RAOUL PAL: Jeff, it's great to be here in
Palm Beach and to get you onto Real Vision. Just chatting off camera, we've got a lot
of friends in common we didn't. You've got a fascinating story and I think
people would love to hear the story of how you start your career, how you got into real
estate, but even starting before then, you as a student, going to university. Talk us through a bit about that. JEFF GREENE: Well, I don't know where to begin. I grew up, I was born in Worcester, Massachusetts,
which is a city about 40 miles from Boston. My dad was a textile machinery dealer, which
meant you sold these giant machines that were longer than this room, they could be 100 feet
long, to mills and parts of that also and they did it very well. We're a middle class family in like cute little
house with a backyard and my mom was pretty much a stay at home mom. Then in the late '60s, all the textile mills
got unionized in New England and they moved to the south. My dad lost his livelihood because he didn't
have mills to call and that's all he'd done. He had all this money in this business. He had a warehouse with parts and materials. My parents picked up and moved to West Palm
Beach, actually. My dad bought a small rubber stamp business. He never really got on his feet again. For me, I was just a junior in high school
when they moved here, but I was really still in junior high school and when our financial
fortunes went the wrong way. I had to work my way through college, and
I had some financial struggles, which probably made me hungrier than ever to do well. RAOUL PAL: How did you pay your way through
university? There's a bit of a story about that, because
you went to Harvard, didn't you? JEFF GREENE: Well, I went to college at Johns
Hopkins University in Baltimore. It's interesting. I applied for scholarships, and I got scholarships
and student loans. That paid some of my costs and then also,
I had been an exchange student in Israel in high school. I learned to speak Hebrew fluently. I taught Hebrew school three days a week. I had to ride the bus in Baltimore and I had
to change three changes. Two transfers. Three bus rides to go out there to teach Hebrew
school on Tuesday and Thursday. Then I rode out with another Hopkins student
on Sunday. Then I had another job where I checked IDs
outside the gym, it was called work study. It was a government funded program where you
get paid a buck 50 an hour when you're supposed to be able to do your studying while you check
the IDs, which you do. Then I also, when I came down here to visit
my parents, I worked with the Breakers Hotel here in Palm Beach. I was a busboy, and then a waiter in the main
dining room, and I just slogged along and made it through college. I finished Johns Hopkins in two and a half
years, not because I was such a genius. I think it was because it was working so hard. It wasn't really a fun college one. RAOUL PAL: Then after that, where did your
career go? JEFF GREENE: Well, so then what happened is
I was down here one summer in West Palm Beach. I was working at the Breakers, not making
any money because who's here in the summer? Nobody, so no tips. I signed out of the local papers, had telephone
sales and I went to [indiscernible], it was to sell circus tickets for the local Riviera
Beach Fraternal Order of Police which is a nonprofit Police Organization and it's at
$2.50 an hour or commission. Well, minimum wage was a $1.60 in 1972. $2.50 an hour, you can make 100 bucks a week. Tuition at Johns Hopkins in those days was
2700 a year so if I work for 12 weeks, I'll make 1200 bucks. Not so bad. High stress on these tickets. I've noticed that I'm selling more than everyone
else, if I feel like I'm selling more than everyone else in the room so I said to the
guy at the end of the day, how much would I've made on commission? He said $93. I'll take commission. Instead of making $20, I made 93. Anyway, I ended up doing this all through
college. Wherever I had a break, I then would go on
the road and run a telemarketing office for the circus. After I finished at Hopkins, I went on the
road to run these telemarketing operations for fundraising circus from Sarasota, Florida,
and I would roll into little towns all around the country like Bluefield, West Virginia,
tangy, you never would have heard of. [Indiscernible] 20,000, 30,000. Then I had a Pontiac Grand Am. I had my clothes on a bar across the backseat,
loaded with laundry detergent in the trunk to go to the laundromat. I would roll into town, check into the Motel
6 or Days-in or whatever it was. I set up an office, sell the circus tickets,
hire local people. I did this. It was a lonely life. I finished college before I turned 20 so I
was just 20 years old, 21, 22 all by myself like a traveling salesman in these little
towns. Forget having a girlfriend, you couldn't even
have friends because you're always seeing different people. You're always on the move. I did this and I saved up and I worked so
hard. I saved up $100,000 in the mid-70s. It was just from working, I worked nonstop. I lived on nothing. I saved every penny because I was determined
after what I'd been through going through working my way through college, never to be
broke again. My dad, actually, it's worse than not losing
his livelihood, he actually lost his life. When I finished Harvard Business School in
1979, in May, my dad didn't make it to graduation because he was having heart issues. He died two months later with a massive heart
attack at the age of 51. I really believe it was because of the stress
of not just losing his life, losing his dignity and his sense of worth. It puts me in touch today very much and that's
probably one of the reasons I've gotten involved so much in philanthropically, and politically
because I've really saw firsthand how somebody can get broken when there are economic reality
changes. Anyway, so I saved up all this money, go back
Harvard Business School, I had $100,000 in the bank. Never had bought any real estate because how
could I? I was in a different city every two weeks. RAOUL PAL: Living out of the car. JEFF GREENE: Sorry? RAOUL PAL: Living out of the car. JEFF GREENE: More or less. I did have stuff stored. I'd never had an apartment. I had stuff stored at my parents' house, my
aunt's house. I was living out of my car more. When people say that you think I wasn't sleeping
in my car, but that was my base. My Pontiac Grand Am. Now, a lot of people I knew had invested in
real estate. It's interesting. I got into Harvard Business School. I didn't get into the good housing complex,
so just field apartments because there was a waiting list. A friend of mine from Hopkins said, who would
have started off with those first so I said what do I do? He said, well, what you can do is why don't
you go buy one of these three-deckers? What's that? It's like a three family house built in the
late 1800s. You can live in one, rent out the other two
and at the end of the time, you think you're probably going to sell and get your money
back and live rent free and I said that's interesting. I was set by to discuss-- a friend who was
