An interview with Mortimer Zuckerman: How he succeeds in real estate

(Scott Eells/ Bloomberg ) - Mortimer \

(Scott Eells/ Bloomberg ) - Mortimer \"Mort\" Zuckerman, chairman and chief executive officer of Boston Properties. Real estate and media magnate Zuckerman says he invests in cities with “brainpower” — cities like D.C.

Mortimer Zuckerman, 76, is known for being a regular on the political talk show “The McLaughlin Group” and for owning such media properties as the New York Daily News, U.S. News & World Report and the Atlantic Monthly, the last of which he sold to Washington businessman David Bradley for about $10 million in 1999.

But he made his fortune, estimated at more than $2 billion, buying and constructing office buildings. He is the founder and chairman of Boston Properties, a publicly traded real estate investment trust with 138 properties, many of them in the Washington market. His is one of the most respected minds in the real estate business.

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Zuckerman was born in Montreal, the son of a successful merchant. He has degrees from McGill, Harvard Law School and the Wharton School of the University of Pennsylvania. He has two children: a teenage daughter, Abigail, whose mother, Marla Prather, he divorced in 2001. His other daughter, Renee, is 4.

The Washington Post caught up with Zuckerman in his spacious 18th-floor office in a Boston Properties building at 53rd Street and Lexington Avenue in Manhattan. (Lightly edited excerpts from the interview appear below.) The office, stuffed with books, periodicals and, of course, that morning’s Daily News, also has a flat-screen television and a stationary bicycle. His current reading list included Washington Post columnist Charles Krauthammer’s “Things That Matter.”

Ask Zuckerman if you may call him “Mort,” and he retorts, “Do you know anyone with the name Mortimer who minds being called ‘Mort?’ ”

The next question was:

How did you come to be a part owner of the Washington Redskins?

I was an original investor in Snyder Communications, and I did very well with that. (Redskins owner Daniel Snyder) was, therefore, a partner of mine on some level. He said, ‘I need you because otherwise the NFL won’t approve my acquisition.’ He didn’t have the net worth, and I guess I did. So that’s why I was in that.

Did you make money on it?

Yeah, I made money on it. Not a great deal of money. I don’t remember exactly when I sold. It wasn’t too long later. If not the first year, then it was the second.

Do you remember how much you put in?

That I don’t remember either. It’s something that I have deliberately packed up and put into some recess of my mind. I suppose with about two drinks, I could tell you what it was.

What is your relationship with Daniel Snyder now?

I don’t do business with him. I’m not unfriendly with him. But I basically do not interact with him.

Should the Redskins change their name?

You have to be empathetic to people who are insulted by the name, and I certainly am. But it’s been such a part of Washington for so long, I don’t think it has the sort of implication, the denigration or the diminution that some people might suggest. And my view is, if you want to change the name because of that, take out the name Washington.

What is your philosophy on real estate and the Washington market?

When my colleague and partner joined me, 11 months into the formation of Boston Properties, we had an agreement on a strategy, which we have tried to adhere to as best we can: We were going to have A buildings in A locations and A locations in A cities. Because we had always come to the conclusion that these kinds of buildings not only do the best in good markets, but do the best in bad markets. And if you’ve been through enough, you know there are always bad markets. And Washington was a very, very good market as far as we could tell. We have a huge position in Washington and in Reston [Va.].

How many buildings do you have in the Washington market?

We have somewhere around 4.5 to 5 million [square] feet between Reston and Washington. You can’t imagine what we are doing in Reston.

What are Washington’s real estate strengths?

Number one, there is a shortage of supply, primarily because there is a height limit. Number two, there is a shortage of really good supply because people tend to build fairly conventional buildings, and we have tried to do a lot better than that.

We believe, and have had the experience, that a lot of good tenants will go into the better buildings. And every building we have done there has been really a great success. Not so much because of us, although I think we cater to the right sector of the market, but because it’s a great market for office real estate and it’s a growing city. Washington itself has become much more of a dynamic, metropolitan area on its own, setting aside the government.

Are you bullish on Washington real estate?

I have been bullish on it for, God knows, 30 years. We love the market. I think we have established ourselves as one of the major, not the only, but one of the major office developers. When I went down to Washington, I met this man who I thought was a fabulous broker: Ray Ritchey. As soon as I could, I hired him. And he has been leading our office, with another man, Bob Burke. The two of them built up a great office.

