David Lichtenstein has a very different real estate investment strategy today than he did a few years ago. The 55-year-old self-proclaimed normal guy from Brooklyn learned the hard way that it is bad to carry billions of dollars in debt. Sometimes you just can't dig out from a mess like that. But sometimes you can!
These days, Lichtenstein runs the real estate development company Lightstone, which owns 11,000 apartments, 3,200 hotel rooms and 6 million square feet of commercial property in 22 states. He is in control of 100% of the firm and has an estimated net worth of $1.4 billion.
Lichtenstein is a New York native. He is one of seven kids who grew up in the working class Sheepshead Bay neighborhood with his teacher parents. Like most kids at the time, he played stickball with his neighbors. He graduated from James Madison high school – the same school that Bernie Sanders and Ruth Bader Ginsburg attended (albeit more than a decade earlier than Lichtenstein.)
College wasn't in the cards, but Lichtenstein had a burning desire to make money and he figured the easiest way would be to get into real estate. He was 23, his wife was 19 and pregnant and he needed money. So he maxed out his credit cards to buy his very first property, an $89,000 two-story house in Lakewood, New Jersey. Not long after he bought another house and another and another and a steady flow of cash started coming in, which he supplemented with loans, lots of loans. Debt was Lichtenstein's friend at the time.
However, by the time the credit crisis hit its pinnacle in 2009, Lichtenstein had $7.3 billion in debt—largely because he financed the purchase of the Extended Stay hotel chain—and $200 million in equity. The hotel chain went into bankruptcy protection. Later that same year, Lichtenstein's Lightstone sold off 22 of its outlet malls for $2.3 billion. Though the malls had been bought in 2003 for $638 million, that profit wasn't enough to take care of the Extended Stay mess.
Lichtenstein was on the hook for $100 million personally in the Extended Stay debacle due to a "bad boy" clause in his original purchase agreement. Basically, his agreement to purchase Extended Stay said that if the hotel chain voluntarily sought bankruptcy protection, Lichtenstein would be required to pay his lenders a fine. This didn't sit well with Lichtenstein and he took his lenders to court to fight it. He was unsuccessful and eventually paid the $100 million fine. Then he sued his lawyers alleging legal malpractice for bad legal advice that led to that bad boy clause. He sought $104 million in damages but the case was dismissed.
Lichtenstein was at a career low in 2013. However, like a phoenix, he rose from the ashes of the Extended Stay debacle. Now, he is in the process of developing budget-conscious hotels with a hipper vibe for Marriott's Moxy brand. These hotels will be aimed at millennials who tend to turn to Airbnb rather than hotels for their lodgings. Four of these outposts are in the works in New York City; two are planned for Los Angeles, and the final (for now) in Miami.
Lichtenstein has made an astounding comeback, aided in no small part by the rebounding (and in many areas, soaring) real estate market. Through Lightstone, Lichtenstein is developing luxury residential buildings in the Financial District of Manhattan and Long Island City. In Brooklyn. Lightstone's Bond Street project has 700 luxury rental apartments.
All in all, right now, Lichtenstein has his hands in $2 billion worth of in progress projects. Although these days, he is quick to point out that debt is not his friend and he firmly sticks to the industry standard of 50% debt or less.