broker, also been to the business school and who I still know actually. I bought a three-decker, and lived in one
and the market was so undervalued in 1977 when I bought this, I could see I was saying,
I bought it for $37,000, 7000 down, so that would happen as I got approved for the housing. I said, what'll it make me if I rent all three,
how does this investment work and by every measure I looked at, I was going to end up
after my mortgage payment, making $2200 a year on my separate thousand dollar investment. If that's a 30% return, I said I got to get
more of these. While I'm at Harvard Business School, I accumulated
18 properties. I bought them. RAOUL PAL: You were just buying them out of
the cashflow of each property? JEFF GREENE: No, I had my hundred thousand. RAOUL PAL: Out of school. JEFF GREENE: For the first one I wanted when
that was perfect, so I'm saying I can't be like dealing with repairs when I'm at Harvard
Business School. Who's going to do this work? Then I started getting comfortable doing remodeling
and for the time I was done, I was buying junkie buildings, fixing them up and anyway,
that became the beginning of my real estate career. As it turns out, the market was so undervalued. That property I bought for 37,000, I sold
three years later for 185,000. Another property bought for 38,000, right
near the Cambridge line, and somewhat sold it for 3380, 330 to 380. RAOUL PAL: Is that when interest rates started
coming down that suddenly the price of property exploded? Around '81, '82? JEFF GREENE: I think you're right. That's when Reagan was just-- RAOUL PAL: Yeah,
that's right. Reagan just cut in, there's the Reagan-Thatcher
years, interest rate just peaked and just started to come by-- JEFF GREENE: The late
'70s, so yeah, so before whatever it was, the market just exploded and my 100,000--
by the time I finished Harvard Business School, I had a million dollar net worth. Then I was off to the races. It's interesting because people often-- RAOUL
PAL: You didn't use your Harvard education at all? JEFF GREENE: I always use my Harvard education. RAOUL PAL: You leave Harvard, you've made
a million bucks and I guess you decided real estate's the business you want to be in. JEFF GREENE: I fell into it. What happened is I decided to move to California. I had a great aunt and some cousins there
so I moved to LA after I finished at the business school and thought I'd do real estate but
the prices in LA were very different than they were in Boston. Boston was-- it was before the tech booms
and the biotech booms and Boston was a little bit sleepy in the early '80s. Slow growth. Even after things had started to appreciate,
you could still put down when you buy an apartment building, you put down 20%, 30% you'd make
a nice return on your cashflow 5%, 10%. I go to LA and you buy a building, it's okay,
here's what you do. You put 30% down and you'll lose cashflow. Because basically in LA, you are buying the
futures because everything was perceived to be going like that, and I just didn't get
it. I did some other things. I bought actually 50% of a clothing manufacturing
company, did that for 14 months. RAOUL PAL: Why? JEFF GREENE: I just finished Harvard Business
School, I had to do something for my career. I looked at buildings, they all just seemed
outrageously expensive, didn't fit the format. I was used to cashflow real estate. I just couldn't figure it out. I think, to tell you the truth, I'd taken
a class, a business school by small businesses. The way you find a small business is you do
business brokers, go talk to local accountants. What my cousin had was a textile salesman. I said, let me go see your accountant. Well, the only companies the accountant knows
is textile and garment companies. He said, well, I got this guy who has half
of-- he has a company, he's just fired his partner, he's looking for someone like you
to come in and help run the business. I bought half of this company, and it was
very successful 14 months. I hated every minute of it. It wasn't my cup of tea. I was thrilled and I'm showing up in my--
at the time, Brooks Brothers suits and buttoned down shirts and ties and these guys who were
working there, gold chains around their necks and they were in these spray on printed shirts
that just it was aggressive, tough screaming and yelling. It wasn't what I was planning on doing with
my newly minted Harvard MBA. Anyway, I got out, made some money and then
I started doing real estate deals and started buying. I figured out the LA market, started buying
properties and had a nice run up till early '90s when I participated in the crash like
most developers and investors. RAOUL PAL: When you said you figured out LA
property markets, does that mean you just went into the momentum trade and realize it
was all about price gains and not about-- JEFF GREENE: Yeah, I realized that you're
not going to make your cashflow in year one, you'll get your cash flow in year three or
four and that's how it was priced and just I started doing things that way and sure enough,
you bought one or two so I bought like an eight-unit building, a seven-unit building. Then you're seeing there, as the rents go
up and I started saying, now, I get this. By the time I get to a-- that was the starting
like in '82-'83 and by '91, '92, '93, I had about 100 million dollar real estate portfolio. I never had investors or partners, but I had
a lot of debt. That's how I built it. I probably had debt on at maybe, I don't know,
65 million, which is 35% equity, had been refinanced and did grow aggressively, and
then the market dropped and all the sudden, somebody-- '92, '93, '94. By '94, my $35 million net worth was like
minus $15 million. RAOUL PAL: Did that terrify you? How did you think about debt from then? JEFF GREENE: It was tough, because basically,
from my papers and snow shoveling jobs, my whole life in business had been straight up. The truth is let's finish Harvard Business
School at 24. I have a million dollars. I'm thinking I'm a genius. I'm bored, and people call you, you must be--
you're really boy wonder, you think I'm really a smart guy here and basically, I had never
been-- had not been married. I had girlfriends, but I had been single,
all I really had was my career, to tell you the truth, to hang my hat on. In 1994, I was just turning 40 years old and
basically, everything I had worked for was all of a sudden that and it was traumatic. It was a tough few years. It was a tough few years, because I'm thinking
like I could actually very easily be liquidated out back to zero and have nothing at all to
show flow for what I've been doing in my whole career. I got good education, but what would it have
gotten me? RAOUL PAL: How did that affect you psychologically
at the time? JEFF GREENE: It's tough. It's interesting, I still-- RAOUL PAL: You
can't take risk so easily when you're thinking like that. JEFF GREENE: It's interesting. I've always been a fundamental-- believe in
the fundamentals like the way I invest, where I do everything and I try to focus on long
