Although there was no mention of Grave Dancers in Thorndike’s Outsiders, we’d add Sam Zell to the list of Capital Surgeons. Here are a few excerpts from the above-captioned classic:
The emergence of the Grave Dancer reflects an alteration in the risk reward ratio of real estate investment. The classic motivation for real estate investment is passive reflecting a desire for stability, security, inflation protection and growth. However the Grave Dancer is an active investor seeking greater risk by acquiring property in distress and even greater reward by earning the economic benefit from successful resurrection. The Grave Dancer’s measure of reward is reflected by improving the value of real estate, which if successful far outpaces the performance of the economy.
Grave Dancing is not for the faint of heart. Opportunities arise from the distress of others, but such distress does not assure success for the Grave Dancer. Careful assessment of the risk/reward ratio will increase probability of success. The institutionalization of real estate has brought many investors to real estate. The short term perspective of today’s lenders materially reduces the size of an potential reward which may be achieved by a successful effort. In past periods, lenders were willing to alter the terms of their loans and leave them for 15-20 years. Now concessions are achievable, but only in a short term perspective of 5-7 years.
The lack of discipline that creates the Grave Dancer’s opportunity is contagious. The undisciplined Grave Dancer can easily become a victim rather than the savior. Taking risks today for tomorrow’s reward is both the most challenging and difficult of tasks. Unbridled optimism must be tempered with reality. The Grave Dancer’s motto must always be, “I suffer from knowing the numbers.” His success will emanate from an understanding of supply and demand, the basic premise of Economics 101.
Grave Dancer: See also William McMorrow. See also Kennedy Wilson.