Marshall Greene’s business deteriorated in the late 1960s, as mills moved south seeking cheaper labor. So he followed his customers, traveling to cities like Chattanooga, Tennessee; Spartanburg, South Carolina; and Fort Oglethorpe, Georgia. When Marshall called home, his son could detect disappointment in his voice; it was a dramatic change for the normally affable salesman.
“He’d try to sound optimistic, but I could sense things weren’t going well,” Greene recalls.
His mother, a child in the Great Depression, was a genius at stretching the family’s dollars, becoming a regular at Filene’s Basement, the local discount giant. One year she fitted her children with irregular velour shirts; the stitching was a bit off but not so much that Greene’s friends noticed. Marshall Greene had a very different perspective on money from his wife, spending whatever he made as quickly as it came in, leading to growing tension in their marriage.
“My parents always argued when I was growing up,” Greene recalls.
Marshall bought a rubber stamp business for a time, and then became an auctioneer. Eventually he acquired a soda-vending business in West Palm Beach, Florida. Nothing really worked, though.
Making money came more naturally to his son. On snow days, Jeff Greene was the first up in the neighborhood, grabbing a shovel to clear neighborhood walkways, beating the better-off kids with their snow-blowers. He mowed lawns, had a paper route, made $5 playing trumpet at Memorial Day parades, and caddied for the wealthy, saving enough money to eventually buy a used yellow Datsun 510.
When Marshall decided to move his family to Florida to be with him, Greene resisted, unwilling to leave his friends. So his parents let Greene, just fifteen at the time, move into a spare bedroom at a great-aunt’s home.
“I didn’t drive yet and she didn’t, either,” Greene says, “so I got a lot of rides.”
During vacations, Jeff flew south to help with his father’s business. They would load a van full of soft drinks to restock vending machines in local motels, businesses, and farms, sometimes donning long boots to walk through mud and around snakes.
“My dad was always proud,” Greene recalls. “But he struggled the rest of his life.”
When she wasn’t teaching nursery school, his mother worked as a waitress at Palm Beach’s storied Breakers Hotel.
In high school, Greene didn’t particularly stand out. But he was part of a competitive class, many of whom gained acceptance to some of the top schools on the East Coast. Greene received a partial scholarship to attend Johns Hopkins University in Baltimore, a halfway point between his Boston home and his parents’ in Florida. He took extra courses and graduated in three years, partly to save money.
One day in 1973, Greene spotted an advertisement in a local newspaper for “telephone sales positions.” Few had heard of telephone marketing at the time, but Greene was intrigued. The pay, $2.50 an hour or commission, beat the $1.60 an hour minimum wage at the time. The job was to sell circus tickets to local business groups. Customers assumed the proceeds went to local police, firefighter, or other nonprofit groups, putting them at ease. But the businessmen running the telephone-sales operation usually took a healthy cut of the action.
On his first morning, Greene took a spot in a long row of seats and began making calls, using the standard pitch he was given.
“Hi, I’m calling for the Fraternal Police Association. We’re sponsoring the circus at the Hippodrome this year. Care to buy some tickets?”
Greene barely made any sales. He wasn’t much of a morning person, and he quickly became bored and frustrated.
After lunch, though, Greene returned in a better mood. He decided to improvise on the canned speech.
“Hey, how are you doing?!” he’d start, with great enthusiasm, as if he was a friendly neighbor. “The Fraternal Police are bringing the circus to town. Can we count on you?!”
By the end of the day, Greene was making six times more than anyone else in the office. He claimed a commission as his pay, forgoing the hourly rate.
“It wasn’t much of a circus,” Greene recalls. “The only elephant was the one on the ticket. But I was making a hundred dollars a day, and I realized I loved sales.”
Greene stayed with the business and continued to work on his delivery. Soon he was making $500 a week, more than his father’s salary. One day, the operation’s manager pulled Greene aside, asking if he wanted to quit school and run his own circus-sales office in Virginia. Greene initially turned him down. But he noticed that his boss, just a year older than Greene, drove a Cadillac El Dorado. Clearly, much greater profits came to those running the operation. So he approached his boss. “Yeah, I’m ready to be a promoter.”