term and not let noise bother me. I knew why that market had happened. I understood it very clearly. It's a longer story, but the government empowered
savings and loans and then try to allow them to make crazy loans. Basically, because what happened and if you
will remember back, interest rates started going up, SNL is having their books, all these
fixed rate loans, and they were all in trouble so the government said, okay, you want to
be able to pay 8% for CDs, we'll let you do anything. People were buying McDonald's franchise with
the SNL funds and they will make 100% construction loans. Of course, you're going to have this crazy
froth in the market. I didn't really feel I would like that. Then nothing that I had done, it was the government
that did it, and it happened and so when it's so good, I plotted through it. I kept renegotiating with lenders. Lucky for me, I had one main lender, called
Glendale Federal Savings, they were the sixth largest SNL in the country and believe it
or not-- RAOUL PAL: They stayed solvent? JEFF GREENE: Barely. They had $200 million in capital. I owed them like 69 or 59, give or take. RAOUL PAL: Okay, so you were too big to fail. JEFF GREENE: It's crazy because they were
like, it's almost a $20 billion SNL, my little thing was enough to push them over the hump
so they kept working with me and I was-- look, I was very persistent. I'd give them a building, they would cut loans
in other buildings. We just work together and kept restructuring
a few times, then eventually by probably '95-'96, my net worth was zero again, like all my loans
equaled my values. Then I got lucky and I said, look, I sold
one property. I had a property on Sunset Boulevard, a nice
house at a very nice part of LA, 40-unit building. It probably was worth $4 million. The loan was for $4 million, but the Getty
Museum needed housing for the new faculty. They were just finishing the new Getty Museum. They had looked at some other land I had,
I called them up and I said, how about this building? I sold it for $6 million, so I get 2 million
bucks cash. Now, most people having been through what
I was, they would have taken that 2 million. I said, I'm not going to risk this ever again,
but I didn't. I went I bought three new buildings immediately. I bought them from the RTC. I bought an office building for $30 and cents--
RAOUL PAL: I just want to get back a little bit. How do you-- the psychology of doing that. Taking a loss or getting close to having to
realize a big loss is actually quite hard thing to do. Trading, investing and I run a hedge fund. I know what that's like, how did you distance
yourself from that? Let's do it again. You thought you had nothing to lose anyway? JEFF GREENE: No, no, I just felt that-- I
really felt that I understood why this had happened. I felt that this was a crisis that was brought
on by the savings loan excesses and that the RTC and the government had it very badly. I don't know if you remember it, the Resolution
Trust Corporation. They just took everything and liquidated and
they caused a lot more havoc than would have otherwise been in the market. I could see that's why my properties were
dropping in value to those levels, not because people were leaving LA or didn't want to live
there anymore. I have a chance now to buy these properties
at barely pennies on the dollar. I snapped up an office building at 30 bucks
a foot, that was like eight years old, it was what it costs $200 a foot to build then. Then I bought another 65-unit apartment building
for 2.7 million. All townhouses and I'm thinking there's no
way you can lose money on these deals. Sure enough, they all like tripled in value. Then I was able to get those stabilizes, or
refinanced. I just started going and buying and honestly,
I'd say that my recovery in the late '90s was really relationship oriented. I've always been very relationship oriented. I had one bank that I worked with a lot. I figured out what they needed, they figured
out what they need to do with me, and they were my lender, and I started buying properties
very aggressively at very cheap prices. RAOUL PAL: All in LA? JEFF GREENE: All in LA. I was buying apartment buildings, because
what you had was you had in this SNL period, you had people who had built all these new
buildings. Hundreds and hundreds, if you drive to LA
today, you'd still see these late '80s, they're four-stories. That's the zoning over two levels of parking. Wood frame, stucco. They all look the same. Basically, these buildings, what happened
is moms and pops would have them or people would not own them. They were shell shocked because they went
through rents-- because they have a building. They may be got it in say, and I'm just guessing
they built it maybe in, I don't know, 1987, '88, '89. That's when the big build-- now, this RTC
gets the building next door and cuts the rents by 40% so now, you cut your rents by 40%. By the time you get to '96, you're just so
happy to have tenants. No one's raising rents, rents are way below
market. You go into buildings, you just buy them,
we clean them up a little bit. Change the entire rent roll to market and
then refinance and buy more and so I got this going again through great broker relationships,
lending relationships, and I got up to 8000 units by 2005. RAOUL PAL: 8000 units? JEFF GREENE: Yeah, and over a billion dollars'
worth of real estate. RAOUL PAL: All in LA. JEFF GREENE: All in LA. RAOUL PAL: Talk me through the next phase
then. 2005, you've now got half of LA, it sounds
like. JEFF GREENE: It was a great run. I'm freaking out, and my debt was probably
I'm guessing 500 million. I've said I've gone from minus 15 million
to positive 500 million net worth, but I know that stuff can happen and even things that
you have nothing to do with like the SNL crisis. I'm thinking what had happened was the value's
gotten so high because after the dot-com bust, interest rates were cut to the lowest since
World War II. As a result, cap rates on apartment buildings
got very low and I'm thinking like, this may not be sustainable. What can I do? As this is happening in like '04, '05, I'd
go and I'd sell five or six buildings, get some cash, then I think, yeah, I'd do an exchange
and buy more buildings. I'm thinking there's got to be some hedge
because I'm reading about all this stuff on Wall Street. RAOUL PAL: Which year are we talking about
now? JEFF GREENE: This is '06. There's got to be some way rather than just
selling buildings and paying and getting nervous then buying new ones. There's got to be some way to get a hedge
so if the value of the buildings drop, I won't lose as much money. I go to talk to Goldman Sachs, JP Morgan,
they said, well, you can short the SNL stock because if the market collapses, those will
drop. Then I think, well, if you do that, what happens
if the one that you short gets taken over or something. Then I went to see a very old friend of mine,
John Paulson, who was a very close friend. I called him up, and I said any ideas on this,
he said, come see me and work on something you may like, so I went to his office and
