Exclusive: The sad story of a fallen millionaire...his full story of losing it all
Oct 6th 2009 8:00AM
Updated Oct 6th 2009 11:27AM
On Saturday, Nov. 1 -- All Saint's Day, as he knew from his Catholic upbringing -- Paul Pierce walked into a Philadelphia Rite Aid store, plunked down two bucks, and bought a notebook with a marbled red-and-white cardboard cover: the kind grade school students use to do homework.
Then he returned to his luxury home in the Society Hill neighborhood just a few blocks away, a double-lot house that developers like Pierce dream of building or buying for their families once they hit it big.
His stomach in a knot, he sat alone at the island in his spacious, modern urban kitchen, and scrawled:
This is the diary of a guy that started his own real estate firm. He graduated to retail development and thought he was pretty successful. On paper, his net worth was close to $30 million and he enjoyed luxuries that most people well off enjoyed. But soon, without knowledge, he lost it all and his company.
Had he "lost it all"? Though a high-flying real estate wheeler-dealer, Pierce was not given to exaggeration, especially in a brand-new journal for his eyes only.
Only 48 hours earlier, he stood poised to close the biggest deal of his young, promising career; it would bring Target, Mervyn's, Lowe's, and Best Buy to a mammoth suburban shopping center. But while Pierce had seen banks tighten their belts in previous months, he hadn't counted on the recession denting Target's sales to the point where they'd cut off construction of new stores -- like the one they'd promised him weeks earlier.
So Pierce was utterly unprepared when the Minnesota-based retailer pulled the plug, in a phone call the previous day, a very scary Halloween. Then Lowe's caught wind of what Target had done, and followed suit. Then more retailers backed out. The dominoes were tumbling.
"From a retail and financing perspective, the music stopped. It completely, 100 percent stopped," he recalls.
The project had taken Pierce years to arrange. He'd signed guarantees worth tens of millions of dollars, never thinking for a moment that the banks would have to come calling for their money. But in less time than it takes to hold a 24-hour clearance sale, Pierce's shopping center was dead. Pierce thought he was finished, too.
I never have been so buried, so depressed in my life. I don't think there's any chance I can conceivably ever get out of this Hell!!!
For Paul Pierce, a Pandora's box of financial and personal nightmares had just taken flight. And like a prop from a Charlie Chaplin Tramp film, the cardboard-bound journal became a humble, almost farcical blotter of solace as his corporation collapsed, and his net worth plunged into the negative eight digits.
Even the dream home he'd moved into just months earlier now faced a very uncertain future. So did his marriage to a patient Southern woman with a sharp sense of humor and copious coping skills. She was a teacher and longed for domestic sanity and stability, not Pierce's money. That week, Pierce wrote:
Came home and wife commented that I should fire two of my associates. Her point wasn't taken well but necessary; she was feeling that they were taking bread off our family table. She's willing to sell her jewelry to make ends meet.
So what made Pierce start the first diary he's ever kept? He couldn't pretend that keeping a journal would make total sense of his free fall, or that he'd find the insights to fix what the economy had irreparably broken. Instead, he used paper and pen to vent, to record events, to ask rhetorical and often bleak questions, and to claw to the heart of a yawning chasm in his life, one that predated his financial hole. He sensed that an inner emptiness had haunted him for some time: even months earlier, while deals still cruised through, before the real-estate market tanked, back when his Midas touch turned land to gold seemingly at will.
Pierce's self-styled assignment: to confront those gnawing feelings and make changes. Permanent changes. But first, he would have to fight every temptation to give up, and beat back recurrent thoughts of harming himself.
Tues. Nov. 11: Saw my therapist and told her the inevitable is going to happen. Bankruptcy. I now need to structure to protect my family. This is my worst nightmare. If I got hit by a truck it would either be over or I would have an excuse.
• • •
Given the gross misdeeds of the mortgage banking business in triggering the recession, it's too easy to treat anyone involved in real estate as unworthy of sympathy. But by all measures, Paul Pierce doesn't fit any of the pejorative stereotypes of a rich real-estate mogul hitting bottom. He's not into smashing historic buildings to throw up pre-cast concrete nightmares. He's never greased a politician's palm for zoning changes. In fact, Pierce had never given a dime to any candidate's campaign.
"I despise politics," says Pierce, 42, a handsome, affable guy with close-cropped curly brown hair and the kind of lean build that makes for the ideal racquetball partner. "I am the most apolitical person you'll ever meet."
