I’ve always valued long-term relationships, but John Hsieh, the former head of Itel’s container leasing business, taught me that you simply cannot su… - Sam Zell

Years later, people would ask me, “How did you know when and what to buy?” But all I basically did was create a massive arbitrage — a fixed-rate instrument in an inflationary environment. I essentially took on $4 billion of nonrecourse debt at an average interest rate of 6 percent in an environment with inflation of 9 percent or higher. That means I was already making 3 percent returns the second the deal closed — without doing a thing to the assets. Sure, we picked some terrific properties, but every one didn’t have to be Class A.

I figured the deal was as good as done, and I returned to Ann Arbor and identified five houses that were all in the same price range for what I was going to pay for the land, about $32,000 to $34,000. These five houses were beautiful — every one of them was three times better than what Mrs. D lived in. One day I drove her around to see them. She walked through each one but never said a word. I couldn’t get any response at all. At the end of the day, I drove her back home. As we neared the corner by her house, we saw a man swaying and holding onto a lamppost. I pointed him out, and Mrs. D said, “Oh, that’s my brother. He lives with us and visits the bars every night. That’s why I don’t like any of the houses we went to see — because he can’t drive; he has to be within at least eight blocks of the downtown bars because he goes there every night, gets drunk, and then walks home.” That’s what we call the major unknown factor. “No problem,” I said to Mrs. D, for the first of many times.

I believed that the fundamentals of real estate were universal. That is, issues of supply and demand, demographics, capital flows, and so on were as relevant overseas as they were here at home.