he showed me how-- he said, I'm shorting subprime. Subprime? What does that mean? Well, I'm using derivatives. What's a derivative? Well, you use credit deposit? What's a credit deposit? Then he shows me some slides. I get the idea. Housing prices are not going to go up, are
going to drop and people won't be able to pay the mortgages and the bonds will default,
but these are very complicated instruments. I didn't really know exactly how you get from
giving your money to this up to putting your money up to you make a profit because the
way these bonds work, they were very complex. I remember saying, I said JP, can I do this
on my own because now, we're friends and I may be-- and he said, no, you won't be able
to because you have to sign this. It's an institutional trade. His fund wasn't ready for several months,
anyway. This is like in March or April of '06. I went back to LA and went to Berlin. Then I called up all my bankers, and they
told me, absolutely not, you can't do this. I hustled SIP, and I've pushed them in then
I got approved to do this trade. Initially, I went short $650 million worth
of subprime mortgage backed securities with JP Morgan and Merrill Lynch. RAOUL PAL: You then sit it out for a bit,
because nothing happens. It gets marks against everybody. JEFF GREENE: Yeah, a little bit. It went down a little bit, and then I went
to JP, sent me his fund, finally said, I'd like to go in your fund now. I told him, I'd done every email, I told him
my I'd done some trades, and he got upset that I'd done the trades. RAOUL PAL: Without him? JEFF GREENE: Yeah, but I still wanted to go
to his fund. We're still friends now. I think it was I should have probably told
him I was doing it when I did it. I'd say, I just did it. I figured he's running up, at the time, he
had $5 or $6 billion in a matter I think, he's got a big business and I'm just doing
a relatively small amount of this in the overall scheme of things but, and I'd said I should
have told him and I couldn't, I think it caused a problem between us for a while, but nevertheless,
I ended up doing that. The fund dropped in the summer a little bit
and then so I was down. Then it went up and then it went down again
the next January for some reason. RAOUL PAL: Have the housing prices have a
tipping over at this point? JEFF GREENE: Housing prices with-- all the
fundamentals of housing were going like this, the punt's going like that by January, it
made no sense. I said I want to do more of this. I caught up and I was able to do another 400
million of the short and so I had 1,000,000,050 on at that point. I was going to do more truthfully but by the
time I got approved for more at one of the two banks, it already started to deteriorate,
the prices already dropped against. I had this in them. Then I just gradually started closing out
that trade in, I'd say, 2008 and it was a very profitable trade. It turns it wasn't a hedge at all. That's the craziest thing and I knew when
I went and started, the more time I spent on this trade, it's faster I realized that
this is not a hedge because apartment buildings values were a function of rents and interest
rates, lower interest rates provide low cap rates and high and stable rent markets, people
want to buy buildings with stable rental markets, but I looked at it, I knew it was an incredible
trade because I'm thinking this doesn't make any sense. There's no way that these bonds are getting
repaid. That's why I stepped right up and I did over
a billion dollars in this stuff. RAOUL PAL: That was a hell of an initiation
to the world of derivatives. JEFF GREENE: Yeah, pretty lucky. It could have gone wrong. RAOUL PAL: It could have gone wrong. There again, in the end, they're not very
expensive trade. The good thing is they were relatively cheap
to put on but the punt was so ridiculous if you get them right. JEFF GREENE: Yeah. Well, I think I had to put up I think to 5%
which made sense because basically I was doing it 1.3 over. Here's the problem. The problem with this trade is I was very
lonely doing this trade. I'd never been on-- I'm going up against the
biggest banks on Wall Street effectively. I don't know anything about the stuff. I'm thinking about-- am I missing something? Just seems all seemed too good to be true. I would talk to my smart friends, like my
close friends from Harvard Business School and some other friends who are on Wall Street. I'd say, what do you think of this? They would go talk to their advisors. Interestingly enough, a lot of very smart
people would come back and said, the problem is just really stupid that you're basically
agreeing to pay the spread for 30 years on these margins. If no one pays off the loans, you'll pay for
30, but that's completely nonsensical, because even normal loans get refinanced and as an
average duration of any bond, any pool of loans. In this case, I focused every-- I don't know
if you have seen how these loans business is like, so basically, there was one type
of loan, it was called a 2/28 loan. I would try to find bonds at 80% of this. What that meant was for two years, the rate's
fixed at some very low rate, maybe it might have been at, in those days, at 6% for a subprime
loan, and then in month 25, it can go up to 300 basis points, then 100 basis points every
six months till it peaks at 600 basis point increase. It means after three and a half years, it's
a good chance that these loans are going up 6% to 12%. On top of that, a number of the loans of the
pools that I shorted went from interest only to amortizing. Imagine you have a 6% interest rate loan,
three and a half years later, you're amortizing it at 12%. Of course, nobody can afford. The only way out is if housing prices keep
getting higher and you can refinance, but when I did this trade, only 11% of buyers
in California could qualify for the median priced home loan, means 89% couldn't qualify. Who is going to possibly push prizes for a
lift? Nobody. That's exactly what happened. RAOUL PAL: You get through the housing crisis
pretty well, and the value of your real estate portfolio didn't really suffer? I guess single family homes got really killed
in that. JEFF GREENE: Yeah, everything dropped, I'd
say, but apartment rents dropped 15%, 20% in LA and the value's the same. The thing about LA, it's a very supply constrained
market. Even in the worst crash, it never really that
bad. It was bad in the early '90s. There was such an enormous overbuilding, there
wasn't any overbuilding going into 2000 into this crash. There was no overbuilding at all of apartment
buildings. It was a very tight market. Of course, people, the economy get bad so
rents dropped a little bit. It was no big deal, then they came back immediately. RAOUL PAL: Then after that housing crisis,
and that was the financial crisis, what opportunities did you see? Because a guy like you sounds like you would
have been looking for opportunities in there. JEFF GREENE: Well, it's interesting. What happened was I'd never been married. I met my wife in the summer of '06. '06 had a pretty good, spring, summer when
I did subprime short in April, I met my wife in June. That's a pretty good period and I'd never
