Sam Zell - Am I Being Too Subtle?
i have just read this and will share some quotes:
- "I have always believed that every day you choose to hold an asset, you are also choosing to buy it. Would I buy our buildings at the price Blackstone was quoting? Nope."
- "I thought I’d have no trouble finding a job with a good law firm. But after my forty-third rejection, I was beginning to wonder."
- "My investment thesis was still based on targeting small, high-growth cities where there was no competing capital."
- "I like doing deals with the same people. You get to know each other and build a mutual sense of trust."
- "I don’t know how you can ever have a real partner unless you both share the same risk."
- "The most reliable measure of our buildings’ value remained—and had always been, in my opinion—replacement cost. Replacement cost mattered more to me than rents or comparable prices or vacancies or economic growth or stock price. This was because replacement cost determined the price of future competition."
- "With each additional house we acquired, we expanded the aggregate site’s ability to accommodate a larger, more efficient and economically viable development. By assembling the pieces, we had made the whole more valuable."
decent book, 7/10. best part is chapter two when he explains how he did his first deals while he was in law school.
I would personally score it higher than a 7/10. But nonetheless, I enjoyed the book and these quotes.
Did you buy the book?
No, I found it on libgen. Also found confessions of a real estate entrepreneur on there, liked that one a lot - 9/10. Couple books I can't find on there though - the real estate game being the one that I can't find but want to read the most. Just going to buy that one I think. Got any RE book recs?
ended up just buying the real estate game by poorvu. bullshit that there is no kindle version, it's 2019 ffs! also just bought making it in real estate by john mcnellis.
watched a video of him speaking and he seems dope.
great book. one of my favorite reads. happen to know any other books that are easy reads like that?
wow this john mcnellis book is fckn awesome
We give it to our interns every summer. It's a short, easy read with some great info.
Guessing you found my other comments where I took a photo of part of my book collection. It has grown even further. Currently reading Liar's Ball for fun. Gonna read Shadow World (about the global arms trade) next.
Does he discuss his investments in trailer parks? Its surprised me that someone with such a stellar rep would work in that sector
He does. It's also funny because he directly addresses your second sentence in his book
Why? His "stellar" reputation is for ruthlessly generating returns and not giving a fuck. ELS has recorded the second-highest returns of any REIT that was in existence at its inception up to the present.
Carlyle and others are in the space as well. They weren't a first-mover like him, but they're there now.
I just got back from my first site visit to an MHC and I was pleasantly surprised at the community as well as the few comps that I visited. I went in expecting the worst and left thinking I wouldn't want to live there but they're totally fine. The ones I visited were calm and mostly older folks.
This is the beauty of real estate. Small, nimble companies not focused on prestige can generate outsized returns by jumping on things. Trailer parks are mostly really nice communities too. Like you mentioned, it's mostly retirees and young families. There are bad ones, but by and large they're pretty nice.
Why do you think it’s odd he would work in that sector? He’s buying best in market mobile home parks and RV parks. It fits his strategy well as he started buying when people weren’t in the space and built a huge portfolio.
The MHP business is separated into two parts - (1) affordable mobile home parks and (2) life style mobile home parks.
In today’s dollars, the affordable parks are going to rent between 200-350. The lifestyle parks, which is what Sam Zell’s company’s buy, can rent for upwards of $1000. The people living in those parks are choosing the life style of living in a mobile home as opposed to renting or buying a home elsewhere. Many of the homes in the parks his company buys can sell for over $100,000. (For anyone unfamiliar with the business model, tenants generally own their own home and rent the land underneath. The landlord is generally responsible for keeping the park clean and safe and the utilities working. It’s like a ground lease model). There are huge misconceptions about the space. Go to ELS’ website and look at the parks - they are very nice and generally in awesome locations. On the RV park front, the cash of the parks his firm buys is actually very steady and predictable. They buy in top locations and will sell seasonal passes booked a year plus in advance. So they know the revenue they are going to have far ahead of time. Some of it is transitory like a hotel, but a portion of it is pre-sold. I would argue they can be less risky than other areas of real estate due to this but it prices at a higher cap rate as it’s an operational business, similar to senior living or self storage (though self storage cap rates have compressed).
Power to you
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