Pierce didn't bet the future of his company on way-too-risky investments, nor had he tangled with corrupt or criminal types in building his business. A straight-shooter from South Philadelphia, Pierce grew up believing that fair play and hard work -- relentlessly hard work -- could get a guy anything in this world. He'd proven that to himself back in high school, when he bet his skeptical dad, a mechanical engineer, that he could get straight A's three years in a row.
"He forced me into a Catholic high school, and I didn't want to go. All my friends were going to the local public high school," Pierce recalls. "So he said, "Well, if you get straight A's, you can transfer anywhere you want your senior year.' Now, there's no way he ever thought I would have pulled off straight A's and wanted to change schools after three years. But I got straight A's, and I transferred."
To pull it off, Pierce transformed himself from a C-student into a young man possessed. Even after he'd proved his mettle to his old man and switched schools, he studied until 1:30 in the morning, in part to keep his coveted point guard spot on the basketball team. When Pierce landed in the hospital with a mystery infection the doctors couldn't diagnose, it didn't stop him from graduating with honors and landing a two-year full-ride college scholarship. He simply barreled his way through. "The basketball team was 25-5," he adds proudly.
After college, Pierce climbed the career ladder with the grit of a mountain climber focused on conquering K2. He embarked on a successful real-estate career, then worked his way into his own development in 2000, not long before his first son was born.
The way Pierce describes it, developers bring many elements to the table -- most importantly, money -- to ensure a land tract or former factory turns into a shopping center, parcel of homes, or a condo building. Like a film producer, the developer sees the vision of a construction project through, start to finish, and finds the resources and people to make it happen.
His first deal involved a small Blockbuster in front of a Target shopping center that needed cross-access through the Target. After three or four developers struck out, Pierce gave it a shot, mixing his deft people skills with financial hustle. He put up $50,000 of his own cash and raised another $150,000, including $50,000 from his dad.
A year later, he'd sewn up the contract with $400,000 profit to split: a 200 percent return. "I just caught the market at the right time," he says. "It's like getting a nice wind when you're sailing, and you just kind of keep saying, 'Oh, this is easy.'"
It got easier still. Immersed in a real-estate market that was all boom and no bubble, Pierce popped some sweet deals without risking a cent. In 2006, he flipped one contract and walked away $845,000 richer -- in essence, making almost $1 million just by finding a buyer for his property and shuffling some papers. All told, he exerted not much more effort than he would have from hawking Beanie Babies on eBay.
Before long, Pierce's Havilland Corp. (a play on his wife's maiden name) boasted 22 employees. Pierce drove an ultra-sporty Maserati and a Range Rover. At any given time, he and his associates juggled as many as 40 projects. It had taken him a dozen years to earn a shot at doing his own development deals, another eight to build his business.
All along the way, and back to his high school days, Pierce experienced setbacks, but never outright failure. He'd always believed failure could be outrun, outworked, outsmarted. If that made him cocky, so be it.
But he also believed in God. And though he fought like hell to get out of his Catholic high school, Pierce never stopped his conversations with the Almighty. Fresh out of college, he shared his real-estate dreams with God -- promising to make Him his "business partner" and give Him "a majority of my wealth." It wasn't any epiphany in a church pew filled with shafts of light or weeping; that's not Pierce. Besides, he'd rather stand on his promise than on ceremony.
And Pierce believes he broke his promise time and again over the years. He now has this theory that successful people don't act like they need God; that they, like him, push God to the margins when things are going fine.
Pierce doesn't think for a second that God pulled the rug out from under him in quid-pro-quo fashion. God is too big for that kind of tit-for-tat stuff, he says. Here is what he sees instead: The wealthier he got, the blinder he became.
"I was too busy, too uptight," he says. "I didn't give time to people, the time that they deserved." Pierce had also become something of a stranger to his two young boys, and drifted from his wife to the point where he failed to see that she craved a life of consistencies, not luxuries.
When she retained her own attorney for possible bankruptcy -- and a possible split -- the realization smacked him like a jagged wrecking ball. She also gave him some homework for his little red book.
Fri. Nov. 14: I received a call from my wife today slightly before noon and she asked me to take 20 minutes and write why she should be angry at me. I thought it would be best to write it in this journal:
First, she has every right to be angry at me. Basically, I inverted everything I had, dollar-wise, and all the work I've done over the past seven years, and pissed it all away, putting my family at risk. Possibly altering our lifestyle (and my children's) for life.... Shame on me for not being smarter. I do know this won't happen again. I probably won't have a chance to let it happen again.
But I'm learning and God has a path for me.