been married. RAOUL PAL: Mike Tyson's party, is it? JEFF GREENE: Mike was actually on a boat I
owned in Sag Harbor for his 40th birthday. I'm like a guy who likes to really figure
things out and really plan things out, that are going to happen, I don't know, like depend
on random circumstances. I don't go to Vegas and place bets on things. I'm really pretty mathematical serious. Meanwhile, how do I met my wife? I'm having a crazy party for Mike's 40th birthday. Friends of mine go get a DJ. DJ says, can I bring a few hot chicks? Walked in with the DJ. It ended up that's the mother of my three
children, go figure it out. You know the plans you have, they sometimes
are funny. Anyway, so what happened is, so I met my wife
that summer, summer '06, and then we ended up getting married in September of '07, and
she'd been living on the East Coast and in truth, I knew I was cashing out the subprime
debt anyway and I was thinking, you know what, I'm going to have 100-- I could save 100 million
dollars in state income tax if I live in Florida versus California. The point is I was only in LA three or four
months a year, because I was on my boat a lot, traveling, so it wasn't like I was--
had kids in school. I was only there part time, so I said, and
I was already in Florida a month and a half a year because I had my boat or something
and I went, let's spend a couple more months in Florida, one month in LA and I'll save
100 million dollars and I'm not doing anything illegal, everybody gets that's the law. We end up moving to Florida, getting a place
in Miami and this is in early '08. At that point, everything was a mess. RAOUL PAL: Miami got murdered in that. JEFF GREENE: Interesting enough, well, you
couldn't get anything in Miami because what happened is I'd be driving around and I'm
giving up, I've got like, I'm a real estate guy, who truthfully never had any money. You don't go from zero to eight to a billion
dollars with a real estate with no investors, and no partners and have cash in the bank. You do that by you refinance a building, 15
minutes later, that build money is due to buy another building. It's like literally you got enough money to
pay for lunch but not much else. I'm cash poor, asset rich my whole life because
I was always moving around. Now all of a sudden, I'm sitting with either
a million dollars of cash and the real estate market has collapsed and everything's-- I'm
thinking like, wow, this could really be a lot of fun for me, instead of being like all
my peers, struggling, I'm just the guy with the money. What a great reversal that was. RAOUL PAL: Somebody told me once very early
my career, he said, listen, there's one piece of advice. He who has cashed in the recession is king,
and it's so true because then you've got the opportunity that nobody else has got. JEFF GREENE: Anyone else-- it's not saying
that like I didn't need to make more money. It's really more that also, it's just so much
more relaxing years I have in liquidity. Just in general, even forgetting opportunity,
just not having-- it's nice to build a business and grow, and not have partners or investors
to worry about, but it's stressful constantly trying to move things around and depending
on loans and refis. It was certainly like I saw in Miami, I'm
there and I'm driving around like some-- I'm a deal junkie and I'm a serial entrepreneur,
I'm looking around and I see all these big buildings with all these low lights on and
I see all these empty lots next to the big buildings. I think, how do I get some of these and nothing's
available because it's early '08, and they're in the bank portfolios, nobody's sure what's
happening. Then, but we moved here in December of '09
to Palm Beach. By the time we moved here, it was just the
time I'd say like 2010 when the property started getting sorted out, the lender started getting
control of them and they were starting to liquidate them. I started buying here very aggressively. I bought this hotel. I bought the note here and foreclosed on it. This hotel, I think it cost the former owner,
it was over 100 million dollars, I bought the note for 41 million from UBS and all kinds
of fractured condos and land and it was really, there's a lot of opportunities in this market. Originally, I was coming here just thinking,
okay, I'm living here in Palm Beach, I'll do a few things to make some money. I thought they've really great values. I didn't really necessarily think it was a
great place to do deals, that it was a good place to do deals. Then the more time I spent here, realize this
is just a great place to live, a great place to invest, a great place to develop. I was able to snap up all these great opportunities. RAOUL PAL: Then the whole hedge fund industry
moves here. The whole of Greenwich turns up here, and
that's going to help you, the hotel, and of the neo taxes and the big move here. JEFF GREENE: I don't think it's as big as
people think. As soon as you talk to people in business,
first of all, hedge fund people, how many do they employ? First of all, the kinds of hedge funds that
come here, the little ones are on office, they have a satellite office. RAOUL PAL: Yeah, because people like Paul
come here and it's just him, he stays in his office and he didn't bring any employees then. JEFF GREENE: No, of course not, because everyone
says us, from these big business developments had said, we've got all these hedge funds
to move. People and hedge funds, first of all, if you
have a hedge fund in New York City, you've got mature, serious people, have wives and
parents living there and kids in school and country clubs. They're not just going to, hey, guys, let's
all moved to Palm Beach, okay, we'll all just go there. RAOUL PAL: It's only the founders and the
owners who come down here. JEFF GREENE: Of course. It's hard to come here because they still
have to keep their presence because people, it's not that that people don't like, it's
a great quality of life but people have commitments, not everybody don't just going to pick up
and moved and uproot themselves. You really haven't seen that. On top of that, those aren't the kinds of
companies that employ large numbers of people like LA, you got like Snapchat, they open
an office, and they employ-- they have 200 people, rent 100,000 a year in one office. Google, when those kinds of companies come
into New York where I'm building a building and about two blocks away, Google's building
a saying jobs terminal, you're talking about 6500 jobs and I read the average pay is over
$100,000. That's what moves as an economy here. We haven't really seen that. RAOUL PAL: Talk to me about the New York real
estate market, because I've been talking to a few people. Just the Real Vision offices are in New York
and I'm there every two weeks, and there has been one of the largest buildups of New York
real estate, I think in history, has gone in the last four years. What do you about all of that? What's in your radar? JEFF GREENE: I wish I had another deal I do. I've just finished a 25-story building. It's when I started doing this, it seemed
