Meet The Man Who's Become Area's Biggest Property Owner -- Sam Zell Has Bought Heavily Into Office Space, Apartments

He's mouthy. He's flashy. And he owns more real estate than anyone else in Seattle.

That description used to fit Martin Selig, the colorful local developer and builder of Seattle's tallest office tower, the 76-story, coffee-colored Columbia Seafirst Center.

These days, though, it belongs to Sam Zell, a billionaire real estate investor from Chicago whose recent shopping spree has made the investment trust he controls the largest single owner of Seattle and Eastside office and apartment buildings. His holdings even include Selig's prized Seafirst Center, which Zell bought from a bank last year after the bank bought it from Selig in 1989.

To many around Puget Sound, Zell is largely unknown, a faceless name that might be confused with the diamond sellers, Zales. But in national circles, he is known as a Bill Gates of real estate, an investor with a golden touch.

Zell's trust owns much of what you see when you look at Seattle's skyline, including the squatty green-domed Second & Seneca Building and the light-tan First Interstate Center.

He also owns much of Bellevue's office space. And he's the biggest apartment landlord in this region, owning some 45 complexes from Puyallup to Woodinville to the downtown Seattle waterfront.

Zell, who has extensive investments outside real estate as well, was the largest shareholder in QFC before its sale in late 1997 to Fred Meyer. He also owns stakes in radio stations, manufactured homes, a cruise-line company, a high-tech networking company, Chart House restaurants, Midway Airlines, the Sealy mattress company, a sugar-cane company and a medical-management company.

With an estimated net worth of $1.6 billion, he's wealthy enough to land solidly in the Forbes 400 list of richest Americans.

Zell, 57, spoke today to local real estate executives in a rare public appearance. Many were eager to hear what he has to say because they know if Zell raises office rents, they probably can. And if he's nervous about the economy, maybe they should be, too.

"I'd sure like to know where he's putting his money in the next 12 to 18 months," said Rob Aigner, a long-time Seattle leasing agent. Would Aigner follow Zell's lead? "If track record is any indication of performance . . . sure I would."

During his speech today and in a separate talk with reporters, Zell said he views an economic slowdown as likely and a recession as possible. Two of his developments were cast "in limbo" last summer after law firms he had signed as major tenants for the buildings got nervous and pulled out.

Zell also:

-- Predicted a long, slow recovery for Asian economies. The West Coast is particularly vulnerable because of its trade dependency, he said, citing the fact that cargo containers now come here from Asia full and return empty because exports have slowed so dramatically.

-- Played down predictions of widespread economic problems caused by Year 2000 computer failures, saying potential problems have been so well publicized that he feels companies, utilities and others will be well prepared.

-- Played up the importance of high-tech communications, saying he was building a business of providing tenants with high-speed phone lines for computer communications.

Jon Runstad, a veteran Seattle developer and now a partner of Zell's, said Zell "was one of the first to really call . . . the depression of real estate in the early '90s. He was talking about it in the last half of the '80s. He was seeing what other people didn't want to see, which was the overbuilding. And he saw opportunity in that."

Zell, who got into real estate as a college-aged property manager, amassed a national real estate portfolio by forming real estate investment trusts, known as REITs, and buying distressed properties at rock-bottom prices.

He came to Seattle too late to exploit the real estate collapse here, though. He bought in over the past year or so, purchasing six local buildings from Wright Runstad in December 1997 and the Seafirst Center last summer. Wright Runstad now manages those properties and has entered joint ventures to develop two more sites with Zell.

Runstad remembers a dinner with Zell in June 1997 when Zell held up a map of the United States and asked, "What's missing?" He had property in every region of the country but the Northwest. By the end of that year, that had changed.

Zell's office REIT, Equity Office Properties Trust, now owns nearly 300 buildings across the country and has shares worth $6.8 billion on the stock market.

All the Seattle-area property said to be owned by Zell is actually owned by the investment trust he controls. But he's such a strong personality that he is commonly said to "own" the buildings.

He rides an Italian motorcycle and calls his rider-friends Zell's Angels. He described himself as a "grave dancer" because of his knack for buying distressed properties, refurbishing them and jacking up rents.

And he's known for his straight talk. A sampling, from The Wall Street Journal last fall: "The days of the deaf, dumb and blind lenders giving any developer unlimited money are over."

Funny he should mention those lenders. It was that group - described locally in much gentler terms - that gave Zell his chance to get into the Seattle office market.

Banks and pension funds provided loans for four Seattle high-rises around the same time. The buildings, each with one million square feet of space or more, opened in the mid- to late-80s, bringing about the city's largest office glut and subsequently its biggest collapse in the early 1990s.

The collapse left many local developers, including Selig, without money to continue. Many were looking to sell property to escape debt and raise cash. Some of them are returning now; Selig, for example, is building a smaller office building on Lower Queen Anne.

But they're all operating in the shadow of Zell now.

"They basically lost their businesses and their assets," Runstad said of some of Seattle's most prominent high-rise developers of the 1980s. He cited the Zell deal as "a huge help" in Wright Runstad's ability to continue developing.

Aigner said Zell's control of so much property around Puget Sound might be contributing to steep rent increases. But he acknowledged that low vacancies help. Office rents in downtown Seattle have risen from $26 a square foot in 1996 to as high as $40 now.

But Runstad argued the benefits of Zell's involvement through the publicly owned trusts, saying stock-trading laws require the public release of much more information about high-rise financing than ever got out before.

Michele Matassa Flores' phone message number is 206-464-8343. Her e-mail address is: mmflores@seattletimes.com

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Sam Zell's places .

Real-estate investor Sam Zell controls eight local office buildings with about 5 million square feet of space, plus some 45 apartment complexes. He's the largest office and apartment landlord in the area. His local holdings include: . Bellevue: . 1. Rainier Plaza, 777 108th Ave. N.E., Bellevue . 2. One Bellevue Center, 411 108th Ave. N.E., Bellevue . 3. Twenty-Nine Hundred on First, apartments, 2900 First Ave., Seattle . 4. 2300 Elliott, apartments, Seattle . 5. Pending purchase: World Trade Center East, downtown Seattle . 6. Second & Seneca Building, 1191 Second Ave., Seattle . 7. 1111 Third Avenue Building, Seattle . 8. First Interstate Center, 999 Third Ave., Seattle . 9. Columbia Seafirst Center, 701 Fifth Ave., Seattle .

. Off the map: . -- Nordstrom Medical Tower, 1229 Madison St., Seattle . -- Summit at Lake Union, apartments, 1735 Dexter Ave. N., Seattle .

. Under development: Sunset North Corporate Campus, I-90 corridor; Three Bellevue Center, downtown Bellevue; City Center Building, downtown Bellevue .