"I'll Take Manhattan": How John Catsimatidis Built a $4 Billion Empire

[Jonathan Boyar] (0:04 - 1:51)

Important disclosures and disclaimers apply to this episode. Please listen to the end of the episode for the full disclaimer. Welcome to The World According to Boyar, where we bring top investors, best-selling authors, and business leaders to show you the smartest ways to uncover value in the stock market.

 

I'm your host, Jonathan Boyar. My guest today is John Catsimatidis, Founder and Chairman of the Red Apple Group. He came to America from Greece at six months old, the son of a lighthouse keeper who bussed tables to feed his family.

 

He left  NYU eight credits short of an engineering degree to buy into the supermarket where he'd been working. By 25, he owned 10 of them. And in the late 1970s, when New York was left for dead, he bought Manhattan buildings because he needed somewhere to put his stores.

 

It became one of the great New York real estate bets. Today, Red Apple spans supermarkets, refining more than 400 gas stations, real estate, and WABC radio. Forbes puts his fortune north of $4 billion.

 

In this episode, how he financed an empire on vendor credit, whether his children will keep Gristedes, and what he said when I asked if he'd run New York City's grocery stores for the new mayor. Here's John Catsimatidis. John, welcome to the show.

 

Thank you for having me. I really enjoyed your book, How Far Do You Want to Go? From it, I gathered your business philosophy is simple, but not easy.

 

Focus on a product, keep your customers happy, get your employees to work together. And most CEOs would kind of echo that, but you actually are able to execute it. Where do people go wrong when they actually try to do this?

 

[John Cats] (1:52 - 2:23)

Everybody that you work together has to realize and respect the fact that when you say charge, it's like, in the army, charge. Everybody follows you through. Not like, please, Mr. Custer, I don't want to go. If you remember that movie, getting people to row the boat in the same direction is very important. And that's where it comes down to leadership. People have to believe in you and want to follow you, and not you just have a title.

 

[Jonathan Boyar] (2:23 - 2:30)

And how do you do that? How do you get them to want to follow you and be the general and have them listen? How do you incentivize them?

 

[John Cats] (2:31 - 2:43)

The same thing I've always said, I never ask anybody to do something I would not do. And if they know that you would do it, then 99% of the people will follow.

 

[Jonathan Boyar] (2:43 - 3:08)

Something you did do earlier in your career, I mean, you're best known, probably it's the smallest part of your business, is Gristedes, the supermarket chain. It's in a business that's not exactly known for innovation. One of the things you did was decide to stay late.

 

You decided to open late. All the stores were closing at eight or nine o'clock. You decided to close it after midnight.

 

How do you come up with all these innovations? What do you do?

 

[John Cats] (3:08 - 3:58)

You have to say, look, I'm paying rent 24 hours a day. I'm paying for electricity 24 hours a day. Those refrigerators are running 24 hours a day.

 

Why are we collecting money only 12 hours or 14 hours? And you try to maximize money in versus money out. I think you just have to think things out.

 

It's just plain common sense. One of the original reasons I opened on Sundays is I gave out a bunch of checks on a Friday. The checks would clear the bank on a Monday.

 

So, I said, holy cow, I need that extra day sales. How come I'm closing on Sundays? I made sure we're open on Sundays and I got an extra day sales.

 

So I made sure the checks I gave out on Friday were good on Monday.

 

[Jonathan Boyar] (3:58 - 4:06)

It's a great idea. And just circling back to, you know, the refrigerators are on, you have fixed costs with your rent. So there's a profit motive there.

 

[John Cats] (4:06 - 4:24)

Not a profit motive, it comes to more like survival. Forget about profit, survival. First order of business is survival.

 

And that you're successful. That people want to come to you. They want to come to your store because they know that you're there, you're open, and you're gonna give them a good deal.