His parents urged Greene to drop the idea, trying to convince him that the job was too risky and the flight south too expensive. But Greene grabbed the opportunity and proved a natural.
“We’re bringing the holiday circus to town! Can we count on you again to buy a book of tickets? Great! Is it okay if we round that up to fifteen tickets?”
Greene spent the rest of the summer selling tickets. He found he could quickly read his customers, determining who might buy big blocks of tickets and who would be resistant, and he adopted unique methods to put customers at ease. When Greene dialed a family with an Irish-sounding surname, he introduced himself as Jeff O’Hara. With an Italian family, he’d adopt an Italian surname. Sometimes he’d even slip in an ethnic accent, mimicking whoever answered the phone, perhaps working in some Yiddish or even an Irish lilt.
“Just from their tone and pauses I could tell how hard I had to push,” Greene recalls.
He traveled to Savannah, Georgia, to set up another office, hiring eighteen young people, including someone to run the operation and report to Greene. Twenty percent of the profits went to the local Knights of Columbus, 40 percent went to the company, and 40 percent went to Greene, out of which he paid his crew. In just three weeks he made $1,000.
The next summer, after finishing his final exams, Greene picked up where he had left off, pocketing $10,000 working out of the back of a small local business and living in an Econo Lodge, eating buffet dinners at Pizza Hut or Sizzler.
“All my friends were drinking and having a good time,” Greene says, “but I’d hit the road.”
After finishing college in 1974, Greene managed phone operations in small cities like Rome, Georgia; Jamestown, Virginia; and Gettysburg, Pennsylvania; racking up thousands of miles on his Grand Am. Local businesses remembered Greene fondly from previous circus seasons, and Greene soon was making almost $1,000 a day.
After a few years, Greene had banked $100,000, a remarkable sum at the time for a young man his age. It was enough to pay his way at Harvard Business School, which he entered in September 1977.
A serious student, Greene nonetheless continued to run the circus business. His first year, he made $50,000, more than most graduates of the school, and became eager to invest his growing profits. Real estate was one obvious possibility; Greene chatted about housing with businessmen at local Kiwanis Clubs when he called to pitch circus tickets, and sometimes discussed it with the owners of the circus business.
A few friends of Greene’s were profiting by buying three-decker apartments in the Harvard area; they would live in one of the apartments rent-free, and rent out the other two. Greene got in touch with an agent in nearby Somerville, a blue-collar community, and agreed to buy a three-decker apartment for $37,000, using $7,000 as a down payment. Days later, Greene was offered inexpensive student housing on campus, but he decided to go through with the purchase and to rent all three of the apartments.
“My parents said it’s a headache, don’t do it,” Greene says. “But I really liked real estate.”
Greene made hundreds of dollars each month and was quickly bitten by the real estate bug.
I’ve gotta own more of these! he thought.
So he bought more three-deckers, charging graduate students $750 a month for each apartment, a bargain compared with the r
ent in nearby Cambridge. He fixed up dilapidated properties and rented those, too. By his second year at Harvard, Greene was buying homes, refinancing them, and purchasing still more; by the end of the year, he owned eighteen properties. He convinced a classmate, Jeffrey Libert, later John Paulson’s first boss at Boston Consulting Group, to buy properties for himself.
Greene was constantly on the phone with circus promoters, tenants, and mortgage lenders. He wouldn’t miss a class, but sometimes he had little time to read the required case studies.
“He doesn’t read—it’s an attention-deficit issue—so he’d call me up and say, ‘How much have you read?’ ” recalls Libert. “But he could spot the smartest guy in the class and pick his brain and pump him for information. That’s Jeff’s skill.”
Greene had taken advantage of the moribund real estate market of the mid-1970s to buy properties inexpensively. Soon the market raced back, sending the value of his properties climbing. It left the twenty-six-year-old wealthier than the parents of some of his classmates.
