Upon first glance, it seems hard to believe that Richard Wilpon, Michael Katz, and Tom Osterman run the diversified investment company that also owns the New York Mets. Sure, the three dress the part of successful businessmen, wearing dark, expensive-looking suits for a photo shoot held three hours before game time at Shea Stadium on a sunny July day. But it's not long before the three kids from New York come out in these 50-plus-year-old men.
Osterman starts the ribbing, telling Katz to run the bases for action shots. Katz takes jabs at Osterman's liberal political views. Wilpon stands in the middle, getting tugs and rabbit ears from his long-time business partners. Then Osterman wraps up the session by standing on the top stairs of the Mets dugout posing with an "Eat. Spit. Be Happy." bucket as Mets players Al Leiter, Tom Glavine, John Franco, and others walk by in pre-game warm-ups.
This is how it goes at Sterling Equities, a New York-based company that has 17,500 multifamily units now and has owned about 55,000 since its inception. Despite the fact that these three men helped build a business that's not only a huge player in multifamily, but other sectors of real estate, the media, sports, and now even recycling agricultural waste, it's hard to get them to stop joking around. Maybe that's because they've known each other so long they're practically brothers. In fact, Katz's and Wilpon's brothers, Saul Katz and Fred Wilpon, started the business in 1972. Richard Wilpon joined at the company's inception, Michael Katz joined in 1973, and Osterman joined in 1974. "We've known each other so long that we finish each other's quotes," Osterman says.
But just because Sterling leaders like to joke around doesn't mean they don't take their business seriously. As a matter of fact, the continuity and collegial environment at Sterling helped set the tone for the growth of the company, according to Michael Katz. The group built Sterling with the real estate business, with apartment units and 17 million square feet of commercial and retail space. "The real estate business was what brought us to the baseball business," says Richard Wilpon.
When looking at baseball players, the Mets want to find that elusive five-tool performer–a position player who possesses a powerful bat, can hit for a high average, has speed, owns an accurate, strong throwing arm, and has a good glove. While some would argue that there aren't many five-tool players wearing Mets uniforms at the moment, the company that owns the team has five key tools in multifamily: power business relationships, a high average of successful deals, laser-like accuracy to pinpoint markets, speed to do quick turnarounds, and flexibility to try different market sectors. "They have an unbelievable reputation in the marketplace," says Charles Frischer, a senior vice president with Capri Capital, an Arlington, Va.-based banker for Sterling.
Power Relationships The home run is possibly the most inspiring event in baseball. Nothing can turn around a game quicker than a 400-foot shot off a slugger's bat–that's why baseball scouts are always looking for someone with strength and bat speed to power the ball out of the park. In multifamily deals, Sterling comes to the bargaining table armed with capital from powerful investors, including individuals, families, and institutions.
As Sterling grew in the 1970s and '80s, its investors included a number of wealthy individuals and families that the Wilpon and Katz families knew. In 1991, the company partnered with American Securities LP, which was founded as the investment office of Sears and Roebuck's William Rosenwald (son of Julius Rosenwald, president of Sears), to form Sterling American Property Inc.
That same year, Sterling had started a fund targeting properties in New York–but the real estate climate sent the company scooping up mortgage notes instead. It followed with two more successful funds that bought real estate, and its happy investors took note. "Ninety-five percent of the people who participated in prior funds went into our fourth fund," Katz says.
This is no small feat, according to Frischer. "Their investor base includes some incredibly smart people," the banker says. "If they trust you with their money, it's a big vote of confidence."
Sterling takes this responsibility very seriously. To prove its commitment to each fund, the company contributes about 10 percent of the capital, making Sterling the biggest single investor in each fund. "Other people use their investors to get where they want to go," Frischer says. "We see Sterling act more as a participant with their investors." Sterling agrees. "We know many of our investors personally," explains Michael Katz. "We don't want to sit across the table from them and tell them we lost money."