 

[Jonathan Boyar] (4:25 - 4:33)

And you're innovating to survive. Yes. So with someone, if you have a city-owned grocery store with no profit, these types of great innovations would never happen.

 

[John Cats] (4:34 - 4:50)

Well, if you only want to work eight to five, I mean, and you fail, you know whose fault it is? Your own. I mean, I don't know if you've ever read my book page, number 255, like number one rule.

 

If you're scared of losing, you can't win.

 

[Jonathan Boyar] (4:51 - 5:09)

That's great advice. Going back to your career, you were an unbelievable success early on. You kept buying more grocery stores and buying the land underneath those grocery stores because you thought it gave you a competitive advantage.

 

How did you get the idea of doing that?

 

[John Cats] (5:10 - 6:00)

Well, I'll tell you, I started early. When I first went into business, I was 21 years old, 22, 23 years old. By the time I was 24 years old, I had 10 stores already.

 

Back in those days, I was making a million dollars a year. A million dollars a year in 1973, 74 was a lot of money. And the fact was, if I bought the real estate, we had nothing else to do with the money.

 

We didn't have any banks. We weren't borrowing. Banks were mostly borrowing from our vendors.

 

The fact is that they wanted to help because I convinced my vendors, dairy suppliers, my frozen food suppliers, my ice cream suppliers, I convinced them that if I do more business, they're going to do more business. So we kept building and building and building, and they provided the money, and the money wasn't coming from the banks. It was coming from my vendors.

 

[Jonathan Boyar] (6:00 - 6:14)

Did your youth help you in that? Because taking on your real estate hat, in the 1970s, you know, Ford to New York dropped dead. If you were really analyzing this as someone who's done a million deals now, you think you would ever have done it?

 

[John Cats] (6:15 - 7:07)

The fact is that in 1977, the world was coming to an end in New York. A lot of the people don't realize it. I was doing business.

 

I didn't have to worry about buying the building and renting the store to somebody because my mission was, okay, if I'm going to buy that building, I'm going to put one of my stores in it, and I'll make sure the rent is paid. And I'll make sure if I get a mortgage, I'm going to make sure that the mortgage is paid. And I remember back then, in the back in the 1970s, Chemical Bank was my main bank.

 

Every time I would use the company money, I would need to buy a building, and then by December 31, I'd borrow the money from Chemical Bank to pay back the company. So I was using the real estate company and the supermarket company to work in parallel, and one helped the other.

 

[Jonathan Boyar] (7:07 - 7:12)

Was that the plan at the time, or were you just trying to grow and grow and grow?

 

[John Cats] (7:12 - 9:55)

We were growing, growing, and growing. Our suppliers that would supply this, our groceries, Sam Stein, who was Lou Stein's brother. Lou Stein was the chairman of Food Fair.

 

Sam Stein was an attorney in New York, Stein and Rosen, and then Wunstein eventually, and he owned Filigree Foods, which was a wholesale grocer. He would call Frank Sorretta and say, John wants to open up one more store. Open up his line of credit, give him enough credit to open up another store.

 

And then six months later, give him more money, you open up another store. Give him more and more money, you open up another store. So the suppliers supplied the money.

 

By doing business with me, they were getting the business, so they won both ways. I was opening up more stores, and then I would buy the real estate besides. It was the suppliers helping you grow, and then at the same time, you were buying the real estate.

 

So I ended up being the food business and the real estate business. I bought real estate back in 1977 when the world was coming to an end in New York. I was using the space for my own stores.

 

And then I remember one of my suppliers would take me out to lunch and say, John, you're gonna wake up one day and you're gonna be worth a lot of money. So I must've put about $5 million in 1977, 78 into the real estate business. And I did wake up about three years later, four years later, and that $5 million I invested was worth $100 million.

 

And that's how I made my first $100 million. Not bad. Not bad.

 

But New York real estate, don't forget. If you buy New York real estate for a million dollars in five years because it's Manhattan. I was in Manhattan.

