The end of the 1980s, the days of the first intifada was a tough time for combat soldiers in the IDF. They spent most of their service under barrages of stones and petrol bombs facing rioting demonstrators, and in pointless pursuits after wielders of Palestine flags and builders of improvised roadblocks. They usually spent the time between one patrol and the next in derelict buildings confiscated from Palestinians, or in improvised tent camps. As is always the case with soldiers, the conversations frequently focused on the day after their discharge - the trip to Thailand, studies, freedom.
Ophir Sternberg, then a soldier in an IDF elite unit, was the exception to the rule in conversations like these. Sitting in the rancid tents erected near Gaza's refugee camps, he already dreamed then of international deals, a global company, and endless trips. Nearly two decades on, it would appear that the age of just 37, he has realized that dream. He is currently working on the finishing financial touches to two deals in Macau, which, on completion, will take the value of his property portfolio past the one billion dollar mark. Sternberg made most of his wealth in deals in New York, and in recent years he has also operated in other parts of the US, and in the Caribbean. Recently, he began refocusing his efforts on China, and in particular the former Portuguese colony of Macau near Hong Kong, which thanks to Jewish billionaire Sheldon Adelson, has become an international gambling center.
"I started in Manhattan 15 years ago, when real estate prices hit rock bottom. The strategy was to find properties in neighborhoods where the price could only rise, such as the Lower East Side, East Village, or Washington Heights," Sternberg recalls. "Three years ago, I concluded that we were close to a high in real estate prices, and I began selling some of my properties and positions, while at the same time, learning about the Chinese market." In retrospect, he adds, his forecast was premature, and in some of the areas where he sold properties, prices continued to skyrocket. Despite this he has no regrets - and according to him, the real estate in potential in China is vast and is a long way from being realized in full," he says.
An unsolved murder
Some Israeli millionaires tend to seek media exposure, and revel in the spotlight once they get it. Sternberg is slightly different, and the explanation for this lies, perhaps, in his family history, and his own unusual life story.
His maternal grandfather, an Italian Jew, arrived in Burma at the end of the 1930s as the local nobility's first Western doctor. While he was there he met a daughter of one of the families he was supposed to treat, and the romance blossomed. A love affair between a European man and a member of the local nobility was quite a scandal in a traditional country like Burma, and so when they were found out, the doctor and his girl fled to Thailand where they married. They settled in the northern town of Chiang Rai, at the center of South East Asia's "Golden Triangle," and it was there that Sternberg's mother , Ruth, or Supatra to use her Thai name, was born and raised.
"As a captain with Zim, Dad did a lot traveling around the world. On one of his visits to Bangkok at the end of the 1960s, he met Mom, and was surprised to find that she had ring with a Star of David on it. He asked her about the ring, and she said she got it from her father as 'Bat Mitzva' present," says Sternberg. It was love at first sight, and led soon after to marriage between the 40-year old captain, and the 25-year old Thai woman.
Ophir Sternberg was born in 1970 in Haifa, but he didn't really grow up there. Until he reached the age of 10, the Sternberg and his mother and two siblings spent most of the time sailing around with his father, a privilege reserved for captains. "We would come to Israel briefly," he remembers. "But we were usually on ship with Dad. He loved new locations so we visited some fascinating places. At that time, the end of the 1970s, sailing was much more enjoyable, because you would dock at a port and stop over for three or four days, and sometimes even longer. As a captain, Dad enjoyed the privilege of being able to leave the port and do some sightseeing with the family."
At one stage, the family was dispatched by Zim on a four-year posting to Japan, but the idyll didn't last long. In 1980, the family decided to return to Haifa and reside there permanently, and Sternberg and his two sisters attended a local school. Shortly after the return to Israel, Sternberg's father was given command of one of the company's new ships, "Zim California." He flew to France, and left it en-route for Israel on the ship's deck as part of the handover process. On the way they dropped anchor at the port of Piraeus in Greece, "and then the tragedy happened," as Sternberg junior describes it.
On December 8, 1980, the day John Lennon was murdered in Manhattan, Amnon Sternberg's body was also discovered. "Dad was found dead in the command cabin. The murder has never been solved to this day. At first they thought it was terrorism, but we didn't receive any confirmation of this. The troubled relations between Greece and Israel at that time prevented cooperation and a thorough investigation."
