Real Estate Mogul Jeff Greene: The Man Who Shorted Subprime

CNBC.com

Today I have the first television interview with Jeff Greene, a Beverly Hills real estate mogul who single-handedly shorted subprime. His $50 million investment is up tenfold, to $500,000,000. He is apparently the first individual investor to do such a trade.

I met Greene at his 40,000 square foot estate on 27 acres off Coldwater Canyon. He took me by surprise--a nice, smart, focused and somewhat eccentric man of contrasts. He is someone who lives large, but always expects the worst. He's ostentatious, yet can't shake his New England sense of modesty.

As you can see from the television interview segments posted here (more coming through the day), Greene tells his story of working his way up from nothing to something, then nearly losing it all in the housing bust of the '90s. After rebuilding his portfolio, he vowed not to get burned again. "Every year I'd go into a mini-panic mode," he told me, "and think 'I need to protect myself.'" Greene says that two years ago, he asked a friend, hedge fund manager John Paulson, about a hedge. Paulson said he was starting a fund to short subprime bonds through credit default swaps. "I asked him, 'John, can I do this on my own?'" He says Paulson told him, "You won't get approved.'"

Greene tried anyway, finally convincing Merrill Lynch and JP Morganto let him short bonds backed by risky mortgages through these swaps. It took a lot of convincing. But it has paid off handsomely, though it may have cost him a friendship--he and Paulson are no longer talking. When we asked Paulson to talk to us about Greene, we were given a firm "no comment."

Greene has cashed out about $75 million of his subprime bet, but he still has a lot of money in the game, partly because the investment is somewhat illiquid.

That's okay. He's got enough money to refurbish the his mini Hearst Castle. This is where he got married last fall--his first marriage--to wife Mei Sze, a lovely woman who stayed off-camera but appeared protective of her husband and their home, letting us know what we could and could not videotape. At their wedding, Mike Tyson was best man. MIKE. TYSON. Another Jeff Greene contrast. Why Mike Tyson? Greene tells me they met ten years ago at an annual Memorial Day barbecue Greene throws at his second home in Malibu. Expecting Tyson to be "scary," he says the two actually hit it off. "I was shocked that this guy I'd been reading about...was nothing like that," Greene told me. "Mike is a very, very bright guy, very well read, very sweet disposition."

Greene took me through his gorgeous mansion, filled with an eclectic mix of contemporary Vietnamese art and European antiques. He could tell me the price of everything, and what a great deal he got on each item. Greene didn't even used to like antiques, but has grown fond of them. One reason: antiques can be resold to recoup at least some of your investment, while new furniture has no residual value.

He also owns not one personal jet, but three. Yet these are not the most expensive jets available. Two are Hawker 700s which Greene bought, only to turn around and charter (waste not, want not!). The third is a G2 Gulfstream. Greene could afford the much nicer G550, but says he and his wife do most of their traveling within the continental U.S. "If a G2 is worth $2 million, and a G550 is now, I think, $50 million," he says, "you really have to have a reason to use that other than your ego."

Perhaps nothing summarizes this man of contrasts better than a story he tells from his childhood. Back in Worcester, Greene says wealthy people would still drive their old Impalas. One didn't show off. So when someone once drove by in a Cadillac, a friend's mother said, "'Look at that guy in the Cadillac with the little window so he can hide his bulging wallet!'" Greene says, "I'll never forget that." What would she say about Jeff Greene?

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