity Office Properties Trust, to the Blackstone Group for $39 billion. It was the largest private equity deal in history, but Blackstone did not stop there: it immediately flipped hundreds of the buildings for $27 billion.
Today, the wreckage of those purchases is strewn across the country, from Southern California to Austin, Tex., to Chicago to New York. Many of the 16 companies that bought Equity Office buildings are now stuck with punishing debt, properties whose values are plummeting and millions of feet of office space they cannot fill.
Few deals better exemplify the excesses of the commercial real estate boom than the dismemberment of the Equity Office empire, and fewer still better underscore their bitter consequences.
Buyers purchased buildings at what, in retrospect, were vastly inflated prices. Lenders provided lavish, even excessive, financing based on unrealistic expectations of rising rents. And now that values are tumbling, vacancy rates are rising and credit has become impossibly tight, many on both sides are struggling against default, foreclosure or bankruptcy.
The impact could ripple beyond the companies that bought Equity Office buildings and the investment banks that financed them. If the owners cannot make their loan payments, it could create a financial crisis for the pension funds, hedge funds and insurance companies that hold securities based on Equity Office mortgages.
The list of Equity Office buyers reads like a Whos Who in American real estate. In Stamford, Conn., RFR Properties, a partnership headed by Michael Fuchs and Aby Rosen, who owns Manhattan landmarks like Lever House and the Seagram Building, spent $850 million to buy seven Equity Office buildings that analysts say are now worth less than their mortgages.
(Excerpt) Read more at nytimes.com ...
Actually, it sounds like old Sam did right well for himself.
Let’s see. If Zell sold it, IT ISN’T HIS EMPIRE any more.
Thanks for the fine reporting, NYTimes.
Maybe I’ll adopt a puppy and then I’ll have a use for you.
He is not nearly as bad off as the living scum at the New York Times that sold out their building to have enough cash to pay the daily Queer columnist and the daily communist columinist and the light bill and a lawyer to screw over the bankers holding the debt they will never be able to pay.
Pot (nyt) calling the Kettle black, and doing it poorly.
I do have to be impressed that the Times can make a guy liquidating property when the market is high sound like some kind of incredible scheme. He saw the market was overbuilt and decided then was the time to sell. There's nothing wrong with that.
This article is a bunch of gobbledygook obviously written by someone who has no idea how the real estate market works.
If Sam is still alive, he may buy back his empire for much less than he sold it for. I think that would be funny.
Reporters don’t write headlines.
And, apparently, editors don’t edit.
Zell is a conservative, so it only stands to reason that the NY Times would attempt to slander him with a totally misleading headline.
“Zell bought low, sold high — Women and children hit hardest”
Sounds like Zell and the Blackstone Group are smart cookies. good for them. Bad for the morons who bought overpriced properties when it was clear to all the bubble was bursting. Unfortunately I heard on CNBC that Geithner wants to give some TARF money to commercial landlords. Mistake! What ever happened to selling at a loss and moving on?
NYT stock hit yet another all-time low today at $4.05. Less than 50% of its IPO price.
I manage funds for others and have done well the past few months buying bonds, gold and put options as I look ahead to the coming doom. I am advising people looking to buy property to wait. We predict there will be a "Bottom #1" in about 6-8 months, and many people will snatch up properties in the midst of massive government interference and subsidies, and prices will seem to go up temporarily. But then we predict there will be a fresh, huge wave of new defaults and foreclosures, along with bank SEOs now bottled up (we estimate as much as 2 million homes) finally put up for sale. There will then be a "Bottom #2" which will be 20-30% lower than the first bottom. THAT is when to buy.
I still have a tiny bit of CHANGE in my pocket, I guess I should do the patriotic thing and help bail out the poor schmucks that bought Sam’s property at the height of a real estate bubble. /extreme sarcasm, I have NO sympathy for ANYONE that expected the bubble to go on indefinitely hoping to profit on it.
got any tickers, strikes and expiriations you care to mention? ;)
Mostly unwound at this point, since they were in financials and mortgage companies over the past year. Nothing fancy now, just sector and index options. We mainly trade futures. Have shifted to gold. Selling treasuries this week (who isn't?). Trying to (carefully) play crude looking ahead to a large upside potential. Bought a b/o above 36.25 this morning for a swing.
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