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Sam Zell's brave new world of REITs and real estate

Samuel Zell, Chairman of the Board of Equity Group Investments, L.L.C. (EGI), based in Chicago, IL, will give a talk entitled, "Brave New World: Real Estate in the Millenium," on Tuesday, March 30, at 5 pm in the Wong Auditorium at MIT.

"Sam Zell possesses a unique combination of insight, creativity and enthusiasm that have enabled him to build one of the greatest real estate enterprises of modern times. He has transformed the American real estate market along the way," said MIT President Charles M. Vest, who will introduce Mr. Zell to an audience of students, faculty, alumni/ae, and media.

Mr. Zell, whose personal fortune has been estimated at over $1 billion, is known for his vigorously entrepreneurial approach to business and to life.

He received the BA (1963) and JD (1966) degrees from the University of Michigan and began investing in real estate in Chicago in the late 1960s. Within a decade, he foresaw the first big property crash and, with his partners, began buying up distressed real estate. Mr. Zell has called himself the "Grave Dancer" because of his appetite for buying troubled properties.

Considered a pioneer in the securitization of the REIT industry, Mr. Zell was among the first real estate investors to tap the capital markets by taking his REITs public, rather than rely on mortgage financing. (A REIT is a fund that is exempt from corporate income tax, paying its investors 95% of its annual income instead.)

Mr. Zell's other major innovation has been to concentrate on properties that are currently unmarketable but have significant appreciation potential. For example, in 1995, Equity Office Properties bought 28 State Street (Zell's first Boston property), despite its problems with asbestos, vacancy and debt. Mr. Zell focused on its prime location and on projections of a boom in demand for first-class downtown office space.

At this time, his real estate trusts, all publicly traded, make him the second largest owner of apartments in the US and, following the acquisition of The Beacon Companies in December, 1997, the largest office-building owner in the US.

Through the privately held Zell/Chilmark fund and other entities, Mr. Zell also invests in turnaround situations of industrial companies, notably Jacor Communications (radio broadcasting), Davel Corp. (an independent pay-telephone company) and American Classic Voyages (ocean cruise lines and Mississippi riverboats).

Mr. Zell's personal interests are as adventuresome and individualistic as his business practices. He is an avid skier and racquetball player as well as a devotee of motorcycles. His motorcycle club, Zell's Angels, made a 50-person appearance at a gala hosted by Mr. Zell to open the Chicago segment of the Guggenheim Museum's touring show, "The Art of the Motorcycle." Mr. Zell underwrote the exhibit's Chicago stay.

Mr. Zell's one day visit to MIT will include his speech in the Wong Auditorium, meetings with faculty and students at the Center for Real Estate and the Sloan School, and meetings with members of the $50K business plan competition team. He will also meet with electrical engineering and computer science faculty researching artificial intelligence and the Internet.

Mr. Zell's talk is sponsored by the MIT/Sloan School of Management and by the MIT Center for Real Estate.

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