In 1979, his father, a two-pack-a-day cigarette smoker, suffered a massive heart attack, dying at the age of fifty-one. It was a sad end to an often frustrating business career, and it left a deep impression on his son.
“I realized I didn’t want to lose a career like my dad did, and struggle week to week,” Greene recalls.
After graduation, Greene set out for Los Angeles, staying in a month-to-month rental in Sherman Oaks, close to a few relatives. Later he bought a one-bedroom condominium in the upscale Brentwood neighborhood.
Greene had never had much of a social life up to this point. He was younger than most of his classmates in high school and college, and his summers had been spent on the road selling circus tickets.
But Greene took to the Los Angeles party scene like a bear coming out of hibernation. He bought a silver Mercedes convertible and a 3,000-square-foot, $385,000 home in the mountains of Bel Air, with a pool and a Jacuzzi. At the age of twenty-six, his real estate was worth well over $1 million. He quickly became known as the Harvard-educated boy wonder and was coveted at parties and at the hottest clubs. Even his Worcester accent, marked by his dropped r’s, helped him to stand out.
“Out there I was considered a genius because my background was different,” he says. “All of a sudden I had this amazing social life and—oh my God—there were all these hot girls everywhere.”
Invited to a backgammon tournament, he found himself facing off against Lucille Ball, a childhood idol. Later in the evening, he spotted Frank Sinatra.
Greene assumed he would continue to invest in real estate in Los Angeles, just as he had in Boston, but he couldn’t quite figure out the West Coast market. He was accustomed to buying a property only if he could make a profit renting it, a straightforward calculation. In Los Angeles, however, Greene kept getting outbid; owners seemed happy just to break even with their rental properties. They were much more focused on flipping properties and taking a profit than charging monthly rent.
Uneasy playing that game, Greene decided to branch out. He already had a crew of one hundred people working for him making circus calls. Maybe they could sell tickets to other events that Greene could organize?
He searched for wholesome, family-oriented music groups, signing the New Christy Minstrels, which once had included John Denver and Kenny Rogers and was best known for the song “This Land Is Your Land.” They committed to forty dates around the country and made Greene an immediate profit.
Next, Greene hired acts like the Serendipity Singers, Gary Lewis and the Playboys, Glenn Yarborough, and Rick Nelson, one-time wonders thrilled to extend their careers. Together they netted Greene more than $1 million in 1984.
Attorneys general around the country were cracking down on misleading telephone sales, however, and Greene received a warning letter that his callers didn’t fully disclose how much of the tickets’ proceeds went to charity. He didn’t want to push his luck, so in 1986 he closed down his company to focus exclusively on the local real estate market.
If he had to buy high and sell even higher in Los Angeles, Greene decided to buy aggressively. He started with an eight-unit apartment building in the Brentwood area. Soon, he held $15 million of properties. As the market soared, his properties grew in value to about $110 million over the next six years. Minus the $80 million Greene owed to the banks, that gave him a net worth of roughly $30 million. He ran a thirty-five-person company to manage all the properties; lenders shoveled money at him.
“I was buying aggressively, using crazy, short-term loans,” Greene says.
The collapse of the California real estate market in the early 1990s caught Greene flat-footed. He figured there might be a slowdown, eventually, but everything seemed to crumble at once, even his best properties. His holdings—five office buildings and about 350 apartments—suddenly were worth just $50 million while Greene was facing debt of $60 million. His lenders threatened to foreclose on Greene’s properties, leaving him broke. He had to find a way to pay them back in full. It was the first crisis in a charmed business life.
“I was blindsided; I didn’t see it coming,” Greene says. “It was like someone flipped a switch—there were no yellow lights. Every day I said, ‘What do I do?’ ”
Greene had built a 10,000-square-foot home for himself in Brentwood, with dramatic views of the Pacific Ocean to the south, views to the west of the Santa Monica mountains, and a hundred-year-old pine forest to the southwest. Desperately needing cash, he was forced to rent it out, making as much as $50,000 a month from the likes of singer Diana Ross. But a dispute with one tenant, actor and director Ron Howard, put still more pressure on Greene’s finances.