What is your next big play in Washington?

As soon as we have it announced, we will let you know.

Do you have something in mind?

We always have something in mind.

What do you think of Donald Trump entering the Washington real estate market?

I welcome him, wherever he goes.

Compare the New York City real estate market with Washington?

Just as a matter of physical logistics, New York is a high-rise city. Washington is a low-rise city. And there is a different kind of concentration of tenants in each city.

Why are you good at real estate?

I would say this: I love it. It’s never been work for me.

How did you get started?

I was amazingly lucky. I started off in Boston, which is why the name of the company is Boston Properties. But I worked for a wonderful man at a firm called Cabot, Cabot & Forbes in Boston. I worked, basically, as a principal assistant to a guy named Gerry Blakely His job was primarily focused on growing the company, finding the sites, putting the deals together, developing them or whatever. I was his assistant. And I loved it. I have described myself from day one as an urban alcoholic. I love cities.

What do you love about real estate?

There’s something also very tangible about what you do. At the end, you don’t have a brief, you have a building, which for me is a wonderful feeling.

How did you and the late Edward Linde become business partners?

I hired him at Cabot, Cabot & Forbes. When I started Boston Properties, it took me almost a year to persuade him to join. I said, “You and I are going to be 50-50 partners.” He says, “Why, that’s crazy. You’ve got all the contacts. You’re putting up all the money. That’s just too good a deal.”

I said, “You may think it’s a good deal today. But 10 years from now, I’m going to say it’s the best deal I ever made.” That’s exactly the exchange we had. And by God it was, and I knew it would be. So that’s how we got started.

He was an engineer from MIT, and he had a graduate degree from the Harvard Business School. And he was going to get involved in a project at Cabot, Cabot & Forbes called Technology Square, which was right adjacent to MIT. A big, big development.

By that time, I was the chief financial officer and was doing a lot of the dealmaking.

It was going very, very well, and we needed another person.

And I remember asking him — it was a very complicated financial structure at Technology Square. Nobody understood it. The only reason I understood it was because I had to because I was chief financial officer and I had put it together. I tried to describe it to him, and he just sat there silently. I thought to myself, “Another person who doesn’t understand it.”

Then he started to ask me questions. And the questions revealed not only did he understand it, but he was trying to think,

“Okay, but what if this happens, would you move it this way or move it this way?”

And I remember looking at him. And you know that line from “Butch Cassidy and the Sundance Kid”? “Who are those guys?” When they couldn’t shake the sheriff.

I said to myself, “Who is this guy?”

Is your forte the financial side of real estate?

My forte, if I have a forte, is to assemble and put together the site and the deal. The financing part.

How do you assemble a team, and how did you assemble this company?

(long pause)

If I have any talent that I’m particularly proud of, it is picking good people.

That to me is a success in everything I’ve done. I haven’t been perfect, don’t get me wrong. When things have gone wrong, it’s because I’ve had the wrong people. By and large, I’ve had terrific people.

What do you look for when you hire?

You look for somebody who has experience and knowledge in the field. But essentially, I look for somebody whom I think has judgment. I won’t say my record is perfect. But by and large, my record is good. Ed Linde was one. Ray Ritchey was another. Bob Burke, whom I met through my sister-in-law, he’s fabulous.

What characteristics make a person a great real estate investor?

It’s the same thing to me in everything, whether it’s publishing, real estate. It’s good judgment. And good judgment means on some inner place, they have their act together. So they make their judgment not based on psychological or emotional needs. They make it based on a metric of data. A metric of understanding the process and the issues.

What is your biggest mistake in real estate?

Ugh. We were designated to be the developers of a program called Park Plaza in Boston. It was a big development overlooking the park. The Boston Common. We had a wonderful architect. Lew Davis of Davis, Brody and Associates. He did a great job. But high-rise buildings in Boston overlooking Boston Common created a load of opposition. So the deal ultimately got croaked by public opposition.

Why did you and Linde work so well together?

