A Whole Lot of Greene

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Jeffrey Greene is living the high life in Los Angeles after making an audacious investment play betting against subprime mortgages. He scored a cool $800 million and is L.A.? newest billionaire.

In late 2005, as most of the country celebrated the skyrocketing growth in real estate values, Jeffrey Greene was getting nervous.

After having nearly lost his fortune in the downturn of the early ?0s, the real estate investor had a healthy fear of market cycles. And this market, he figured, had become too big too fast.

? was being offered buildings to buy at prices I? never seen before. I got a sense that the entire real estate market was forming a bubble,?he recalled. ?eople that I was acquainted with for many years that had been in regular operating businesses had suddenly become real estate developers, buying and selling houses. My rabbi had gotten into the business of buying and selling condominiums.?p>So like industrialist Joseph P. Kennedy before him ?who was famously said to have escaped the crash of 1929 after being shocked to get a stock tip from his shoeshine boy ?Greene, in essence, headed for the exit.

In search of a hedge to protect his 8,000-property portfolio, Greene pulled off one of the most successful investment plays of all time. On a tip from a hedge fund manager, Greene became the first individual investor to use now-infamous credit default swaps to effectively short subprime mortgage-backed securities.

While other big-name investors were losing billions and giant investment banks like Lehman Bros. went belly up, Greene made a cool, clean $800 million.

With his prescient call, the 54-year-old left his merely rich peers behind and catapulted into the ranks of the super-rich ?and onto the Business Journal? annual list of the Wealthiest Angelenos for the first time with an estimated net worth of $1.6 billion.

? never aspired to the kind of wealth I achieved. I never said I wanted to be a billionaire,?claimed Greene, during a recent interview at his 43,000-square-foot estate in the Hollywood Hills, one of the largest private homes in Los Angeles ?and one of four places he calls home. ? have lots of friends who I went to school with who were smarter than me, put in longer hours and haven? accumulated any kind of financial success. I definitely think that I had a good luck charm.?p>


High roller

A charm perhaps, but Greene has always had an eye for value and a keen understanding of business fundamentals.

Indeed, he was already successful by just about any measure before the subprime debacle further boosted his wealth. For the better part of the past two decades, the real estate mogul has had a beachfront home in Malibu and a Mercedes in the driveway. By 1990, he estimated that he was already worth eight figures.

But it was not until very recently, after enlisting a PR firm, that Greene burst onto the national stage with a front-page story in the Wall Street Journal. Indeed, while most of his wealthy peers are quietly dealing with shrinking wallets, Greene has stepped into the limelight.

Affable and approachable, with a seemingly perpetual smile on his face, Greene does not betray the countenance of a typical jet-setting billionaire ?yet he is certainly living the life, whether hobnobbing with celebrities or trekking across the world with his wife, Mei Sze.

In addition to his Hollywood Hills mansion, he owns a smaller home in Malibu, a condominium in Miami and a 145-foot yacht that he and his wife reside on several months a year. The mogul also owns three private jets. Yet the two insist ?with straight faces ?that they are not the high rollers they appear.

?e?e not big spenders,?said Mei Sze, who complained about the large size of the diamond engagement ring Greene bought for her.

And though their Hollywood Hills home has a ballroom, bowling alley and vineyard ?and is so large that Greene admits there are parts he doesn? see for months at a time ?the billionaire views it more as an investment than a permanent home.

?e tend to prefer more modest housing than this,?Greene said. ?t? just too big and too grand ?it? an impractical place to live. We got this place out of a receivership. We bought this always with the intention of finishing it off and selling it.?p>Indeed, even with a ten-figure net worth, Greene is always looking for a deal ?an artifact, perhaps, of his working-class roots.

From the age of 10, he began working in his Worcester, Mass., neighborhood shoveling driveways in the winter and mowing lawns in the summer. He eventually paid his way through Johns Hopkins University by working a variety of jobs, including telemarketing and teaching Hebrew school.

It was in the late 1970s, though, as a student in the Harvard University M.B.A. program, that Greene stumbled into the world of real estate. With the money he had saved, he bought a house and rented out the remaining rooms at a profit.

