Real Estate Geniuses Make Mistakes, Too

You probably know the names Mortimer Zuckerman and Sam Zell. They’re real estate magnates who buy sky scrapers like the rest of us buy duplexes. A Bloomberg.com?article?by Bob Ivry reveals that Zuckerman’s company, Boston Properties, Inc. is reporting a $165million loss on three Manhattan skyscrapers purchased in ?May of 2008. To put the number in perspective, Zuckerman also owns the $2.8billion GM building on 5th Avenue. Sam Zell has received massive credit for selling his 500+ buildings in February, 2007, right at the peak of the real estate market.?

You’d think Mortimer Zuckerman would feel pretty badly. You might be feeling badly about purchasing a property at the peak of the housing bubble. But Zuckerman doesn’t feel badly. “We do expect to get somewhat less rent in those buildings than we thought we would, but it doesn’t mean the buildings are worth less,” replied Zuckerman to a question in a recent interview.

His position seems to make sense. Real estate is about long-term planning and ups and downs won’t greatly affect your position provided you’re not burdened by too much short-term debt. As long as income of a piece of property is enough to sustain its maintenance and ownership, Zuckerman seems to think that property values will bounce back in the long term. Hold onto that and if it isn’t enough, consider what recently happened to Sam Zell. The brilliant real estate mogul who sold out of the business during the market’s peak, privatized Tribune Co., which is currently seeking bankruptcy protection.

Even if you had sold out at the peak of the market, there’s no guarantee that you would have put your money into a safer investment. Zell’s made billions in real estate and even he is left wondering “what did I do wrong?”