like a great idea. The problem with real estate developers is
one developer has a successful building. It does really well and then there's no regulation
how many others can do it. Then 15 other developers are hired to do the
same building and everyone thinks, well, I've got a better architect, I've got a better
view. I'm a smarter developer. Then you end up with 20 buildings, and there
really were enough buyers for just the first one. I think in New York, that's what have happened. For me, look, I don't use construction loans. I don't have investors. I don't have EB-5 money. I don't have limited partners. I try to just do enough, that kind of development
that I can afford to pay for with my own cashflow and I'll make it through this cycle. I think it could be a long cycle. The good thing about the building I'm building,
lucky for me, is it's in an area called Hudson Square, which is a little-- not Hudson Yards,
but Hudson Square, which is a tiny pocket, just below the West Village, above Tribeca,
between Soho and the river so it's really a five-minute walk to West Village, Tribeca,
Soho or the river and that was great because you're in the middle of everything. What's even greater is ABC Disney just in
that is building right now. The whole operation one block from my building
on the same street, it'll be ready in a few years and then Google's building St. John's
Terminal two blocks away. We're going to have 15,000 new jobs within
two blocks. That's very lucky. I think that I have to figure out how I'm
going to make it till when we're done in about six months till three years from now when
the neighborhood really comes into it, but New York's-- you know what, you can't bet
against New York because isn't even as bad as it is. Just those two projects in my neighborhood
are going to have 15,000 jobs and I realized the ABC people were working up in the Upper
West Side, but those buildings solve a steam bottom and they're going to rebuild them into
something. New York is like it's the greatest city in
the world. It's our biggest city. If you want to do certain things, you want
the talent and the resource. You want the infrastructure, that's where
you're going to go. Eventually, we'll figure out a way to get
past this cycle, I'm sure and all this real estate, they will just-- RAOUL PAL: How are
you thinking of the real estate market overall now? I know you're mainly focused here in Florida,
I guess, for most of your investments and some in New York, what are you thinking now? What's your senses? Because you had amazing timing in 2006-'07. JEFF GREENE: Look, I think there's different
kinds of real estate obviously. Right now, I'm building a 300,000 industrial
building here in West Palm Beach. I feel very positive about that, because the
movement is clearly towards more industrial because everybody's ordering on their computers
and getting it delivered by Walmart or Amazon so there's tremendous demand for industrial
space. It depends on the category, I would say that
the values of things like apartment buildings that are in the three to four cap rates, and
based on rents which have already gone up for the most part a lot, seem pretty high. It feels like we're in an asset bubble in
almost every category to be honest with you and I think stocks are at an all-time high,
bonds low, interest rates are low. Those are all close to a high. Real estate's close to a high, and it's interesting,
everyone just seems to be very optimistic. I just had lunch with someone today from Merrill
Lynch, he was telling me how he thinks all the smart people, they were just going to
be fine because rates are low. When everybody thinks things are going to
be fine, that means everybody's already in and you're not going to be so fine. RAOUL PAL: That's one of the things that struck
me about Nome Goldsman, who we talked about before. Nome, he's had to say he's had had a sense
of some of this. His whole, he went over the hedge fund business
and a lot of real estate and he ends up buying fast food, businesses and frozen food. He bought a huge chain of Burger King. He built the largest frozen foods business
in Europe, just looking for that anticyclical, smooth thing. It feels like it's the time to be cautious
when nobody else is. JEFF GREENE: Yeah, but interesting enough,
look, the other side of this, everybody's been saying that now for a long time. RAOUL PAL: Yeah. It's been going on. JEFF GREENE: People are sitting on a lot of
liquidity, stay in the loop of liquidity, though is coming from this-- you've had a
rigged economy for 10 years, where basically with artificial-- you have the central bank
balance sheets adding, I don't know what, $15 trillion globally to their balance sheets,
and you have rates held artificially at zero for almost for a decade and now, again, very
low and negative in Europe. It obviously cause distortions in the market
now. I think everyone's used to the distortions
and figures the distortions will keep on going, so everything will be just fine. Who knows? I don't know if that's going to-- RAOUL PAL:
What about the community here? There's a lot of hedge fund managers, a lot
of people, entrepreneurs who've made a lot of wealth, is their sense starting to shift? Because some people I know are sensing shift
and others are saying, no, still full on, aggressive risk taking mode. What do you think the mood is here? JEFF GREENE: Everybody talks, everybody says
you got to be cautious, but I think everybody is also thinking I can't-- cash is trash. We got to buy things. Look, one of my biggest holdings is Apple. It's sitting at 1.3 trillion market cap, I
get it. It's no longer a device company. It's now a platform that everyone's on. It's now the telephone company when I was
a kid, everybody has to have one and we'll keep getting them and buying these services. The question is, what's the value of that? Is the value, is it more than 1.3 trillion? If it's less than 1.3 trillion, stabilize
them, we're all going to lose money in today's stock price. I don't really, obviously, if you could show
me that earnings are going to keep growing from today's levels at that company and they're
going to be making-- I guess they're going to have to make 100 billion dollars a year
to trade at 13 times earnings, which is what you'd want to be at some point, maybe not
today. It's a lot of money to make, even a global
company with the monopolistic platform like the iPhone. Who knows where these things are going? That's been real estate to me. It definitely feels that a lot of good news
are already out there. Rents have gone up a lot. Unemployment rate's very low. Just to be-- I guess the question is how real
is this global economy and how much of is it rigged? That's the question. If it's real, and it can get a snide, you
can do, we can rig things, but then the rig timing can lead to real-- RAOUL PAL: Well,
the question is does rigging last? What fragility is it building? It's like you talked about the SNL crisis. That was a rigged situation where the SNLs
