Finance: REAL ESTATE
WORLD FOR RENT. CALL STEVEN GREEN
Mike Milken invests in his deals. So do Steve Wynn of Mirage Resorts, Larry Ellison of Oracle, and Rupert Murdoch. Commerce Secretary Ron Brown invites him on trade missions. Bill Clinton gives a party for him and his wife on their 28th wedding anniversary and puts them up in the Lincoln bedroom. Who is this Steve Green?
Most people have never heard of the 49-year-old real estate maven. But Steven J. Green's empire is growing fast. His personal holdings include 120 retail properties across the U.S., which he estimates are worth more than $500 million. Through partnerships, he has a stake in a real estate company in Britain that owns 22 office properties in European business centers, an industrial project in Eastern Europe, and a retail development in Moscow's Red Square. And he's the chief executive of Astrum International Corp., a $1 billion company that owns the Samsonite, American Tourister, and Culligan brands.
Green's connection with Milken goes back to the halcyon days of junk bonds, when Drexel Burnham Lambert Inc. financed a bond issue for a real estate transaction of Green's. But it wasn't until last year that Milken put any money into one of Green's ventures. The Milken Family Trusts--the trusts for the children of the former junk-bond king--invested an undisclosed amount with Green, who plans to raise $1.5 billion to build one of "the world's largest real estate organizations." Milken, who served time in a federal prison after pleading guilty to securities-law violations, is barred from the securities industry.
PRESIDENT'S MAN. Green has political connections at high levels. He got involved with the Clinton campaign early on, and one of Astrum's subsidiaries was a sponsor of the Presidential inaugural gala. Since then, Green has gone on numerous trade missions with Ron Brown. Green was recently appointed to the President's Export Council, which advises the Administration on trade.
Clearly, Green's ventures could prove risky. His international experience is limited to the past few years, and many of the world's real estate markets are still in the doldrums. Nonetheless, Green believes he can fill a growing market need. Based on his own experience and on a survey of U.S. companies, Green thinks that businesses looking to expand into untapped foreign markets are put off by the high costs and hassles of building or buying facilities overseas. His solution is to create a fund that would build properties to a U.S. company's specifications and lease it back to the company.
OLD HAND. Green's venture is a mouthful: Auburndale Central & Eastern European-Newly Independent States Property Fund. CEE-NIS plans to raise $240 million to develop industrial facilities in areas such as Ukraine, Poland, and the Czech Republic. To try and make the venture more palatable to lenders, Green got the Overseas Private Investment Corp. (OPIC), a governmental agency that promotes overseas investment, to provide a $240 million loan guarantee. He has commitments for $80 million in equity and says his lender, Bank of Boston, will raise the other $160 million in debt.
Green is an old hand at dealmaking. At 25, he was hired to restructure an overleveraged company called Robino-Ladd Homes and sell off its assets. Next was a department store chain, which he bought, restructured, and sold off. Green looks for deals where there is a "sick mind and a healthy body"--a company with strong real estate, but a bad balance sheet.
Early in his real estate dealings Green formed an alliance with controversial financier Meshulam Riklis. In 1987, Riklis brought in Green as a consultant to Astrum, which was then called E-II Holdings. In 1990, when E-II was losing money and bondholders were calling for Riklis' ouster, he negotiated to turn leadership over to Green. While Green wasn't able to prevent E-II from going into bankruptcy, he is credited with keeping the company afloat until it could emerge as a healthier entity, well-positioned for growth. He is now trying to raise $190 million in debt in order to spin off Culligan and focus on Samsonite.
While Green may be preoccupied with his job at Astrum at the moment, he has plenty of time, it seems, to devote to his private ventures. His employment agreement requires only that he spend 50% of normal business hours--defined as a 40-hour workweek--tending to its business. "There was a concern that a guy with that many interests would spend enough time on [Astrum]," says a spokesman for Green. "But it's not an issue. He works 60-hour weeks there."
In Green's biggest real estate deal to date, a partnership he formed won the bidding for Heron International, paying almost $800 million for the financially troubled commercial real estate firm. "They had terrific assets and terrific debt," says Green. "We said that if we could restructure the debt, we could restructure the properties." The deal gave Green and his partners 22 properties across Europe and an operating company--the beginnings of a European presence. Green's spokesman notes that while people speculate that Milken lined up the investors--many are former Drexel clients--it was Green who found the deal and solicited investors.
NEAR MISS. Earlier this year, Green thought he was close to establishing a beachhead in Canada as well. One of Canada's largest real estate companies, Bramalea Ltd., was on the verge of bankruptcy. After intense negotiations, the deal didn't work out and the company went into bankruptcy.
Green's role as CEO of an international consumer-products company often opens doors for his private deals. "The international exposure from Astrum got me thinking about my real estate," says Green. Opening a Samsonite store in Red Square in Moscow in 1992 put Green in a good position when GUM, Moscow's department store, wanted proposals for a renovation and modernization of its historic arcade. As CEO of Astrum, Green was in Moscow in April, 1994, with Secretary Brown as part of a U.S. Presidential Business Development Mission to the Russian Federation, and a letter from Brown was included in Green's proposal. Green's team was selected to do the job. Milken is also familiar with the site, having toured GUM last summer.
Green objects to people making too much of the Milken connection. "I've never hidden the fact that he is my friend," says Green. "I have zero to apologize for, but I do resent headlines that say it's Milken managing the business, that he's behind certain deals." Green concedes the Milken name may have helped in marketing: "It's like chicken soup: It certainly didn't hurt."
What's next for Green? He thinks his OPIC connection provides a unique niche, and he's looking in France, Italy, Spain, even Mexico. He's also eyeing a few real estate investment trusts (REITs).
Soon, Green hopes to take a breather and spend his 50th birthday on his 110-foot yacht. Hmm--sounds a little too quiet for a world traveler. Maybe Bill and Hillary can climb aboard and help him celebrate.
A $1.5 Billion EmpireIn the Making
AUBURNDALE PROPERTIES Green's personal portfolio of 120 shopping centers and other retail properties in the U.S. are owned in partnership through this private acquisition and management company.
CENTRAL & EASTERN EUROPEAN-NEWLY INDEPENDENT STATES PROPERTY FUND A fund to build industrial warehouses and other business facilities overseas. The Overseas Private Investment Corp. will provide a $240 million loan guarantee. Green has commitments in excess of $80 million in equity. The Bank of Boston will raise the rest in a debt issue.
HNV ACQUISITION L.P. This private partnership won the bidding for Heron International, a distressed, overleveraged commercial real estate company based in Britain. HNVA paid almost $800 million for the company, which owns properties in business centers of major European cities.
GUM 2000 The historic GUM Department store in Moscow's Red Square wants a makeover. A team organized by Green has been selected to do the renovation and modernization project.
DATA: BUSINESS WEEKBy Suzanne Woolley in New York