 

How's it so low? I'll take Manhattan. You would buy it for a million dollars in three years to four years, that million dollars would be worth two million or three million.

 

If you take that million dollars and bought it in Boise, Idaho, Kansas City, in five years, maybe it's worth 1.1 million, 1.2 million. So there was a difference because in New York, if you had a property for sale, you had 30 buyers versus in Kansas City, how many buyers you had? Yeah, no, it's supply demand.

 

I'm not knocking Kansas City. I'm just using that as a typical middle America city. The demand always was high.

 

Now we got a problem in New York. The problem is you have a socialist system running New York. A lot of people worldwide are scared about putting money into New York because of the socialist system.

 

Would you put more money into New York now? Let's just say it this way. We are cautious.

 

What do they call Florida? The promised land.

 

[Jonathan Boyar] (9:57 - 10:08)

Everyone's fleeing New York. The narrative is horrible, but is it like the seventies where no one wanted to own New York real estate, but then again, the prices are much higher today. You don't want to arch the safety.

 

[John Cats] (10:09 - 10:22)

The regulations are much different, but no matter how bad in the last 50 years, I must've gone through four or five or six recessions in New York. But guess what? New York always makes a comeback.

 

[Jonathan Boyar] (10:23 - 10:25)

But you need the staying power to be able to do it.

 

[John Cats] (10:25 - 10:32)

You need the staying power. In other words, if you're buying something a million dollars, don't borrow 900,000.

 

[Jonathan Boyar] (10:32 - 10:41)

My very first big guess was Ken Langone. And he said his biggest competitive advantage was he didn't need the money. He had that staying power.

 

[John Cats] (10:41 - 11:01)

And that really is an advantage. I say the same thing now. But life is different today than it was 50 years ago.

 

Absolutely. Ken Langone was a great operator with Office Depot. And I remember his other partners in that deal.

 

We did a co-editorial with, oh, I forget his name. He did a great success with Office Depot.

 

[Jonathan Boyar] (11:02 - 11:16)

Yeah, he was an early investor in Eli Lilly. Well, not an early investor, but he made a fortune in Eli Lilly stock. He's a brilliant businessman and a great philanthropist.

 

I agree. So one of my favorite stories is you bought the predecessor to NetJets.

 

[John Cats] (11:16 - 13:39)

Can you tell that story? I started a company that became NetJets. And we started with one jet.

 

And if you look on top of my cabinet up there, what do I have? A lot of jets. A lot of jets.

 

And I flew them all at one time. My first jet that I bought, I bought it from Roy Disney. He was the brother of Walt.

 

The brother of Walt Disney. I remember saying to my pilot, because I bought it for fun. Then I said to my pilot, this is expensive to run these jets.

 

And I said, let's figure out how we're gonna make a living. And I got a great story for you. It's creating a way to make money.

 

Atlantic City opens up, 1977, I think it was. They would take limousines from Philadelphia, anywhere from 120 mile radius, two hour ride to Atlantic City. So they locked themselves in.

 

120 mile radius, 140 mile radius. I convinced, I forget which was the first hotel we did business with. I convinced them that if they take my jet, then they can expand their, instead of a 200 mile radius, a 150 mile radius, to a 500 mile radius.

 

We get the people there in an hour. We gave them a deal that at that time, with the price of jet fuel, et cetera, $5,000. Bring the customer in from 500 mile radius, go to Bader Field, I remember, the taxi to take them to the hotel, the casino.

 

They can have dinner, play, and it was $5,000. And the customer may lose $20,000. So the gross margin, the cost of goods sold was $5,000, but if the customer lost $20,000 or $30,000, that was their big, as they say.

 

We became very successful. By 1986, 87, 88, we had, I think, 48 corporate jets. And then we sold it to Santuli from Goldman Sachs, and they changed the name.