From the first day we met, we just hit it off. We were friends as well as partners. We had an unusual and unbelievably satisfying mutual trust. We overlapped in terms of the same values. But he had a real construction ability. He ran all the construction. I did virtually all the financing. He was just the most extraordinary man, as talented a person as I have ever met. But as decent a person as I have ever met.

What are the best real estate markets in America?

The market’s we’re in. Washington, New York, Boston, Cambridge and San Francisco. They are all cities that have within them a driving economic force that is fundamentally intellectual firepower.

What do you mean by “firepower”?

It’s brainpower. That’s what Boston and Cambridge is about. That’s what New York is about. That’s what Washington is about. That’s what San Francisco is about. Those are the cities that I believed will be the strongest cities over the longer term. And that’s the way it worked out.

What does it take to create a great urban project?

The ability to find a great architect, to understand how to work with an architect to create space that will have economic viability so that you can build and finance it, then move on to another great project.

Why do you buy trophy properties like Embarcadero, the General Motors Building, Hancock Tower and Citigroup Center.

We believe in the durability of those. We are not looking to maximize value in the short term. We’ve always taken a long-term view. And the long-term, in my judgment and Ed’s judgment and in our experience, those are the buildings that do the best not only in terms of putting together an inventory of properties that speak to a certain type of quality, we try to build buildings like that.

Is there one deal that stands out?

There are two. We own the Prudential Center in Boston. We also own the John Hancock building.

What about the General Motors Building?

A great building. A great acquisition. It took years, years, years, years. I cannot tell you what a complicated negotiation it was to buy the building.The person on the other side of the table was Harry Macklowe. We developed a very good relationship and ultimately did the deal. I’ve always believed that in the business world, in the personal world, in the diplomatic world, the political world, that you have to establish a relationship with the other side.

What real estate contemporaries do you respect the most?

There are a lot of them. I respect Gerry Hines. He’s a very talented man. He has a great feeling for design as my partner had.

(Gerald D. Hines is the founder and chairman of Hines, one of the largest real estate firms in the world. It is privately held, and its U.S. headquarters are in Houston.)

We have to have a couple of media questions.Talk about your investment in Fast Company, the tech magazine you once owned.

I put up all the money for that company. I owned almost all of it. The two guys that inspired me to go into the deal, Bill Taylor and Alan Webber, they had their 20th anniversary. They called me up and said, “You’ve got to come to the 20th anniversary” (claps hands), which I was happy to do it because I had such a great time with those guys.

How many times your money did you make?

You go from $10 million to $300 million . . . several times.

Did you make money on the Atlantic Monthly?

Nothing serious. But I brought in a great editor. Bill Whitworth. He transformed the magazine. Bought it right back to the level where it had once been.

Talk about the Daily News, which you own, and its endorsement of Mayor Michael Bloomberg.

We were the only newspaper to endorse him. I was on the board for the Institute for Advanced Study. He came on the board after me. It was really quite remarkable. He went to the board, and he said, “What are your major issues?”

And there were four or five of them. He said: “Just let me handle this one. I’ll get it done within a year.”

Within 11 months, he got the thing done and did it brilliantly, including the fundraising for it. He did everything. Then he said: ‘I’ve made my contribution. I’m going off the board.’

That was my only contact with him.

When he ran for the mayoralty, the Daily News endorsed him on the Sunday before the election and on the day of the election. And I felt from that day on, for the last 12 years, every single day, that I feel I have justified my stewardship of the Daily News and I made a contribution to New York City because he’s been a fabulous mayor for the city. He’s changed the whole city.

Do you ever wish you ran for office?

Yes, I do.

What would you have become if you had not gone into business?

A teacher, I think.

Do you have any big plays left?

Who knows? To be honest with you, if anybody had told me that my life would play out the way it did, I would have told them you’ve got to stop smoking.

Who could have imagined? I’m the luckiest guy in the world, first because I’ve got two great children. But beyond that, look at the career. I started out with nothing.

(Laughing) When I joined, Cabot, Cabot & Forbes, I had a six-year-old Chevy and I owed $500 to the Harvard Law School.

So Gerry [Blakely] asked me, “What do you think would be a fair salary?”

I figured I’ll go for the top, and I said $7,750. I don’t know where I came up with that.

He said, “We’ll pay you $8,750.” I said this is the right place for me (laughs).

That’s where I started.

 
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