Zell’s Apartment Business Takes a $115 Million Hit

By Richard Brenneman
Thursday January 15, 2009 - 06:52:00 PM

Sam Zell, media mogul and Berkeley’s biggest landlord, has taken another financial hit. 

Last month Zell was forced to declare bankruptcy for his Tribune Co. so he could restructure the company that owns, among other holdings, the Los Angeles Times, Chicago Tribune, Chicago Cubs and Wrigley Field. 

Then Friday his bigger, richer businesses, the publicly traded Equity Residential and private partner ERP Operating Limited Partnership, announced that the public company was taking a $115 million fourth-quarter write-off as a result of canceling five proposed construction projects. Ten other projects are moving forward, the company said. 

Zell is chairman of Equity Residential, the nation’s second-largest apartment landlord. Among his holdings are the Berkeley apartment buildings he purchased from Patrick Kennedy and David Teece, including the Gaia Building. 

The Chicago apartment mogul was a confirmed bull on housing last spring, when he told CNBC 11 months ago that the housing construction collapse had bottomed out, a prediction that proved disastrously wrong. 

Zell bought the media company at the worst possible time, leveraging his purchase on an employee stock ownership plan (ESOP). Less than a year later, he was telling Business Week it was “the deal from hell.” 

With the newspaper business in free fall, Zell was forced to seek Chapter 11 protection for Tribune Co. on Dec. 8. The latest bad news on the apartment front was released a month and a day later—on Friday afternoon, the time when government and businesses typically drop bad news in hopes that the weekend will dampen the impact. 

The announcement came in the form of a Securities and Exchange Commission Form 8-K, and announced that the company’s fourth quarter earnings would take a write-off that works out to about 39 cents a share for five canceled projects. 

“We have said for some time that maintaining ample liquidity and credit capacity are our foremost priorities, and as a result we would be very cautious regarding new development projects,” said Equity President David J. Nethercut in a formal statement accompanying the 8-K filing. 

Nethercut said the company has already downsized staff, and further cuts are possible. 

Zell has been downsizing at the L.A. Times, most recently the much-beloved columnist Al Martinez, an Oakland native, Pulitzer Prize winner and, at 79, one of California’s oldest working journalists. 

Zell’s efforts to sell Wrigley Field are also at the heart of the scandal and criminal investigation that threatens to unseat Illinois Gov. Rod Blagojevich. There has been no indication of impropriety on Zell’s or the company’s part.