Thanks to public comments made back in 2008 about how the real estate market could recover – in short, by “clean[ing] out all those people who never should have bought in the first place and not give them sympathy” – billionaire Sam Zell is now the target of housing advocacy groups hoping to convince Wells Fargo not to sell him 1800 apartment units in East Palo Alto, California[1]. The groups and many families in the area fear that Zell will bring an end to affordable housing in the area and possibly knock down existing buildings to make way for “high end condos and high rises.” According to some sources, “2700 families are in danger of losing their homes without relocation benefits.” Mayor Carlos Romero also discourages the sale, as does the San Mateo County Housing Director Duane Bay.
The groups and families are not just concerned about their current places of residence, but also about what Zell might do to their options for rent-controlled housing. He has used his company, Equity LifeStyle, to “sue multiple California cities to invalidate local rent control laws,” according to a press release from the Youth United for Community Action (YUCA) and has also pushed a statewide ballot measure to end rent control in California[2]. The groups are arguing that since “Wells Fargo has money [they] don’t have to sell to the highest bidder” on the property and that the lender should not sell to a “classic vulture investor.”
Do you think that this kind of outcry is appropriate? Should Wells Fargo sell to Zell?
Thank you for reading the Bryan Ellis Real Estate Letter!
Your comments and questions are welcomed below.
[1] http://www.newbottomline.com/2700_families_may_lose_homes_in_wells_fargo_deal
[2] http://www.tenantstogether.org/article.php?id=2150
The one thing I admire Sam Zell for was selling out, literally to the hour, at the absolute top of the RE bubble. And I recall thinking at the time “this is it” after thinking for about 3 years that the market couldn’t possibly go any higher. His comments at the time (and it was sometime in 2006-2007 when he sold Equity Office or Equity Residential…the details escape me at the moment but the point remains) were something like “…if these folks are stupid enough to offer me so much over value for my properties, they can have them”. He even sang a song about it, IIRC. He had assembled those properties over decades, certainly over many years. He was no flipper, he was a classic investor/operator.
Fox News has repeatedly cried that Obama’s proposed tax on the wealthy is class warfare. But, they fail to point out people like Zell who is in full battle dress and pushing class warfare as hard as he can. Capitalism is all about classes. The powers that be would like us all to believe there are no barriers or divisions between classes within our lop-sided system.
The class war is not being waged by the growing poor or dwindling middle class.
It is a full frontal assault being waged by the rich seeking to gain more for their already bloated kingdoms — Zell is one of the generals conducting this war.
The people who are at risk in Zell’s battle plan are just trying to defend themselves. Yes, it is right that the people try to curb his greedy power.
The rich gain their wealth on the backs of working people. Their primary goal is more money and more power and in total disregard of the lives they affect or demolish. The people’s fight is right, and although Wells Fargo should not sell to Zell, they most likely will for banks are not in the business of selling to the lowest bidder.
Jack S, the first commentator, said it all. It really is time for the “residence” of this wonderful neighborhood to pony up and purchase the units. If they fail to do so, someone with the desire to spend their hard earned money will make a purchase and continue to collect rent. What do the socialists of this country not see, you can not have it both ways.
“But, they fail to point out people like Zell who is in full battle dress and pushing class warfare as hard as he can. Capitalism is all about classes. The powers that be would like us all to believe there are no barriers or divisions between classes within our lop-sided system.”
I don’t understand where these wide-ranging, broad-brush comments come from. They are so abstract as to be meaningless. Poor people are able, in our system, to advance to much wealthier situations. More so than in any society in the entire history of mankind. Rich people are able to destroy their wealth. They are also able to increase it. Capitalism is not about classes unless you want to portray people who work for a living as downtrodden or exploited by business owners. If you were a business owner, you would never say or think that. If workers want to start a business, nowhere in the history of man has there been more opportunities to do so than what we have, even with all its faults. If workers start a business, there is no guarantee of their success.
Every minute of every day, people have the choice as to whether they wish to envy the rich or to emulate them. Out of envy comes nothing but a denigrated sense of self-worth. The rich are not to blame for wanting to preserve or expand their wealth. Sam Zell doesn’t force anyone to live in his properties. Indeed, it’s entirely arguable that by being a skilled operator, he improves to overall condition of all of them.
Our system provides more choices, more freedoms than any other. It is not perfect, but nothing man has ever created is perfect. The poor people who envy the rich create their own prison, inside their own narrow thinking. Smarter people look to emulate the wealthy, to do the things that wealthy people do. It’s all a matter of choice. Make it crappy for rich people and they will leave. Then there won’t be any opportunity for anyone except what the government hands out to you. If that’s what you’d prefer, then you shouldn’t live in a capitalist society…you should go find a socialist one where the government will hand out to you what it thinks you should have and deny to you what it thinks is too much. That’s the opposite of what I consider freedom, but I can appreciate that some might like it. Or think they like it. When they have to live in it they’ll find out for themselves.
No Wells, don’t sell it to Sam. Sell it to me. I’ll take it off your hands for a few hundred dollars down per unit and I’ll pay the rest from the rents. If the renters don’t pay, I’ll just have to delay your payments as well. I could sell it to the tenants. If I pay $6,000,000 for it (I have no idea of hte asking price- -) do you think the tenants would agree to buy it from me for $7,000,000? My thought is that they would expect me to make $15 an hour for my time and sell it to them for $6,100,000.
