LOS ANGELES–When the Denver Gold scored two quick touchdowns against the Los Angeles Express in a pro game recently, J. William Oldenburg flew into a rage. “He began beating on the walls of his private box, and his fury spilled outside as the quarter ended,” The Denver Post reported. That vivid sports page account had Mr. Oldenburg stomping off to the Express’s locker room shouting that heads would roll on the team he had acquired just a few months before.
They did not. But that did not diminish the press coverage of one of California’s newest celebrities. For months, Mr. Oldenburg has been hitting the headlines regularly, not only as the colorful owner of the L.A. Express football team – which he bought in December – but also as a fabulously wealthy real estate tycoon. His organization refers to him as a “self-made billionaire.” The phrase appears in a biographical sketch printed in the programs sold at Express games this spring, headlined “Meet Mr. Dynamite.”
Lately, however, a new note is creeping into the news about Mr. Oldenburg. The 46-year-old entrepreneur, it turns out, is not a billionaire despite his Rolls Royces, chartered jets and ostentatious parties. In fact, his real estate firm, Investment Mortgage International Inc., based in San Francisco, lost money for four years before finally turning a profit in the housing boom of 1983.
Moreover, the 5-foot 6-inch businessman – who refused to be interviewed for this article – has in recent weeks gotten into trouble with bank regulators in Utah, where he owns a savings institution. His thrift unit has been ordered to sell land purchased in late March, from his own mortgage company, because the purchase violated stated regulations.
The less-than-spectacular performance of I.M.I. – its most recent filing with the California Department of Corporations shows net income of $6 million for the six months ended April 30, 1983 – has raised concern among fellow team owners in the fledgling United States Football League that Mr. Oldenburg might not have enough money to support the costs of establishing a team in a still shaky league.
Mr. Oldenburg’s application to purchase the Express for $7 million was approved by other team owners in the league after they received a letter from Mr. Oldenburg’s accounting firm, Pannell Kerr Forster of San Francisco, stating that he had a net worth of $100 million – more than twice the amount the owners said they had sought. Last week, Dudley R. Syler, a Pannell Kerr partner, insisted that the letter was accurate.
Said Tad Tolbe, owner of the Oakland Invaders: “It may be that we didn’t do our homework; we will find out in due course.”
Mr. Oldenburg won his biggest local headlines in March by signing Steven Young, a star college quarterback, to a $40 million lifetime contract, the richest player deal ever in pro football. The coup prompted Mr. Oldenburg to take a shot at a New York rival, Donald Trump, who is another real estate developer with a pro football team, the New Jersey Generals, in the same embryonic league. “I’m used to winning, to nothing less than becoming the best,” he told Sports Illustrated. “Donald Trump can get all the press he wants, but when it comes to business, he can’t carry my socks.”
Mr. Oldenburg’s own career has not always been the success his statements suggest. In 1973, when he established I.M.I., he had just moved to San Francisco from a failure in Seattle. There he had attempted to build an apartment house complex and was eventually forced out of business by creditors who foreclosed. The new firm, I.M.I., operated in relative obscurity until last fall, principally earning large fees to arrange construction loans for risky building projects. And then in a burst of activity last fall, he moved out of obscurity and onto the public stage.
I.M.I. switched to lavish new offices, for which Mr. Oldenburg is paying $2 million in yearly rent. He purchased the State Savings and Loan Association of Salt Lake City for nearly $10 million, and the Express.
A press release last November described I.M.I.’s newly opened office suite – with its Jacuzzi, art works and voice-activated doors – as “the most spectacular office space ever seen in San Francisco (or perhaps anywhere in the world).”
Mr. Oldenburg himself lives in a mansion in the affluent Hillsborough suburb of San Francisco, buys designer clothes at Bijan on Rodeo Drive in Los Angeles, travels by Rolls-Royce and chartered jets, and pals around with Wayne Newton, the Las Vegas singer who occasionally entertains I.M.I. clients.
At the gala opening of I.M.I.’s new office last November, Mr. Newton sang “The Impossible Dream,” backed by a 34-piece orchestra, and Mr. Oldenburg talked of the importance of his firm in American real estate finance. As he spoke, mist rose from blocks of dry ice on the stage.
“There have always been people with ambition and dreams who thought they could make 2 plus 2 equal 5,” said John French, head of mortgage banking for Grubb & Ellis, a San Francisco-based real estate company. “Mr. Oldenburg is trying to make 2 plus 2 equal 50.”
State Savings, with assets of more than $700 million and $10 million in capital, was used by Mr. Oldenburg at the end of March to buy from I.M.I. some 363 acres of undeveloped land in a San Francisco suburb. The price was $55 million. I.M.I. had paid only $800,000 for the parcel in 1977, although it was reappraised at $30 million in 1982 after Mr. Oldenburg won permission to build a condominium on the site.
The purchase appeared to shed some light on cash flow among Mr. Oldenburg’s operations. The day of the closing, March 30, I.M.I. repaid nearly $6 million in an overdue bank loan. That apparently solved one problem for Mr. Oldenburg, but left another. Although no law prohibited State Savings from buying the property of another Oldenburg company, the transaction did break a state regulation that limits the amount of real estate a thrift unit can own to 10 percent of its assets. So under pressure from regulators, his new thrift agreed to resell the acreage.
“He tried to bail himself out personally with the land sale,” said Elaine D. Weis, Utah’s commissioner of financial institutions, who charged that State Savings had gone far beyond the 10 percent limit. “When you think you’re immortal you think you can get away with going through red lights.”
I.M.I. had used the land as collateral to borrow nearly $16 million from three banks in 1982, including the $6 million repaid on March 30, according to documents filed with the Contra Costa County recorder. The documents show that I.M.I. advanced Mr. Oldenburg $1.7 million in 1982, a year when the company lost $882,000.
