Sam Greenberg has a lot of strange ideas about business. No fire insurance, for instance. If something burns at Sam’s U-Drive, his equipment rental company based in Van Nuys, well, it just burns.
He’s not incorporated, either. Sam (who isn’t much on last names) just can’t see paying both corporate and personal income taxes. Instead he pays out a percentage of the company’s profits directly through a limited partnership.
Borrowing? Not for Sam. He doesn’t carry a Mastercard or Visa card, and claims he’s never paid a penny’s interest in his life. He pays cash for everything, and his company has no debt.
Sam’s a little old-fashioned, but since he’s 77 years old and has assembled a family fortune his son puts at $25 million to $35 million, he’s kind of hard to second-guess.
Much has been written about Sam Greenberg, iconoclast, philanthropist, and chairman of the city Board of Airport Commissioners. But he is also a good example of how a family business can thrive in the 1980s on the same principles it followed in the 1930s.
The shoestring concern he founded in Van Nuys in 1933 with his brother and father is run much the same way today, even though it had 1986 sales of $9 million and 120 employees, Greenberg said. Sam’s rents out a variety of equipment, including trucks, trailers, cement mixers and generators.
“He’s good, tough competition, but he’s honest,” said Jack Wanamaker, of Burbank-based Wanamaker Rents. Of equipment rental generally, he said, “It’s a good business, but you got to be on it every minute. It doesn’t run itself.”
The Greenbergs are also evidence that the problem of succession in a family business can have a happy outcome.
Sam is not an easy man to replace. He tends to use profanity (“That’s one of my goddamn shortcomings”) and keeps his eye on things by opening every piece of mail, writing almost all the checks, and working 12 hours a day, seven days a week. He vows never to retire.
His son Steve, 37, who is gradually supplanting his father, is also slowly modernizing things. Steve, a former anti-war activist, finally persuaded his father last month to let the company’s customers pay by credit cards. Previously, Sam didn’t want to pay out the 3% fee to credit card companies.
Steve is also trying to curb his father’s obsession with paying bills as soon as they arrive, costing the company precious float.
The transition has been fairly smooth, and earlier this year Steve officially became managing general partner of the limited partnership that is Sam’s U-Drive. That makes him, on paper at least, top dog.
Father and son have much in common. Both are unpretentious men who shun neckties and fancy offices. Sam is a liberal Democrat who backs his convictions with cash, which he said is why Mayor Bradley appointed him to the Airport Commission. Steve said he is somewhere between liberal and radical, and recently offered to post bail for some anti-nuclear protesters.
Their money comes first from the rental business, which grossed $9 million last year but earned a healthy $1.5 million profit, Steve said, even after Sam’s $250,000 salary. But the rental business is only the beginning.
Vast Property Holdings
A separate family partnership owns property in West Los Angeles, Van Nuys, and Bakersfield, and another trust has property in Oxnard, the family said. Many of the properties produce rental income. Long-term debt, needless to say, is zero, and Sam said he was recently offered about $10 million for the company’s holdings in West Los Angeles alone.
Of course, Sam’s diversified. He believes “big oil” really does rule the world, and owns Chevron stock “up to here,” as he puts it, jamming his hand under his chin. He said he has 15,000 shares, worth about $850,000.
He also believes cartels control industries like rubber. So he bought shares in Firestone when its stock was beaten down to well below $10 in the late ‘70s by the exploding Firestone 500 radial. Firestone now trades at about $36.
Sam also has lots of Pitney Bowes stock, too, because the company has a lock on the stamp machine market. Sam also owns part of a Van Nuys pawnshop. And he rents a small building to a Vietnamese family, which runs an Oriental restaurant in it. He owns a house in Van Nuys, free and clear.
Sam doesn’t always hit the ball. Over the past three or four years he’s acquired a 10.6% stake in Valley State Bank, an Encino-based financial institution whose troubles include years of losses and a $600,000 embezzlement last December. Nevertheless, Sam’s stake is still worth about what he paid for it.
“Our investments bring in more than the rental business,” Sam said.
Drives Second-Hand Cars
All that money hasn’t seemed to spoil either man. Sam still gets to the office at 6 a.m. He buys shirts cheap by mail from Hong Kong. For transportation he has a couple of second-hand 1979 Cadillacs with nearly 70,000 miles on each.
The headquarters itself is a kind of late ‘40s slum that could pass for a trailer home. Sam sits right in the middle with everyone else at a metal desk that wouldn’t be out of place in plumbing-supply store. Steve sits at another ramshackle desk, in front of his aunt, Rachel Fox, who handles the investments, and diagonally across from his father, who considers Steve extravagant for buying a new Volvo.
Sam’s doesn’t advertise, charges relatively high prices and apparently still gets plenty of business, mainly, Sam said, by word of mouth. Also, Steve claims, the company gives good service: when something breaks, they send out a new one.
Paid Off Home Mortgage
The younger Greenberg, Sam’s only son and the youngest of four children, shares his father’s beliefs in fundamentals. He bought his house using a mortgage, but perhaps feeling guilty, he paid it off in just nine years. And he believes the business should move one step at a time.
There have been other changes. Sam’s used to pay out 85% of earnings to its limited partners. But last year “the Ayatollah Greenberg,” as Steve called himself, slashed the pay-out to 65%, even though the limited partners must pay tax on 100% of the earnings, whether they are distributed or reinvested.
As a result, Steve said, the most recent distribution was only 15% more than the total tax liability on the annual profit.
Similarly, he has begun some modest advertising--by putting the company name on the side of its trucks. Previously, Sam kept the trucks unmarked.
In perhaps the most uncharacteristic step of all, the Greenbergs are erecting a three-story, 15,000-square-foot headquarters building for $1.5 million at their Van Nuys rental yard.
Better Working Environment
The new building will contain plenty of customer space and is part of Steve’s effort to bring in more consumer business. Also, he said, the family was entitled to a decent working environment for the first time in more than half a century.
The business was started more or less by accident in 1933, when the Greenbergs were in the used car business and started renting a truck they couldn’t sell.
Despite the family’s wealth today, there is no fire insurance on any of the 100 buildings it owns, said Sam.
Steve adds that there is no collision insurance on any company vehicle. And since Sam only pays cash, there are no lenders to insist on coverage. Sam does have liability insurance, but he said minding the store is the most important thing, and anyway, he takes the long view.
“We’ve been here 53 years,” he said, “and we get sued every week. But we’re still here.”