Billionaire Buzzkill? Developer Jeff Greene Offers Counterpoint To Sunny Real Estate Predictions
More than a dozen panelists spoke at Bisnow's State of the Market event in West Palm Beach Tuesday, and their outlook for the economy ranged from "bullish" to "cautiously bullish" to "optimistic" to "cautiously optimistic."
Then there was billionaire Jeff Greene.
"We all know it takes a lot longer to blow up a balloon and put the air into it than it does to pop it and let it all out, and when it drops, it drops fast," Greene said. "We've been in a rigged market for 10 years now. The Federal Reserve has added over $4 trillion to our balance sheet, and if you look at it globally, over $11 trillion have been added to central bank balance sheets. Interest rates have been at ridiculously low levels.
"It's obviously caused an insane amount of liquidity and I don't think anyone knows how we're going to get out of it as an economy. Maybe everything will just be fine and we'll have a nice, easy soft landing. Maybe we won't."
Greene famously turned $50M into $500M by betting against subprime mortgages a decade ago. He has often tried to sound the alarm about income inequality. In 2012, he told New York magazine that he had a "real, legitimate fear" there could be "a class of poor people that will take over this country" and bring someone like Hugo Chavez to power. He has held an annual conference called "Managing The Disruption" to discuss what might happen if or when automation puts millions of people out of work.
"I can tell you that I am very concerned nationally and globally on the economy, just because this is an experiment we've never had before and we've really pumped things up," he said. "And I don't mean just real estate, but real estate, art, you name it. Almost every asset class has gone way, way up."
Greene's remarks yesterday contrasted with sunnier outlooks from other panelists, like Douglas Elliman's Florida CEO, Jay Parker, who said that South Florida had transformed from a vacation spot to a year-round destination, and that tax reform was drawing "a whole new dynamic, a whole new refugee" — like private schools and hedge fund managers — to South Florida. The luxury market has been "absolutely robust," he said.
Another billionaire, Bruce Toll, a co-founder of Toll Brothers and now the head of BET Investments, owns a home on Palm Beach and said that weather, a great airport and especially the lack of a state income tax made the area attractive. He pointed out that approximately 1,000 people per day move to Florida.
Greene, who began visiting his parents in Palm Beach County in the 1960s, agreed that it had evolved from a "cute little Southern town" to a more sophisticated region that still had a small-town feel; an "unpolished diamond." That is why he started aggressively buying property when he moved to Palm Beach in 2009, he said.
"It's great that hedge funds come, but a lot of my friends have hedge funds and they typically employ five people or 10 people or 15 people," he said, adding that the state lacks human capital that would make it attractive to high-paying big employers like Snapchat or Amazon. "So what we do is we have rich people moving here — a few of them — and we have lots of very, very low-paying jobs."
Greene owns the Tideline Hotel in Palm Beach and says that of his 130 staff, only 15 get salaries. The rest are paid by the hour.
"We hardly make any money because of the short season as it is, so it's not like we can really pay that much more," he said. "It's really the story of Florida in a lot of ways."
That is why, Greene said, he has been developing at a slow pace. He has been criticized for buying up Palm Beach County properties and announcing big plans, but not following through.
Greene built a 540-unit apartment complex, called Cameron Estates, and said it took three years for it to stabilize. He owns majority stakes in several multifamily projects — the Strand, City Palms and the Whitney — but developers are competing for the same tenants.
"It's tough. It's very tough here," Greene said. "One new building gets built and it sends shock waves through all the other buildings. You don't have the number of people making the level of wages you need to fill up buildings to move the development pace ahead."
That's true for the office market also, Greene said. He is currently building two 30-story towers called One West Palm.
"It's no secret that for our office building, we're not counting on people moving here," he said, acknowledging that the building will look to attract tenants from existing buildings, including the Esperante Building in which the panel was being held. His comments elicited laughter from the audience.
Parker said he believed that midsize New York firms, like advertising and marketing companies with 50 to 150 employees, could soon move to Florida. He has also heard rumblings that some Silicon Valley firms are interested in the state's tax advantages and could create a tech boom here.
Greene said he recently chatted with his friend Howard Marks, founder of Oaktree Capital, about the economic cycle. Marks told him its probably at the "bottom of the eighth, top of the ninth — but sometimes it goes into extra innings."
