Photo: Lannis Waters/ZUMA Press"The question is, when does the cycle end? I have no reason to think it will break anytime soon," says investor Jeff Greene.
Jeff Greene: Will there be a new real estate “bubble?”
Investor Jeff Greene wishes the current real estate surge were being fueled by a strong middle-class recovery.
Billionaire Jeff Greene made a fortune betting against subprime loans in the housing bubble. What does he see now? “We’re absolutely in a bubble. The question is, is the bubble going to burst any time soon?” he says.
Since the last bubble burst, “the next Henry Flagler,” as the Palm Beach Post once called him, has invested upward of $300 million in Palm Beach area real estate, a sum and a market where a single player can have a significant impact.
“Jeff’s very smart. He bought a lot of properties at very low prices after the bust,” says Jack McCabe of McCabe Research & Consulting, a real estate analysis firm in Deerfield Beach. Greene has no debt and low carrying costs. “That’s an enviable position to be in.”
Greene, a former Breakers busboy and U.S. Senate candidate, recently finished the first 180 units of his 548-unit Cameron Estates rental project in West Palm Beach. Amenities will include a small movie theater and bowling alley. “Really tried to take it up a notch for a rental community,” he says.
He has another apartment project planned on the 25-acre site that had been home to Atlanta Braves spring training near the revamped Palm Beach outlet mall.
He says he’s moving as fast as he can on a project at 550 Quadrille in West Palm that will feature two Arquitectonica-designed 30-story towers, one for class A offices and the other for condos and a hotel with at least 200 rooms. The city’s tallest buildings also will include indoor and outdoor tennis courts and a sand volleyball court along with “great food and beverage.” Greene has said hedge fund managers and other Wall Street types will like the chance to locate at a place with such a short ride to the airport, the island and the water.
Greene says conversations over the summer while he was in the Hamptons bolstered his belief that many in the Northeast are interested in moving to Palm Beach County but are held back by a shortage of class A office space and fewer sophisticated beverage and dining offerings — leaving the city “kind of like a junior Miami.”
As projects like his come to market, along with All Aboard Florida’s station and related real estate development and amenities such as two Major League spring training teams, “there’s a lot of good stuff that will push people over the top of ‘should we or shouldn’t we.’”
In the “not remotely scheduled to be built” category, Greene recently acquired another parcel for a 19-acre residential waterfront project north of downtown. That project will require major interaction with the city on road relocation and other issues and is surrounded by an area of 1920s-era homes and a park. “A complicated puzzle,” he says, but now the site has a single owner, himself, who can deal with the city.
“Obviously I’m trying to make money. It’s a business. But I want to see it done in a whole transformative way for the city of West Palm Beach.” He’s in talks with a grocery chain, an addition highly sought after by the community.
Says one of Greene’s attorneys, Harvey Oyer, of Shutts & Bowen, “It’s really the opportunity to create an entirely new community in the city. It’s such a big piece of canvas to work on.”
As Greene moves forward, some see caution signs ahead. Mc- Cabe says that developers tell him privately they’re worried about another global recession and that the flight capital that’s been propelling south Florida real estate might not stick. Real estate associations report sales and prices are up, but McCabe notes that homeownership is down, meaning a disproportionate share of sales are to investors. Some investors, including private investment funds, say they will hold them to rent, but McCabe says they will sell if necessary to generate the returns promised to investors.
As Greene surveys the markets nationally, he feels all asset classes are “a little bit like a bubble in some ways.” Asset prices have been pumped up by central banks printing money. He sees little sign, however, of political forces aligning to spend massively on infrastructure, which could lead to wage inflation, higher interest rates and the bubble bursting. The United States, like other Western economies, is stuck in low growth with a massive surplus of labor and capital keeping wages and inflation down, he says.
“Do I feel good about the way the real estate market is?” he says. “Not necessarily.” He says he would prefer assets to appreciate because of a middle class-fueled recovery rather than appreciating as a function of low interest rates or flight capital.
“It’s not a long-term sustainable program,” Greene says. “The question is, when does the cycle end? I have no reason to think it will break anytime soon.”
Greene, 60, can afford not to panic. He bought at deep discounts, has a long time horizon and no leverage. He notes he has three young children to whom he can leave his properties. “I’m in no hurry. If it’s not viable for another 20 years, that’s OK.”