Moore of the Same

Until the early nineties, Houston’s Jerry J. Moore was the shopping center king of Texas. He’d like to be again, and he has a plan.

October 1998By Comments

WHEN YOU WALK INTO A ROLLS-ROYCE dealership, you expect to see mink coats, handmade suits, and Gucci loafers. But, until recently, the first person you encountered when you entered British Royal Motor Cars in Houston was a short, scruffy man in a rumpled, untucked short-sleeved shirt and wrinkled, high-water pants drinking coffee with the dealership’s sales manager. One of the mechanics? No, it was the owner. “Texas Monthly?” he asked one day earlier this year, standing up to greet a reporter. “Jerry J. Moore. I’m going to make you a hero.”

The getup—and the remark—is classic Moore, who for years has charmed and disarmed people with his dressed-down attire and homespun witticisms. His blue-collar demeanor has also allowed him to escape notice from gypsies, tramps, and thieves. (A neighbor once mistook him for a gardener and asked him to clean up the lawn. “I got twenty-five bucks,” Moore says.) But don’t be fooled: Until the early nineties, the spry seventy-year-old was the shopping center king of Texas, worth an estimated $800 million—and he’s mounting a comeback. He’s once again buying up and developing strip malls around Texas and scouting for more all across the Southwest.

Moore has always had a flair for turning real estate into gold. Born in Houston in 1927 to Polish-Jewish immigrants (his father, who died in August at age 94, was a plumber), he dropped out of San Jacinto High School after the tenth grade and hawked vacuum cleaners door-to-door. In 1958 he founded his company, Jerry J. Moore Investments, and bought his first piece of real estate—a three-room shotgun house in North Houston—with money he borrowed from Irvin Shlenker, the legendary founder and chairman of Houston National Bank (“Money will buy time,” Shlenker advised the young entrepreneur). Once Moore fixed it up and sold it, he bought three more just like it. He then did the same with apartment buildings and small shopping centers, which often contained only a laundromat and a convenience store. Initially he focused on Houston’s working-class neighborhoods because in his experience, he says, people there “pay their bills.”

By the mid-sixties he had hit on a money-making strategy: find cheap, run-down strip malls in high-traffic areas, spruce them up, and jack up the rent by 20 to 40 percent. He was still able to undercut the developers of newer shopping centers across the street by as much as 40 percent because he didn’t have construction costs or high interest payments on his debt. He also saved money by employing his own construction and maintenance crews rather than subcontracting those jobs out. It all worked so well that he eventually dropped his home and apartment businesses to focus exclusively on shopping centers. In the seventies, particularly when the oil boom hit, he was able to charge higher and higher rents as leases expired. And after the bust hit in 1982, Moore was able to pick up shopping centers from debt-strapped local developers and fleeing out-of-state speculators, often for 20 cents to 40 cents on the dollar. Other real estate moguls were losing their shirts back then, but Moore’s gross income was $20 million to $40 million a year.

By 1989 Moore was the biggest individual shopping-center developer in the U.S., with more than 160 properties encompassing 19 million square feet of space around Texas, 70 percent of which was in the Houston area. His gruff mug graced the pages of Fortune and Institutional Investor, and he lunched with the likes of banker Walter Mischer. Snubbing River Oaks, he bought an eighteenth-century French château that the previous owner had transplanted stone by stone to the Memorial area. He also owns about seven hundred antique cars, one of the largest collections in the world, including thirty rare Duesenbergs. In 1991 Texas Monthly ranked him third on its list of that year’s one hundred wealthiest Texans.

But in the early nineties something changed—seemingly, at least. The real estate developer’s credo has always been “A dollar borrowed is a dollar earned.” And despite his limited education—he earned his high school equivalency diploma in 1987—Moore clearly knew his way around a banker. But the question he seemed to be asking was, “If I buy it, how much can I borrow against it?” How much exactly is uncertain, given that his company was privately held and therefore wasn’t required to release its financial statements to the public. But, in 1994, Forbes magazine dropped him from its list of the wealthiest Americans, saying his debt load was “greater than previously estimated.” Moore denies that he was ever overextended or had any problem with credit; rather, he says, he started moving assets into the limited partnerships of his children for estate-planning purposes.