were just because of the government irresponsible of what they're doing. We're seeing the central bank's irresponsible
with how money's being thrown around the economy. JEFF GREENE: Well, yeah, so no. Look, if that's the issue, like who knows? The reality is, I can tell you this, up until
two or three years ago, if we had employees who in any way, were a substandard, giving
us a hard time you'd said, bye-bye. There's another one waiting right now, starting
about two years ago probably when Trump became president, not because of Trump, I'm saying
but at that time in the cycle, the way labor market changed dramatically, all of a sudden,
carpenters who are making 35 an hour are making 50 an hour and you can't even get them. All of a sudden, in hotel, workers that were
making 10 an hour, make 15 an hour and wage didn't go up 3%, they went up 20%, 30%, 40%. Pilots, I have a plane and my pilot salaries
went up 30%, 40%, just like that. What's happened is all that liquidity has
now led to increased wages. Now if that's just starting to happen, maybe
we are more mid-cycle and then maybe we're not late cycle because it-- RAOUL PAL: If
it filters through that is, because people can raise prices in the hotel or whatever. JEFF GREENE: It is filtering through because
everyone's making more money and Donald Trump, lucky for him, gets to take credit for it. Whoever the president at the time, he's the
custodian of the economy. That's what seems to be happening. Now, I can't tell you like it does-- what's
the consumer debt levels, I don't know that they're necessarily overextended. A lot of people are refinancing their homes
no with lower rates, their 401ks were on all-time high, they're going to spend money, it's going
to keep this economy moving. What is an economy anyway? An economy is it's a perception and so that's
why people are so confused, because you look at the reality of all this funding money voodoo
stuff going on, and you think, is it real, but then you think at the end of the day,
if everybody believes it's real and they're out spending money, it becomes real. RAOUL PAL: Outside of Apple and real estate,
what do you invest in? Do you have gold, do you think about gold? JEFF GREENE: I don't really, I don't own gold. Because we have a lot of real estate, which
is a hard asset, we have a nice art collection, which is a hard asset. I've other, Alibaba is a big possession of
mine, Google's a big position of mine. I tend to lay down to one of those tech stocks. I have to own the banks and others, too. I have a lot of liquidity right now to me,
honestly. A big chunk of money sitting in a lot of them
in these bank prefers that I know are going to get taken out because they're about to
roll into very high spread preferreds. I'm sitting on a lot of money making 1.7%
to 2%. I'm happy with it. I'm thinking like you know what, when things
that move-- I often look at a time in the cycle, I'd say is morally, if you had to make
one bet, it's two choices. Things are going to be 20% higher than today
or 20% lower than today a year from now, two years from now. I think most smart people would say the better
chance, they'll be 20% lower because of where we are. I'm happy to sit in market, plenty of liquidity. Look, everyone's different. If I were 25 years old, maybe I'd filter. I'm 65 years old, I'm not assuming and if
I have any trouble, I'd be worried but I've already had that. I'm basically just being cautious and I'm
ready to have the liquidity available. If there's great opportunities, fine, if not,
then I can live fine on my assets and make 2%. RAOUL PAL: Talk to me about your other interests,
the institute you set up. JEFF GREENE: That was set up because five
or six years ago, I could see that a country that was solving its inner world, that was
solving its problems only with monetary policy, was going to leave behind a lot of people
and I could see it happening. You could see that those were the assets--
RAOUL PAL: Is this when you were involved in politics as well at the time, or? JEFF GREENE: No, I've been involved in politics
a few times, I actually have lost. It's funny, people say that you learn a lot
more from your mistakes than in your successes so I must be an expert on politics then because
I've lost three, three out of three. Obviously, I must really be smart in that
space. I think that you could just see because I
could see that wages-- I could see as owning businesses that wages were not going up at
all. All of this with assets, saw our value's going
up, because with low interest rates, real estate prices go up, stock prices go up, bond
prices go up, those were the assets who're getting richer, those with labor were not
getting richer, were struggling. I said, this is unsustainable. On top of that, with what was happening with
technology and AI and machine learning and how that was driving people out of the worst
workforce and would cause some big disruptions. We started a nonprofit and we've had some
really stimulating conferences, in which we brought together some very smart people with
Ray Kurzweil, a Tom Friedman, and Larry Summers and Tony Blair, and David Cameron's been here
and they've all come right to this hotel and we've had some talk in the old education. The list goes on, super smart people convening
together to really talk about the future of work. Again, as I said earlier in this interview,
I have a personal experience with what can happen to somebody when their work life changes
because of my dad. I'm very sensitive to that. I have friends, honestly, who were highly
educated, who have been marginalized and lost their jobs and never gotten jobs again. If you lose your job and you're in your 60s,
you really got to go get retrained to become a welder. Of course, you can't do that. I really think that we are going to have a
lot of disruptions and we have a lot of work to do. We talked about that. We talked about education. I don't know if you know that we started a
school in West Palm Beach. We basically were-- I have three young boys
and we were frustrated with the private and public school options so we started the Green
School. If you ever hear and want to see it, we have
to take you by, it's up to just under 130 kids, pre-K to eighth grade. That school really embodies what I'm talking
about and that we want our children to develop a love of learning because we realized that
kids today were going to going to graduate 15 years now or five years from now may have
five, six, seven,10 career changes and they may have to constantly learn and relearn,
they can't hate learning, they have to love learning because they may have to learn new
skill sets throughout their lives. We've also have a focus on getting kids digitally
influenced. They start doing coding in kindergarten like
kid coding exercises all the way to building robots in the fifth and sixth grade. We have enough emphasis teaching the whole
child so we have met mindfulness and yoga and dance and art. We've really tried to create-- and it's a
nonprofit school. My wife and I funded it 100% ourselves. We give financial aid so kids pay what they