This is the opportunity for the tenants. Let them make an offer. They’ll need a strong leader and a financial backer to pull it off. They’ll also need a majority of the tenants to go along with it. OK complainers, it’s time to take action. Go ask Sam if he will front you. If you fail to keep your word he gets to take over. Go ahead. Buy it and then see if you can manage it. It is not as easy as you think.
It actually takes work to even manage money.
Mr Class warfare up there doesn’t get it. These people are not poor because the rich are rich. There is enough money and wealth for all. They must simply start doing rather than complaining. When Sam was young I’ll bet he didn’t spend his off time watching tv or drinking beer. I’ll bet he was studying something and working a plan to earn his keep. Yes, I’ll agree that there are some bad apples who are rich. There are also bad apples who are poor. Those bad apples think that everyone is better off than they are and everyone else owes them a living. Well, if everyone would stop the “woe is me” droning and put their ass in gear, we could get back on track as a whole.
You see, Mr. Class warfare, if the government stakes a claim on the wealthy so that the “poor” can be paid off (for votes as well) then the wealthy will become protective and not risk money in business. If it is stolen from them, they will not be able to have employees and even more people will lose jobs.
It is not class warfare yet. It is the government elite who think they know it all who are trying to pit us against each other. Have you noticed that the political “class” is well above all the other ‘classes’? They get money by selling power. Look at the union debacles for one simple example. They support union causes to the detriment of all other workers. The unions pay them off in a big way. They can actually keep the excess that goes to their campaign funds. Hows that for a government job?
Mr Zell has earned his money. You may call him a vulture, but when he bought those properties, he paid more than the next lower bid. Where was your bid? Yes, Mr Zell. I’d love to work with you.
Apologies to the tenants and Wells…… I just noticed my number on the offer was 6M…. should have been lots more – maybe another zero if anything like units around here. Could be as low as 25M……. I don’t know, but I’d love to play that game.
Many of the “Poor” are not, or, are there by choice. Ok, before you all yell at me, I mean many prefer the life where they do not have to work hard nor be responsible. They would prefer to live in rent-controlled projects or rental units that net a minimum rent to the owner, however, inside you will find a 55″ flat screen TV, a stocked fridge (along with plenty of beer), nice furniture (or, it was when they got it) and a decent automobile. They know how to “Play the system” and they like it that way.
If you really believe that the “Poor” are held down and don’t have a chance without government assistance, go talk to new Congressman Alan West! Born in the slums of Atlanta (his words-not mine), he worked his way out and today is, in my opinion, one of, if not the best man we have in Washington.
If we keep “Giving” things to people, (a) The majority will not appreciate it. (b) The majority will want more. (c) The majority will not try to better themselves. d) The majority will gripe that the “Rich” are not doing more for them.
There are no guarantees in life – our constitution does not guarantee us happiness, only the pursuit of it. There are thousands of reasons walking around who are prime examples of why we should not give more and more. Check out “Star Parker”, Google her name for her web site along with her book “Uncle Sam’s Plantation” that you can get from the library. Then, think about what is truly best for everyone!
Not everyone wants to be rich but it’s nice to know that one could get rich if one chose to acquire the knowledge and expend the energy to do so. But, then, everybody would hate that rich person. Better not to be rich.
It’s so much easier to stay poor. Just give up your dreams and ambitions and let the masters feed you. Laziness and envy are keeping the poor poor. Envy is a sin. The Bible says so.
It’s a sad commentary on our times when a financial institution can be influenced to “Not Sell” valuable assets for the benefit of their shareholders.
Life isn’t fair. The tenants hold nothing more than what they have in their contract.
The properties, or the banks interest in them, should be sold for the best price. If that means Sam Zell or his companies, that’s what should happen, ASAP.
What the poor lack is not money. What they lack is education. Why are we surprised that they think like victems? They have been taught by our American educational system. Who teachs at these systems? – unionized teachers. Who said- “Those who can do, those who can’t teach”. They teach them how to spell, do math, and (thier twisted version of) history. But they can’t teach them how to achieve and live the American dream, because they were not taught that in the great communist college system. There are exceptions, but they are rare.
As someone–I think it was Dan Doran–said, real estate investors should be proud to be called vultures. Incidentally, the bald eagle–the symbol of our country–spends about 60% of its time acting as a vulture, eating carrion instead of preying. If it weren’t for vultures, we’d be up to our eyeballs in rotting, stinking carcases. Vultures don’t kill anything–they just clean up the mess others leave behind. This housing market mess was created by politicians and bureaucrats when they decided they could get around the laws of supply and demand and effectively force home ownership on a higher percentage of Americans. And now these same politicians are trying to use people like Zell as scapegoats, hoping the voters will blame him and not the politicians themselves. And the whole class warfare business is such politician-invented bull%#@! designed to pit us against each other so the politicians can create constituencies for themselves (a.k.a. divide and conquer). During the free-est, most capitalistic part of our history, we had a growing middle class. The half-death of American capitalism (which the introduction of graduated income taxes helped to cause) brought that trend to a screeching halt and reversed it. Look at the raw data, not the spin people put on it, and don’t vote for anyone who doesn’t make a radical reduction in the size of government his or her only priority.