In the fall of 1993 he had hired New York investment house Kidder Peabody to take his company public as a real estate investment trust (REIT), a then-voguish investment vehicle that bundled properties together and sold shares in the bundle to investors. The proceeds could have paid off his debtors and allowed him to buy more properties, but it was too late: The market, which had been gobbling up REITs, had started to lose its appetite for them.

In the spring of 1994 Moore explored going public again, this time in partnership with Morgan Stanley. But while the New York investment bankers didn’t think he’d get many takers, they were interested in buying his properties for themselves. They had already invested $1 billion in distressed real estate and had recently raised another $1 billion from institutional investors to buy more. To Morgan Stanley, Moore’s shopping centers looked awfully enticing. So after five and a half months of negotiations, a deal was struck: In January 1995 Morgan Stanley announced it would acquire a controlling interest in more than half of Moore’s shopping center empire for a reported $400 million, a portion of which was assumed debt. Again, how much debt was anyone’s guess; neither side would say. But a person familiar with the deal told the Wall Street Journal that Morgan Stanley put up less than $100 million.

Moore denies the commonly held assumption that he sold to Morgan Stanley because he had to. “How can you say a person is strapped for cash when he has a car collection worth several hundred million that’s paid for?” he asks. “I sold the controlling interest because I thought it was time.” Moore notes that interest rates back then were around 10 percent. Now they’re averaging 6 percent. “So now is the time to purchase,” he says.

And purchasing he is. Since his two-year noncompetition agreement expired with Morgan Stanley in January 1997, he has snapped up shopping centers in Alvin, Texas City, and Irving from Galveston-based American National Insurance. He has developed a 200,000-square-foot shopping center in Alvin anchored by a Kroger supermarket (“It’s the Galleria of Alvin,” he says). And Moore is looking elsewhere in the Southwest; this spring he was considering a $500 million deal in Albuquerque.

How does Morgan Stanley feel about competing with Moore? “There are a lot of shopping centers out there,” says Scott MacDonald, the president and chief executive officer of CenterAmerica Property Trust, the new name of Moore’s old company. “If they elect to get back into the business, I hope they’re successful. There’s plenty of room for everybody.” MacDonald can afford to be chipper: In his hands Moore’s old company has been streamlined and is clearly back on the mend. Morgan Stanley has spent more than $100 million on renovations, sold off a number of small, unanchored strip malls that didn’t fit its portfolio, and recently began developing and acquiring properties again; its first is a 138,000-square-foot shopping center anchored by a huge Albertson’s supermarket on a 12.8-acre site on Beltway 8 near the Gulf Freeway in Houston.

While the Moore family still owns a small percentage of his old company, he no longer has an active role in its management. (His wife, who acted as its chief executive officer, resigned shortly after the sale, and his son, Jeff, left about a year ago and is developing shopping centers in Louisiana.) But don’t throw him a fundraiser: Between the money he got before and after the Morgan Stanley deal; the properties he retained, including several motels, office buildings, and the Columbia Lakes Resort outside Houston; the four new properties he has acquired; his car collection; his antiques; and the recent sale of the Rolls-Royce dealership to Houston restaurateur Tilman Fertitta, his net worth seems to be, give or take a few dollars, between $600 million and $800 million.

But all of that is on paper. Moore maintains he’s really worth nothing, having doled out even more of his riches to his children in the form of limited partnerships after the Morgan Stanley deal so that they won’t have to pay estate taxes when he dies. “You think I want to pay the government fifty-five percent when legally I don’t have to?” he says. “There are two things: You’re born and you die. You’d hate to work all your life to have your kids end up with nothing.

“My total theory on life—as a young man, as a middle-aged man, and as an old man—is that the only thing that’s impossible is to live forever,” he says. “Other than that, if you want to do it, and God lets you live, you can accomplish it.”

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