can't afford what the computer says they can't afford to pay. It's 30%, 40% get financial aid and it's been
very fulfilling for us, as you can probably see from our [indiscernible]. RAOUL PAL: Yeah. How do you think we're going to resolve this
rich/poor divide? Because it is not getting better. Yes, there's some marginal wage growth, late
cycle wage growth that we talked about, but at a structural level, we've still got a huge
problem. The Fed injecting more liquidity and stock
prices exploding higher and your Apple shares got 35%. JEFF GREENE: Apple's doubled in the last year. RAOUL PAL: Yeah, doesn't help the average
guy. How do you see that resolving? You're getting all these people together,
they're talking about it. Are they talking about it? Is somebody thinking, because you've got Trump
on one side, you got Bernie Sanders on the other. That's how split this is becoming. Someone's got to find a solution somewhere. Because if not-- JEFF GREENE: We know that
the Bernie Sanders socialism doesn't work. As they say, certainly in socialism, the poor
will be richer, but you're not going to make the poor richer by making the rich poorer. Basically, to me, I think the first thing
is education. That's like the absolute no brainer. Right now in this country, 14% of Americans
are illiterate. Now, if you're illiterate, it's not an issue. It's not about an income gap. It's about a possibility of you moving forward,
it's virtually impossible. We've really failed in our education in this
country. I think that's the first thing. I think that-- because you can't even be as
happy if you're not educated. Even if we created a society that people talk
about where you have this, you have unlimited resources, people only have to work 20 hours
a week because you figure out a way to make your food more efficiently and your housing,
your 3D printing houses don't need people to do stuff. If you're not educated, how are you going
to spend your life? You can only have opiates, so you're going
to do drugs and drink? I think being educated gives you the opportunity
and I'm like to do better but to enjoy and to thrive in your life. I think that there are great examples of successful
educational improvements in American. States like Massachusetts and New Jersey actually
has gone from 35 to three in the country in public education by doing a few simple things. Two years of pre-K for every child, because
like in a lot of the states in the country, these kids don't even get any preschool education
at all hardly. Then they show up at kindergarten and they
have a multi-million word vocabulary deficit. You start behind, you stay behind, and I think
we're really failing our children in this country. That's the first order of visit. If I was president of states, that would be
my number one priority. Get our kids educated competitively, because
if they're educated then at least we can compete with whatever there is in the world. Then how do you deal with solving the issue
of jobs where we want people to feel good about their upward mobility? A lot of that, to me is a function of where
we are in our cycle. People don't talk about this much, but my
grandparents, like most people my age came from Eastern Europe or another country. Most definitely they were poor, everyone was
poor. Nobody came with any money. They came with a shirt on their back and a
dream. The only dream my grandparents has probably
that my parents will be able to have on their table, nothing more than that. There's more than they had when they were
in Eastern Europe and maybe a place to sleep that was safe and clean. Then what did my parents want for their kids? They wanted their kids to be able to have
every opportunity to follow the other Americans who've been in for generations. They fought hard and worked hard so we can
go to good schools, and we had great public schools as kids and great, great colleges. What do we want for our kids and as it goes
forward what? The level expectation keeps getting higher
and higher, and no one talks about that, but from my grandparents' generation to my kids'
generation, their level of expectation is much, much greater for the kids. Meanwhile, what's happened is when my grandparents,
after two world wars, we destroyed the industrial complex of our competitors. We were this global superpower with unlimited
numbers of jobs and opportunities when people's expectations were here. Now, we're in a very globally competitive
economy where we have to fight with much hungrier countries around the world and their explanations
are here. You say, well, how do you fulfill their expectations? It's a lot harder. I think the first thing is get our kids educated
so they can be competitive globally. Then just try to figure this all out, but
it's going to be a tough challenge. I think it's something-- it's the issue of
our time. The issue of our time. RAOUL PAL: Yeah, I think it is. I think politics remain pretty volatile until
we figure out some of this stuff. I think that seems to be a part of our future
that we're dealing with and it's across all the Western world and a lot of it is transition
of the baby boomers, your typical, the baby boomer, generation of the baby boomers. That generation and the impossibility for
the younger people to better afford even the housing. JEFF GREENE: I really believe we'll figure
it out. It's interesting. Whenever I get pessimistic, I always think
of our friend, Warren Buffett. Warren Buffett, we've got to know, he's members
of the Giving Pledge, and we're sitting around a table with them in recent June and, or in
late May, we're talking and somebody said, Warren, has it ever been this bad? The antagonism and the divisiveness, and he
said, these are two things that I have lived through for 15 presidents, 14 I invested with. He said, seven Republicans, seven Democrats,
and there's no place in America. The whole world wants to come here. Don't bet against America. Then he said something else, he said, I'm
88 years old, three of my lifetimes, which is 264 years, in three of my lifetimes ago,
there was nothing here. It was dirt roads, and Indians and cowboys
driving around and riding around the horses. Look at what this system has done here. Look what we've built. In the same, you could say the same for the
European countries and the whole Western world, and so in the end of the day. RAOUL PAL: It'll figure itself out. JEFF GREENE: Yeah, the ship will start to
drift a little bit, but we always ride it and I think we'll figure out these issues
and this system works. If we just stay with our system, there'll
always be people like me who are aggressive entrepreneurs, are trying to create and build
things. There'll be other people who are more mellow
and just want to make a living. There'll be other people who are creative
and artists, and they'll be like you who are trying to build your journalism, your media
business. I think we'll get through this just fine. That's my view. I don't know. RAOUL PAL: Jeff, that's a perfect way to end. Thank you ever so much for giving an optimistic
ending amongst all that. JEFF GREENE: I really believe it. RAOUL PAL: Thank you. Thank you.