When Sternberg talks about the family tragedy, he clearly makes an effort to hide his emotions, but it's still hard to miss them. His tone changes, as does his body language. "My mom is a very strong woman, and despite the situation and even though she was a newcomer to Israel, we carried on," he says. "The time in Japan and on the ship with Dad was the brightest and warmest period in my life, probably because Dad was alive then. Although I enjoyed the years that came afterward in Israel, and I had friends in high school, and an interesting military service, my past made me continually want to work overseas, and I have thought about being a businessman since I was child. Even when I had it rough like everyone else in the army lying in ambushes, I continually thought about the trip to New York."
Sternberg says he already had a subscription to "Globes" while he was doing his military service, and when the newspapers were delivered to his camp, he preferred to focus on the business sections, rather than the popular sports sections like the rest of his comrades.
After his discharge, Sternberg decided that it was time to try and put his plan into practice. "My mother always encouraged me. From an early age, she gave me self-confidence and pushed me to take action and think big. When I was in two minds about the trip to New York, she told me not to worry about her, and that I could go with peace of mind. She and my two sisters still live in Haifa to this day."
From realty to investments
Asked if he too is one of the Israeli Cinderella stories - meaning that he arrived in New York with five dollars in his pocket, Sternberg laughs; he had two thousand dollars. "I arrived in New York in January 1993. It was clear to me that New York, as the world's financial center, is the place to play in, even though I had no contacts or starting point."
A week after landing in the city, he found a job with a local realtor called Quality Living, owned by an ex-Israeli. Sternberg says a real estate agent has to have a thorough knowledge of the area in which he is trying to sell, and swim in a sea of information that includes esoteric details such as the ability to show a customer where the good bars are. "I arrived without any prior knowledge about Manhattan, but I got lucky right on the first day and closed a deal for the leasing of an apartment in the Village," he recalls. That small success turned him into a real estate addict.
He studied Manhattan, and within a short space of time he moved from brokering apartments to buildings and hotels. Eventually he moved to the nation-wide brokerage firm Marcus & Millichap, and at the same time he gained a B.S. in finance from the Yeshiva University Sy Syms School of Business. In 1997, he concluded that it was time for him to spread his wings, and founded Oz Holdings LLC. The company began buying properties in Manhattan.
Globes: Did your deals focus on the Israeli and Jewish communities?
Sternberg: "If I look back at the deals, the answer is probably yes, but that was because most deals in New York are done by Israelis or Jews. In this situation, it's really nice to be Israeli and Jewish, since this means there's often chemistry with the other parties."
Sternberg notes that he also specialized in another of New York's communities - the Chinese. "I closed quite a few deals with Chinese in Chinatown and the Lower East Side. The Chinese are considered tough in business, but I actually found a rapport with them. One of the buildings I bought was a nine-storey loft building in China. The renovations took a year and a half, but then I sold it for double the amount."
70% Leverage
Over recent years, as mentioned earlier, Sternberg has sold almost all his properties in New York, but he still holds a few properties in Manhattan. Just recently, for example, he began work on the construction of the West 16 Apartment House Project at an investment of $20 million together with TDC Development Corporation. The project is located in Chelsea, the neighborhood where he now lives with Eva, his partner in recent years, who is of Chinese extraction. Aside from this project, Sternberg has (together with partners) two restaurants: Amalia on West 55th Street, and Aspen on 22nd Street, which was been designed in the spirit of the 1970s.
Sternberg's assets are held through Oz Holdings in which he holds a 60% stake. The rest of the shares are divided between his three partners: architect Allison Greenfield, who joined the company when it was launched, James Anderson, a former executive at a number of US real estate companies, and Sam Petros, an American of Lebanese origin, who Sternberg says is "an exceptional person who built a major real estate company of his own, and teamed up with me to do business during the last five years."
Before Oz began focusing its investment on Macau and China, it started to invest principally in hotel and leisure sites. In December, it will close the purchase of the estate of the historic Vanderbilt family which stands on a 90-acre (364-dunam) plot in Massachusetts, for an estimated $50 million. Another investment, totaling $50 million, was recently closed with Hong Kong-based Clubtel Corporation Ltd. in a spa in the Shanghai region, to be operated by global resort and spa management company Six Senses, which charges around $600 a night at its resorts. A further deal was closed in Jamaica a few weeks ago, in a project worth a total of $400 million. Oz purchased a hotel from the Ritz-Carlton chain and intends to renovate and operate it, as well as building two 18-storey holiday apartment blocks nearby. The price for these is likely to reach $1 million per 100 sq.m. The final closing of the deal is due in January.