Greene held his lenders at bay, waiting for a recovery he was sure was just around the corner. Things only got worse, though; soon each of his properties was worth less than their debt. Loan payments were coming due, but Greene couldn’t find any buyers. It got so bad that Greene was afraid to answer his door, thinking he might be served with a lawsuit.
Greene owed Glendale Federal more than $50 million. He agreed to give the bank a few of his buildings, trimming his debt to $35 million. But Greene’s cash flow was dropping even faster. He stayed up all night, making projection after projection, trying to find a way out of the mess. After all his years of hard work and success, he had nothing to show for it. Worse than that, Greene owed more than he was worth.
One day in 1994, Greene asked to meet a Glendale senior vice president. Sitting across from the VP and several of his staff members in a small conference room, Greene launched into an upbeat analysis of his holdings, detailing a plan to make a few sales, refinance some loans, and pay his debts.
After outlining each step in his plan, however, he received the same response from the VP: “Nyet.”
At the end, the VP gave it to him one last time: “Nyet. Nyet. Nyet.”
“I didn’t know how I would get out of it,” Greene recalls.
In 1995, just as Greene was ready to throw in the towel, the Los Angeles market slowly began to improve; a year later, his properties were valued at several million more than their debt. Greene sold a building to the Getty Museum for $12 million, allowing him to breathe a little easier. Rather than pay down his loans, though, he bought three buildings that sellers were unloading at what seemed like bargain-basement prices.
Over the next few years, Greene bought all he could, taking advantage of those who were licking their wounds and eager to dump properties at prices that were a fraction of their replacement costs.
Greene used fixed-rate, ten-year, nonrecourse mortgage loans, eschewing the supercheap, adjustable-rate mortgages that he once relied on. As quickly as he could, Greene refinanced his loans at lower rates, keeping the cost of his debt low.
Once again, Greene was a favorite of local brokers. They knew he’d pay top dollar if he liked a new property, just based on its description.
“I would refinance a building and fifteen minutes later use the cash for another
closing,” Greene says. “It was a fast-moving train and I didn’t want to get off.”
By 2003, Greene owned real estate that by some accounts was worth $800 million. He lived large in a grand, 15,000-square-foot home in the Hollywood Hills once owned by comedian W.C. Fields and hosted late-night parties with models, celebrities, and other new friends. He was named by Vanity Fair magazine as a top figure in Los Angeles’s after-hours scene. Heidi Fleiss, the Hollywood madam, spent a year in Greene’s guesthouse after leaving an abusive relationship, joining Greene for Passover dinner with his mother. Greene rented his Brentwood home to stars including Angelina Jolie, 50 Cent, and Mariah Carey.
He had few serious girlfriends, playing a game of sexual catch-and-release with an assortment of willing women, including Russian models new to Los Angeles.
“I would always jump ship because there was always a busload of new women coming into town,” Greene acknowledges.
His mother grew worried that he’d never settle down.
“You have all these beautiful chicks, why don’t you go with one that’s wife material?” she would ask on visits to Los Angeles.
“What’s wife material?” Greene responded, noting that several of his friends had divorced. Privately, though, he began to ask the same questions.
For all the wheeling and dealing, Greene’s wealth existed largely on paper, based on the assumed value of his properties. And it made him nervous.
“In the back of my mind I always remembered the earlier period,” Greene says.
As Greene traveled around the country, he couldn’t quite figure out why real estate was soaring. Friends in Miami, where real estate was on fire, said an influx of South Americans was buying up homes in the region, an explanation that seemed far-fetched to Greene.
“How many rich South Americans are there? And do they need thousands of condos?”
Greene sold some buildings, but the market climbed still higher. He decided his caution was misplaced and began buying properties once again.
The Greatest Trade Ever Page 16