 

And my pilot, who I was with, Jim Jacobs, stayed with Santuli, and they opened up NetJets and came up with a new concept where everybody buys a piece of a jet. And they sold that idea to Buffett, and they took that. We started with one jet.

 

We sold it when we had 48. They took it up to 800 jets.

 

[Jonathan Boyar] (13:40 - 14:12)

That's an amazing story. I know how you decided to get into the jet business. I love flying.

 

You love flying, but you didn't know anything about, it's like the good fellows thing. I don't know anything about the restaurant business. You're a grocer.

 

How did you get the confidence? Before we continue, if you're enjoying this conversation, I'd encourage you to subscribe to our Substack at boyerresearch.substack.com. That's where we share some of our research, all of our interviews, and our thoughts on investing.

 

Now back to the conversation.

 

[John Cats] (14:13 - 15:58)

But I created the business stuff, and the same thing when I bought the oil company. In bankruptcy, right? It was in bankruptcy when we bought it.

 

We'd go to the creditor's meeting, and I remember it was in bankruptcy, and I'd go to the creditor's meeting, and they'd say, Mr. Katsimatidis, you're a grocer. What do you know about oil business? I said, well, Western oil, Mazzola oil, olive oil, crude oil, it's all oil.

 

They didn't think it was very funny. But I took over the company, so I became chairman. Every 60 days or every 30 days, you have to meet with the creditor's committee.

 

Go to my first creditor's committee meeting. Your company owed the creditors $100 million. I only paid, what did I pay, $7.5 million for the stock, subject to the debt of the company. I go to the creditor's committee meeting a month later or two months later, and they said, okay, give us the financial statement for last month. And we gave the whole team confidence. The market was turning around a little bit.

 

It always helps when the market turns around a little bit. We give them our financial statement. This is how, Mr. Casperdini's. What did you make last month? I said, well, here's our financials. Last month, we made $7.5 million. They fell off their chairs, and it wasn't anymore the fact of, what do you know about the oil business? It's how you're gonna pay us back $100 million. And they saw that if you can make $7.5 million in one month, we're gonna trust this guy. We shake hands, and we promise to pay them not 40 cents on a dollar, not 50 cents on a dollar. I promise to pay them 100 cents on the dollar plus post-petition interest and cash.

 

[Jonathan Boyar] (15:58 - 16:03)

But how did you do that? How did you take a failing company and turn it around so quickly? What did you do?

 

[John Cats] (16:04 - 17:29)

Leadership. Remember that word, leadership. When you say charge, you want everybody else to charge.

 

I could tell you the same story about when we bought Patriot Pride Supermarkets. From Pearlman. Ron Pearlman, we gave him the money to buy Redline.

 

There was one division of Patriot Pride Sun Supermarkets where they were doing $5 million a week in sales, the Sun Stores division, S-U-N. But it was costing them $6 million to do $5 million. So every week, you lose a million dollars.

 

After a while, at one point, you say, oh, I quit. Well, we changed that company around. We ended up making money in that company, too.

 

So it's leadership. And how do you find the right people to lead? The smarter people you find, the more important it is because you shouldn't be afraid of hardworking, smart people.

 

They have to be willing to work. A good joke I tell, it's probably in page 255 again. If I'm working 60 hours a week and I'm still not doing well, maybe you should work 70 hours a week.

 

Maybe you should work 80 hours a week. And you follow that philosophy. People who want to take off to go to the beach, you lose.

 

It's nice, but there's a price to pay for success sometimes. And you have to realize that if you're ready to pay the price of success.

 

[Jonathan Boyar] (17:29 - 17:33)

You had children, I guess, late in life, so you were able to work more.

 

[John Cats] (17:33 - 17:52)

That's what helped me with my success because it was only me and my wife and worse comes to worse. What happens? I'll sell apples on the street.

 

But once you have children, then you worry more about them than you worry about yourself. And you end up worrying more about them than anything else.