For all his showmanship, Mr. Oldenburg does in fact occupy an important and valuable niche in real estate. His I.M.I. arranges construction loans for commercial builders whose projects – in many cases condominiums – are considered too risky for traditional lenders. The builders pay big, up-front fees to I.M.I. to line up small thrift institutions willing to participate in the risky loan packages. The thrift units share in these fees, and charge high interest rates as well to justify their gambles.
Many of the loans that I.M.I. has arranged are for condominium projects in Hawaii and at least one of those projects is now in trouble – the twin-tower Century Park Plaza in the Pearl City area of Oahu. I.M.I. had arranged $44 million in loans to build Century Park, but many of the 600 units have not been sold, according to Donald Walsh, chairman of First Federal Savings and Loan in Malvern, Ark., one of the lenders. “Our loan is in problem status at this point,” said Mr. Walsh. “The units were supposed to be 50 percent pre-sold. I.M.I. painted a very fine picture of the project, but the pre-sales fell apart for some reason.”
I.M.I. earns its fees from developers as soon as they receive the loan package Mr. Oldenburg’s company has arranged, so I.M.I. is not affected by the success or failure of a project. “It’s a great concept, and Oldenburg is the finest salesman in the world,” said a former I.M.I. executive. He added that Mr. Oldenburg has been able to arrange huge loan packages recently because thrift institutions are flush with deposits generated by new money market accounts.
Nevertheless, until the recovery in the building industry last year, I.M.I.’s business had been weak and it had lost a total of 41 million between October 1978 and late 1982. But Nicholas Muccino, a senior vice president at I.M.I., said the firm arranged $1.5 billion in financing in 1983. That level of business permitted I.M.I. to collect fees for itself grossing $30 million, according to other executives who have now left I.M.I.
Although Mr. Muccino insisted that I.M.I.’s financing last year totaled $1.5 billion, the former executives said the company collected its $30 million in fees on only half that amount. They explained that I.M.I. “double counts” each loan because there are two sets of lenders involved in every project – actual and “standby” lenders. For part of the up-front fee, the standby lenders agree to act as insurance agents, reimbursing the original lenders if a project fails.
The up-front fees that I.M.I. collects to arrange loans usually total 10 percent of a loan package, according to people who do business with I.M.I. That’s far above the 1 percent fees earned by most loan brokers in the building industry. I.M.I. keeps up to 50 percent of this amount while the thrift institutions, including the standby lenders, share the rest.
For Mr. Oldenburg, entertainment plays a major role in convincing thrift executives to participate in the risky building loans I.M.I. arranges for developers. He brought his friendship with Mr. Newton into play last January, during the U.S. Savings League’s secondary mortgage conference in Las Vegas, an annual event at which hundreds of millions of dollars in deals are negotiated. He rented limousines to chauffeur dozens of thrift executives to Casa de Shenandoah, Mr. Newton’s Southern-style mansion in the desert just outside the city. Later, he treated 2,000 thrift officials to a Newton performance at Caesar’s Palace.
Quite apart from entertainment, Mr. Oldenburg lately has been using his new Salt Lake City thrift institution as lead lender in arranging loan packages, although many developers say they are wary of dealing with a broker who also owns the lead lender – a double role that they fear could involve conflicts of interest. That new activity has raised concern from Mrs. Weis, the Utah regulator, who said that State Savings could be hurt by the “questionable nature of the properties being financed.”
In fact, State Savings has not been profitable “for years,” according to Dwayne Hendricks, an executive at American General, the Texas insurance company that sold the thrift unit to Mr. Oldenburg. Mr. Muccino said that since the purchase, State Savings has become profitable, although those profits could be wiped out if the thrift had to sell the land bought from I.M.I. for less than the $55 million purchase price. If that happened, then Mr. Oldenburg’s two new possessions could be a major drain on I.M.I., even if its 1984 revenue exceeded the $30 million reportedly grossed in 1983. The football team is expected to lose more than $10 million this year, according to those familiar with its operations, and Mr. Young’s lucrative player contract calls for a total of $2.5 million in initial payments by December.
Though Mr. Oldenburg is no billionaire, he has come a long way in business since his arrival in Seattle in 1959 from Syracuse, N.U., where he had been raised in a working-class family. “He was always hustling to make money,” his older brother Clarence said. In a telephone interview, Clarence recalled that his brother had worked as a trumpet player and door-to-door vacuum cleaner salesman while in high school: “He would sell anything – his toys, anything.”
For most of the 1960’s, Mr. Oldenburg worked in Seattle as a mortgage broker, but by the end of the decade he had become involved in construction of an apartment house complex in Redmond, a Seattle suburb. After he and his partners were unable to make payments on a construction loan in 1970, creditors foreclosed.
Just before the foreclosure, Mr. Oldenburg attempted to sell the complex by offering partnership shares. Two people who purchased shares later sued Mr. Oldenburg, alleging fraud, breach of contract, negligence, and securities law violations. The case was dismissed after he paid the plaintiffs $16,000.
Because Mr. Oldenburg’s company did not register his share offering in the apartment house complex, the Securities and Exchange Commission filed an action in Federal Court accusing Mr. Oldenburg of selling unregistered securities and misrepresenting them to investors. Mr. Oldenburg, without admitting or denying guilt, signed a consent decree in 1974 enjoining him from future violations.
Meanwhile, he had moved to his new venture in San Francisco. Seattle mortgage brokers said they were not surprised by their old colleague’s second rise. “People up here just shake their heads when they hear his name,” one said. “He goes through the ups and downs with a smile.”