Oz is believed to have an average leverage of 70% of the value of its property portfolio, including those properties currently in the final purchase stages. The company's shareholder's equity is estimated at $300 million, and it based its penetration of the Chinese market on this. Informed sources say that while this rate of leverage is low, it is not unusual either. Until the sub-prime crisis, real estate deals were leveraged by as much as 90-95%. The sources believe, however, that the standard leverage rate is now likely to fall, as a result of the acute credit crisis.
Encouraged by Adelson
The decision to shift the investment focus to China came about almost by chance. In 2004, Sternberg tried to interest Adelson in project he was assessing in the Bahamas. He came to the meeting full of enthusiasm for the project and talked at length about the exotic site and the likely profits. Adelson listened, and then took over the conversation. The Las Vegas Sands Corporation had just opened its first hotel in Macau that year (at an investment of $260 million, which was recouped within ten months), and Adelson wanted to talk about that. He talked about the economic miracle in Macau, and his grandiose plans to build a large number of hotels. Sternberg didn't find a partner, but he came away from the meeting convinced that Macau was indeed the next big thing, and that he must not miss the momentum.
Adelson's representative in Israel, Dan Raviv, said in response that the company does not comment on matters raised in Adelson's business meetings.
As a result of the meeting, Oz examined Macau. The coming months will see the final financial closure of the company's two major deals on the island - the acquisition of the Waldo and Rio hotels for a total of $300 million. The purchase agreements have been signed and Oz is due to assume ownership of the hotels in the first quarter of 2008.
Sternberg says that the underlying principle of the investment in Macau is the purchase of four-star hotels in a prime location, in other words a region now known as the "Macau Golden Triangle." In contrast to Adelson's hotels, where prices are around $250 a night, Oz's hotels will charge less than $150 a night, and will be aimed primarily at the local market. Sources involved in Adelson's businesses note than more one billion people live in China, and they also like to gamble.
Sternberg claims that the collapse in the shares of Macau's casinos - among them the Las Vegas Sands, Wyn Resorts, headed by Steve Wynn, and Melco International, controlled by Lawrence Ho (son of the omnipotent Macau tycoon Stanley Ho) resulted from exaggerated expectations of increased profits by analysts. "How else could one explain their disappointment at the increase of almost 50% in profits since the beginning of the year? They expected an increase of more than 70%, following an estimate by an analyst at Morgan Stanley. I believe that we can meet these standards (Adelson's profit multiples), because we're not competing with the luxury hotels."
In addition to Macau, Sternberg is also considering investments in China itself, through a Special Purpose Acquisition Company (SPAC) co-founded with Stanley & Partners Management Co., a Chinese investment bank with branches in Shanghai and Beijing.
En route to an IPO
Despite his increasing success, Sternberg is virtually unknown, the real estate world included. A search on the Internet reveals that almost all the group's projects have websites but he himself is not mentioned on them. A search for his name on Google also returns few results, less than one would expect for a financier. Sternberg gets a few mentions on Chinese search engines in reports on a conference of real estate analysts, which he and his partners arranged in Macau in September.
There are two reasons for Sternberg's willingness to be profiled - the two offerings that he is considering holding in New York. The first, scheduled to take place in six months, will be held on the American Stock Exchange (AMEX), in which Oz and Stanley & Partners aim to raise $250 million for investments in Shanghai, Beijing, and Macau. According to Sternberg, this will be the first opportunity for Americans to invest in a fund whose investments are solely in China, and for a specific purpose. He pins his hopes on an increase in prices as a result of the demand for offices by companies wishing to relocate their head offices from Tokyo and Singapore to cities in China. The second (and separate) offering, totaling $300 million, will float the activity of the Macau properties.
Despite the offerings, Sternberg stresses that real estate has always interested him more than the capital market. "Real estate is a lot more tangible and real, and more creative - it can be changed. Here, you're not exactly dependent on a stock rising and falling because of the market."
The activity of Israeli companies in New York is most impressive, he adds. According to him, the Americans got to know Shaya Boymelgreen and Leviev first, and then later Yitzhak Tshuva. Sternberg says these are now well-known names that the Americans want to do business with.
In this context, he says he is often asked about the name of the company he controls. The spelling in English is Oz as in the Land of Oz, but the intention behind the name is actually the Hebrew word meaning "courage". Sternberg is quite open about this, and says his Jewish connection plays an important role in almost every business meeting in China, where the Jews are perceived as a role model.
What next? "I follow all the events in the real estate sector in Israel," he says. "I hope to invest in Israel in the future. For the time being, I'm too preoccupied with the US and China, but perhaps I'll do something in the hotel sector in Israel in the more distant future."
Published by Globes [online], Israel business news - www.globes.co.il - on November 12, 2007
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