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BY GEORGE E. JORDAN
Star-Ledger Staff
January 20, 2005
David Lichtenstein knows a good deal when he sees one -- and these days, he seems to be wheeling and dealing around the clock.
His company, Lightstone Group, has become one of the nation's largest privately-held owners of rental apartments and shopping malls. It has properties in 23 states and Puerto Rico.
Lichtenstein has cultivated  a reputation as one of American real estate's most aggressive buyers of cast-off or troubled assets.
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He then spruces them up with a infusion of cash and close attention to details. He founded Lightstone in 1988, right out of high school.
Friends call Lichtenstein a classic deal junkie addicted to the adrenaline rush of making one big splash after another. In two years, the company has bought $2 billion in assets, almost tripling in size.
Lichtenstein, 42, says he is simply a capitalist dedicated to chasing profits where he can find them.
Q. How many partners own an interest in the company?
A. Five people and a few institutions.
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Q. Do the partners include the Wilf and Mandelbaum families, the most prolific real estate entrepreneurs in New Jersey?
A. No. I've never met either one of them. Isn't that amazing? I live in New Jersey and never met either one.
Q. They finance a large percentage of developers. Why not you?
A. We don't use much OPM (other people's money). What I find is, and I'm not talking about Mandelbaum or Wilf in particular, but when you get into that genre, usually all you have is a glorified job. The hurdles are so ridiculous.
In the end, you work your brains out for a salary. I never really wanted to go that route.
Q. How many partners own an interest in the company?
A. Five people and a few institutions.
Q. Do the partners include the Wilf and Mandelbaum families, the most prolific real estate entrepreneurs in New Jersey?
A. No. I've never met either one of them. Isn't that amazing? I live in New Jersey and never met either one.
Q. They finance a large percentage of developers. Why not you?
A. We don't use much OPM (other people's money). What I find is, and I'm not talking about Mandelbaum or Wilf in particular, but when you get into that genre, usually all you have is a glorified job. The hurdles are so ridiculous.
In the end, you work your brains out for a salary. I never really wanted to go that route.
Q. Are you a deal junkie?
A. Let's put it this way, I definitely love the thrill of the chase. If I'm not involved in the transaction, I sort of get a little down. But the vast majority of transactions, I say no.
Q. Have you ever worked for another company?
A. I had one boss before. I worked four months for another real estate company. He was so abusive. I remember years later, it was a good experience.
Everything I learned in my life about business I learned in those four months. Whatever he did, I do the opposite.
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Q. What do you do for fun?
A. I get this all the time. Do you play golf? No. Do you play tennis? No.
Q. So, what do you do for fun?
A. What do I do for fun? Umm, everybody's been asking me a question like that. I read a lot. I read endlessly. I read 10 to 15 hours a week. That's a lot. I read newspapers, fiction, nonfiction, annual reports. I read endlessly.
Q. What's the appeal of real estate?
A. There are so many parts that go into a transaction. It's almost three-dimensional. Sometimes, you have property for sale. Sometimes, you have money for sale. It's always trying to find the moving piece that makes it work, and for the many that don't work.
Q. You like numbers?
A. Numbers talk to me. I can do that backwards and forwards in my brain. I can do internal rates of returns. I sit with the Big Four accounting firms and I can do it faster than them with their calculators.
Q. Have you ever made a deal just for the sake of it?
A. No. No. We have a lot of apartments in Atlantic City. We have holiday parties and usually, we'll rent a room in a casino. So the guys said, 'David, let's play some blackjack or poker or slots.' So I do some quick calculations, and the odds are 70-30 in favor of the dealer.
They say, 'Just put down $10.' Well, discipline is discipline. If you're not disciplined in $10, you're not disciplined with $1 million.
Q. Where did you get your startup money?
A. I was beyond green. I wanted into a real estate broker and told him, "I came to buy some real estate." He asked if I have any financing. So I went to a bank. The first banker I saw asked, "Do you have any credit? If you don't have credit, we can't give you a loan."
Q. What did you do?
A. I came back a week later. I had $3,000 saved up. I opened up a passbook account. So I asked for a loan securitized with the $3,000.
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So I took the loan, paid it back and took the $3,000 and want to another bank and did the same thing. I eventually went to six banks, opened six passbooks, took out loans and paid each one. In three months, I went back and they said, "Mr. Lichtenstein, you have such a wonderful credit profile."
Q. So you eventually bought real estate?
A. I bought a two-family home in Lakewood. Then I bought a three-family, and then I bought a five-family, and then I bought an 18-family in Newark for $180,000 and refinanced it a year later for $400,000.
I said, "I think I can make this work."
Q. Your portfolio is spread across the country. Why not just the New York-New Jersey area?
A. That's what separates us from most of the guys in New Jersey. Be it Wilf or Kushner (Cos.) or Halpran, those three would not have 10 (percent) or 20 percent of their assets out of the greater New York area. What options does that give you?
Q. So the lesson learned?
A. The goal should be to follow where you're hitting your numbers, not where geographically you feel comfortable. At the end of the day, when it hits your balance sheet, nobody is going to care where the assets are.
Q. Did you need to convince your partners you should invest in places like rural Georgia, Alabama and Tennessee?
A. It's not a question of convincing. It's just assuring them that if you follow the crowd, you're always following the people in front of you. The goal is to try to bring a new perspective, try to do it from a different angle, try to see a new opportunity.
George E. Jordan can be reached at gjordan@starledger.com or (973) 392-1801.
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SHOPPING SPREE
Over the past two years, Lightstone Group spent more than $2 billion on acquisitions. A major rental apartment owner, the company plans to double its portfolio of outlet malls and triple its ownership of enclosed malls over the next three years.
Here's a list of Lightstone's major deals during the past 13 months:
This month:
Bid an estimated $688 million for Prime Group Realty Trust, a real estate investment trust that owns several landmark Chicago office buildings.
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Dec. 28: Closed on a $48.2 million purchase of two malls in Shawnee, Okla., and Lake Jackson, Texas, from the Archon Group.
Sept. 9: Paid $110.7 million for five shopping malls and a strip shopping center in Tennessee, West Virginia, Georgia and Pennsylvania.
July 14: Filed with the Securities and Exchange Commission to create a new REIT, Lightstone Value Plus Real Estate Investment Trust.
July 1: Bought a controlling interest in Park Avenue Bank, a Manhattan-based, 17-year-old federally chartered institution with approximately $90 million in assets.
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December 2003: Closed on the purchase of Prime Retail, a Baltimore-based outlet mall company, for $116 million in cash and $511 million in assumed debt. The company owns 29 outlet malls around the United States and Puerto Rico.
SOURCES: Lightstone Group, Crains Business, Associated Press, Globe Street and Commercial Property News.
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