 

[Jonathan Boyar] (17:53 - 18:05)

No, absolutely. Just going back to one of your latest ventures is you bought WABC, the radio station where you have a popular radio show. What made you want to do it?

 

Was it kind of fun or was it a business investment?

 

[John Cats] (18:06 - 19:27)

I ran for mayor in 2013. Jerry Crowley, who ran WOR at that time and later on was running 970, one of the Salem stations, said to me, you ran for mayor, you didn't win, but people liked you. Maybe you should do a radio show.

 

So I started one hour a week. Then it became two hours. Then it became three hours.

 

And so on and so on and so on. I'll give you an example. Last Friday, the day before July 4th, I worked five hours in the morning doing a show for five hours in the morning and one hour in the afternoon.

 

So getting the truth out is very important to me. I have a gift that somebody gave me. My friend just gave it to me.

 

And this is a creative picture. It's Walter Cronkite passing the baton to me. Because 92% of the American people believe Walter Cronkite.

 

92% of the American people believe Barbara Walters. You know who believes who right now in media? 12% maybe.

 

So we've got the message across that WABC, there's only one way you can fire the WABC, not tell the truth. That we're out there getting the truth out and trying to be successful at the same time.

 

[Jonathan Boyar] (19:27 - 19:30)

Would you buy other radio stations? There are a lot for sale that are cheap.

 

[John Cats] (19:30 - 20:44)

We want to buy more. I spoke to the president. I believe that the European people don't have the truth and he wants to help us get into Europe.

 

We made WABC the number one station in America, talk radio station. We want to make WABC number one in Europe and get the truth out. We want you to be able to get the truth 24 hours a day, no matter where you are.

 

And you think radio is still the medium for that? I think that you go to sleep and you want to go half asleep, you listen to the radio and it goes off by itself after 90 minutes or 60 minutes. It's still a media.

 

People love it. And we're available right now in 178 countries and 50 states. Being able to hear New York news in 178 countries and know what the heck is going on and know that the fact is we're telling you the truth has become very important to people.

 

And do you enjoy doing it? I enjoy doing it. I enjoy creating it.

 

CBS went out of business. It closed down the syndicated news channel. We created worldwide news network.

 

Guess what? We're going to be taking over a lot of those stations that they gave up.

 

[Jonathan Boyar] (20:44 - 21:02)

You're obviously very busy. I just want to kind of end with a couple of quick things. And you know, if you were starting out again, what would you be doing if you were in your early twenties?

 

Is there businesses you would be looking at and you're saying this is a great place to be? Are they old economy companies or are they tech companies? Like where would you put your efforts?

 

[John Cats] (21:03 - 21:46)

There's two or three different types of businesses. There's some that we have great fun in. I love flying those jets.

 

When I quit flying because of problems in my left eye, I had 4,000 hours of jet time. And I love in those days where we had very little restrictions flying 300 feet over the beach at 300 miles an hour. I would love to go from New York to Florida, 1,000 feet over the beach and be able to see, remember the old word, a bird's eye view.

 

It was beautiful. So I enjoyed it. Getting out, getting downstairs and going behind the microphone and having millions of people listen to you and to be able to tell the truth to millions of people, I'm enjoying that.

 

[Jonathan Boyar] (21:46 - 21:54)

People are worried. I have young kids. What are they going to be doing because of AI?

 

All that kind of stuff. Where do you think the jobs are going to be? Or do we just not know yet?

 

[John Cats] (21:55 - 22:25)

I don't think we really know yet, but you always have communications with people. So how do you communicate to people is going to be the open question. I am scared of AI.

 

To the respect is, how do you know real news from fake news? If you look at half the Instagrams out there, how many are fake? 30%, 40%.

 

And how do you know what's real or not real? And someday, 50 years from now, who's going to determine what the real news was?

 

[Jonathan Boyar] (22:26 - 22:34)

Scary, isn't it? Terrifying. And exciting at the same time because productivity enhancements are amazing.