• • •
What Paul Pierce calls his path back to belief, most of us might label as pre-bankruptcy boot camp -- nearly every day unleashing a series of fiscal, personal, and vocational groin shots. Pierce meets with bankers who've lent him money, or backers who've put up their own cash, and they take him to the woodshed.
Mostly, he listens and promises to do whatever he can to recoup some portion of the lost funding. Even when they try their best to understand and cap their rage, Pierce always finds the conversations painful.
"There's a guy I was talking to tonight who invested $2 million with me in June of '08," Pierce says. "And by October 26th of '08, he knew it was worth a million. And he's a great guy, a smart guy -- one of the smartest guys I know. I came in under cost and ahead of time with my project. The problem is, the whole market tanked within those three months and my net worth that was guaranteeing it went absolutely negative. He's screwed. He's out a million bucks, just like that. And that I can't control. I have nothing to do with that. That is pure market risk, and that sucks. But that is what I never, ever, ever anticipated."
As a result, Pierce says, "I am working my ass off to try and get him what I can, knowing I'm never going to make a dime out of it, let alone get back any of my own cash in the deal. He's appreciative of the effort, I think. But he's really having a hard time grasping it. He's mad at himself, he's mad at the world. And he's mad at me, sure. He's mad at everybody."
But strange as it sounds, Pierce doesn't mind the humiliation so much, because of the overarching humility that comes with it. He now realizes that the former bullheaded high school kid who could seemingly bend the world to his will must answer to forces that he'll never know or understand: not just market economy forces, but those that cause the circumstances of life to change in an eyeblink. "You never know what tomorrow brings," he says, his head bowed slightly. "You just don't."
He's also tried to keep his sense of humor through the darkest of it. His entry from Friday, January 16, has an interesting postscript: nine bills of mixed U.S. currency photocopied in black and white, reduced in size, meticulously cut out, totaling $183. If you can't print your own money to bail yourself out, you can at least fantasize about it, right?
Freaking out. Running out of cash. Big issues all over the place. It's like being in a boat in the middle of the ocean with holes.
His battles far from over, Pierce still finds himself in danger of sinking. He soldiers on with just six employees and himself. His bankruptcy remains far from a done deal. He wants to retool his business to steer from the kind of big developments that got him into trouble in the first place, but one all-important question remains: Where will he get the money going forward?
And he works at restoring the trust in his marriage, one battle he feels he's winning. In pieces, anyway.
Thurs. Feb. 12: Sherry has been awesome. She is truly the BEST partner I could have chosen. A delicate balance between being pissed, frightened, hating me and supporting me.
He's lost his luxury cars, but he could care less. "Having fancy cars doesn't mean a thing," he says. "And those that it does mean something to are probably not the people who are really going to be there for you. It's not the cash, because I never counted the cash. It's who you are as a person, what your reputation is, what you leave behind. How your peers, how your family, what they think of you, how you deal with them, and what you give to them."
Pierce also found an unexpected lifeline: "my estranged brother, Bill. He called me up in March; he lives in California now, so I've kind of lost touch with him. He told me, 'You need to have a partnership with God. Maybe you've drifted away.' He was right on the mark there, but he was also right about having a partnership with Him and trying to make decisions with Him. So we'll see how it changes things."
Whether talking to his spouse, his investors or his business associates, Pierce doesn't hold back his rediscovered spirituality. "What's interesting is that with each of these people, I tell them that you've got to have faith. The faith I'd describe to them is basically to imagine yourself in a plane and at some point you're flying on instruments. And you've just got to have faith that you're going to make it through."
Facing the prospect of devoting months of effort in every aspect of his life just to tread water and start over, Pierce believes that he's found that faith. And on this point he will yield to a touch of ritual flair worthy of the Book of Job: He calls what he's going through "walking the ring of fire."
This experience -- one his peers would go to all lengths to avoid -- he cannot place a price upon. For in the process, he has come to discover his kids, his wife, his family and his God afresh, all treasures his worth far more than the $40 million-plus he lost: "I'm thankful. I'm thankful that I've gone through what I've gone through if it means that I can be the type of person that my wife and my kids want."
He writes less often in the journal now, sometimes not for weeks or months at a time. But when he does, he tries to savor the second chances that could've only come courtesy of the recession.
Friday, July 10, 2009: I had a unique experience tonight. I took the train instead of driving my Maserati or Range Rover or cab. Very messed up. Yet I'm kind of proud of myself. My kids love me. And I'm not afraid of me. I'm a better person.