?fter I bought that first one, I figured out how it worked,?he said. ?y the time I finished at Harvard, I had 18 properties in the Boston area.?p>Greene soon moved to Southern California and began buying properties ?with significant leverage ?across Los Angeles. His net worth, he estimated, reached $35 million by the early 1990s. Then as Cold War tensions eased and the defense industry cut hundreds of thousands of jobs, the L.A. real estate market went into a tailspin, nearly wiping out his fortune.

?t the bottom of the market, which I think for me was around 1994, my net worth was minus $15 million,?he said. ?t was devastating. (But) I was still in my late 30s and I felt that whatever skills I had that had enabled me to accumulate my wealth, I still had those skills.?p>Greene managed to hang on to about half of his investment portfolio, which rebounded in value during the late 1990s. At that same time, he proceeded to buy up apartment buildings on the cheap, accumulating about 8,000 properties by 2005.

?e? very bright,?said real estate broker Fred Sands, chairman of Vintage Capital Group LLC, who has known Greene for years. ?e? very much a risk-taker. He went through some very bad times, but managed to save himself.?p>


House parties

As his profile began to rise, Greene also developed a reputation for throwing wild late-night parties at his home that attracted clubgoers and celebrities alike. In 2003, Greene was named in a Vanity Fair rundown of the players in L.A.? party circuit.

In 2006, Greene met Mei Sze Chan, more than 20 years his junior, at a party in the Hamptons. The two hit it off immediately.

An ethnic Chinese refugee from Malaysia who grew up in Australia, she left for New York after graduating from Macquarie University in Sydney. She got caught up in real estate and became a regular in the party scene.

A year after they met, the two married in a $1 million ceremony at their home attended by nearly 300 guests including Los Angeles Clippers owner Donald Sterling and film director Oliver Stone. Boxer Mike Tyson, whom Greene had met a decade prior, was Greene? best man.

Meanwhile, as the housing market was reaching its peak, Greene said that he started to suspect the industry was headed for trouble.

?here were just too many people feeding off of what to me had been an extraordinary rise in asset values, both income properties and housing,?he said. ? became concerned that maybe my own portfolio would get whacked again like it did in the early ?0s.?p>Hedge fund manager John Paulson, whom Greene had met socially in the Hamptons some years earlier, gave Greene a peek at a new fund he was setting up that would seek to cash in on the bust that some had begun predicting. The fund intended to short securities backed by subprime mortgages using derivatives that would rise in value as the mortgages defaulted.

Greene passed on the fund, but in early 2006, he started exploring credit default swaps on his own. Paulson, whom Greene refers to as ?P,?told Greene he would never get approval for the trade, but Greene pushed ahead nonetheless. Paulson, who was reportedly displeased with Greene? move, has declined numerous media requests about the matter.

It was a struggle for Greene to get approval, but he soon convinced JPMorgan Chase & Co. and Merrill Lynch to conduct the trade with him; Greene bought so-called credit default swaps ?a type of insurance contract ?on subprime-backed mortgage securities. In essence, he was betting the securities would fail and the contracts would pay off, which they did in record number.

?hen I first got involved in the trade I didn? completely understand all the nuances,?he admitted. ?t was pretty difficult because no one had ever done it before as an individual.?p>He figured it out quickly, though: Today, the trade is up about $800 million.


Financial guru

Greene still maintains a sizable real estate portfolio, but he is quick to cite his diversity of investments. On a recent monthlong trip around the world with his wife, he was in constant contact with bankers to discuss global investment opportunities. While in Hungary, for example, he decided to short the local currency, known as the forint.

?s I went to these countries I was very involved trying to meet these business leaders there and try to get a sense of what? happening,?he said. ?herever I was in the world I had my computer hooked up and my tech-savvy wife made sure I was always online. All my bankers were calling me asking me what? happening in Turkey, what? happening in Hungary, what? happening in Australia.?p>Mei Sze interjected, putting it more simply: ?e works a lot.?p>Though his wife laments his busy work schedule, Greene said his priorities have shifted considerably from the past and he is careful to make time for his family. The two, who have been married less than two years, are expecting their first child in October.

He is no longer a party animal, and his busy work schedule is geared toward smart management of his family? finances rather than wealth-building.

?? probably a little bit less interested in accumulating wealth (these days). I mean, the more the better ?I? always happy to make money ?but it? not a goal of mine,?he said. ?e?e having our first child, so I? like to have plenty of time available to be with my wife and child.?enews_Column=0

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