 

So it's the double-edged sword.

 

[John Cats] (22:35 - 22:39)

Yeah, but if you don't believe the consumer doesn't get the truth, what good is it?

 

[Jonathan Boyar] (22:39 - 22:49)

In your own company, you built this fantastic company, Red Apple Group. It's going to be run by your son. I'm assuming, I think he's president right now.

 

Are you ever a seller of assets?

 

[John Cats] (22:49 - 23:19)

We've never sold anything. And every time I tried to sell something, we ended up buying something. I am getting 77 years old.

 

At a certain point, you have to plan. The one thing that the supermarket business that we've been in, my kids want nothing to do with retail. So I guess over the next few years, we got to make a decision on putting it into the hands because the employees are good employees, but putting it into the right hands where the company survives well.

 

[Jonathan Boyar] (23:20 - 23:34)

And just a final question. I mean, you're very pro-New York. You're a born New Yorker.

 

What are the two or three things you would do right now to save New York City, if you could implement them, aside getting rid of a socialist mayor?

 

[John Cats] (23:35 - 24:37)

Well, I was just on Fox News and they asked me about the mayor. And I said, look, the mayor wants to open up five locations and take him three, four years. I said, he's got $70 million to spend.

 

Give me 70 million. Instead of five locations, I'll open up 20 locations and I'll open it up in six months. We have the ability to do those kinds of things.

 

Mayor said that eggs are very important. Bread is very important. Milk is very important.

 

If it's that important, bread, butter and eggs, milk is important. If I sold 10,000 dozen of eggs, I can reduce the price a dollar a dozen and give me credit against my real estate taxes for a dollar a dozen. That way, every store in New York reduces their price instead of five stores.

 

What are you gonna do with five stores reducing their price? It doesn't make any sense. And he says he's gonna spend $70 million and open up the stores over the next two years, three years, four years.

 

I'll open them up in six months.

 

[Jonathan Boyar] (24:38 - 24:58)

Why can you do it in six months and it's gonna take him years? What's the difference? Leadership.

 

If he asked you to do it, would you do it? Yes. Hopefully you will.

 

It's up to you. I really wanna thank you for your time. This has been fantastic talking about the grocery business, your rise.

 

I love the airline business story. I just wanna thank you.

 

[John Cats] (24:59 - 25:44)

Well, I look forward to meeting you sometime. I'll show you when I had my airline office in the Helmsley building, I would go upstairs to the top of the Pan Am building, take my helicopter to my office at JFK Airport 20 minutes later. By the way, you can get WABC worldwide.

 

You go to your iPhone and you put down 77WABC and you get the app. Or you put it on your computer, worldwidewabcradio.com. If there's one particular country you can't get in, like my friend, John McLaughlin was in Hungary.

 

He couldn't get WABC. I said, you're the poster. You represent the prime minister.

 

Welcome to his office. Tell him to make sure it's turned it on. He turned it on.

 

[Jonathan Boyar] (25:45 - 27:43)

Amazing. Thank you so much. Thank you.

 

That was John Catsimatidis. Here's what stays with me. He didn't buy those Manhattan buildings in the 1970s because he thought he was making a brilliant call on New York real estate.

 

Though it certainly turned out to be one of the great ones. He bought them because he needed somewhere to put his supermarkets. And this was 1977, when in his words, the world was coming to an end in New York.

 

One of his suppliers saw his potential before he did, telling him over lunch, John, you're gonna wake up one day and you're gonna be worth a lot of money. Three or four years later, he woke up. The $5 million was worth 100 million.

 

He owned good assets, ran them well, and simply never stopped. More than half a century and counting, still on the radio and working nearly every day. If you enjoyed this conversation, the best way to support the show is to leave a rating or review wherever you listen.

 

Thanks for listening. I'm Jonathan Boyar, and this has been The World According to Boyar. Until next time.

 

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