The Real Deal New York

New York City real estate’s biggest blunders of 2013

From brokers getting busy at the client’s pad to the resounding thumbs down for StreetEasy’s revamp, we looked at the industry’s worst calls this year

January 02, 2014 02:15PM
By Guelda Voien

TRD’s picks for biggest blunders of 2013

TRD’s picks for biggest blunders of 2013

year_in_review It’s been a great year for real estate in many respects, with residential and retail rents reaching new highs and office towers trading for billions. But what about the mistakes? The slip-ups, faux pas, scandals and the otherwise unfortunate, tawdry, or just plain stupid antics that caught the public’s eye? Mercifully, The Real Deal was there to record those moments this past year. Read on for our annual list of the biggest blunders of 2013.

 

Sandy aid slow to arrive

Hurricane Sandy's wrath

Hurricane Sandy’s wrath

In October, a year after Hurricane Sandy ripped through the region, only one person, a Staten Island resident, had actually received aid from the $648 million package the federal government promised to help with repairs in New York City, as the Wall Street Journal reported. The money was part of a $60 billion aid package that Congress approved last December to provide housing assistance and bolster the five boroughs’ defenses against future storms. (Many residents have already received funds from the state and the Federal Emergency Management Agency, to be clear.) And, as TRD reported in April, Staten Island has taken the brunt of the hit post-Sandy. Residents are left in limbo while local legislators ask them again and again to simply wait. “It’s almost sinful, five months later, to ask you guys to have patience,” City Council member James Oddo admitted to residents earlier this year.

 

Jobs for New York attack ads

An ad paid for by Jobs for New York

An ad paid for by Jobs for New York

The Jobs for New York political action committee, backed by the powerful Real Estate Board of New York, spent hundreds of thousands of dollars to influence the outcome of the September City Council primaries, even backing candidates who wanted nothing to do with them. But some said they went too far, waging campaigns that accused candidates of outlandish – and unlikely – faults, such as supporting a drinking age of 17 and being a backcountry Texan unfamiliar with New York City’s needs. The PAC and its spokesperson found themselves defendants in a lawsuit as a result. And the mainstream media caught wind of REBNY’s influence, buoying the backlash. City Council members who got support from Jobs for New York and won, including Margaret Chin and Carlos Menchaca, decried the group as “beyond negative,” and said they’d made voters “sick to their stomachs.” However, many of Jobs’ picks were victorious in their races, including some who said they wished they hadn’t been supported by the PAC.

 

StreetEasy redesign disappoints

Brokers worry StreetEasy has become "Zillowfied"

Brokers worry StreetEasy has become “Zillowfied”

When the listings website widely considered to be the industry standard overhauled its look in September, there were bound to be detractors. “There are a lot of issues with the new interface that they need to work out,” Donna Olshan, president of residential brokerage Olshan Realty, told TRD in October. “My brokers are complaining.” But nearly three months later, consumers’ and brokers’ complaints still echo. When the changes first took hold, brokers like Eric Benaim, founder of brokerage Modern Spaces, confirmed that the word on the street was that StreetEasy got “Zillowfied,” meaning made to look more like the listing website of its new parent company, Zillow. At the time StreetEasy adamantly denied this, saying the redesign had been in the works for months and promising to listen to users’ input about what did not work in the new interface. Alas, as executives have departed from the website left and right, some think that the redesign was merely the first sign of StreetEasy passing the torch as the most valuable tool for tracking residential real estate in New York City. “Anytime we roll out anything, there is always backlash,” StreetEasy’s then-head of research, Sofia Song, assured TRD in October. Song left the company this month.

 

Brokers get busy – at the client’s house
Two Coldwell Banker brokers in New Jersey allegedly used a client’s home for sexual trysts; now, not only are the homeowners suing them, but news of the lawsuit went viral late last month. Richard and Sandra Weiner claim that agents Robert Lindsay and Jeannemarie Phelan used their Wayne, N.J., home for at least ten clandestine hookups, in a suit filed in Passaic County court in December. “The security cameras … show that … Lindsay and Phelan entered the master bedroom, undressed and proceeded to have sex on the Weiners’ bed,” the lawsuit reportedly reads. The Weiners are seeking compensation on a number of charges, including invasion of privacy, emotional distress and breach of contract. Meanwhile, Coldwell Banker fired the brokers.

 

Robert Khodadadian’s alleged film debut

Robert Khodadadian

Robert Khodadadian

One TRD reporter ended up with a particularly rough job in August, when he uncovered the allegation that former Eastern Consolidated broker Robert Khodadadian sent a sexually explicit video to a brokerage intern. The firm sued him for allegedly breaching a sexual harassment provision of his independent contractor agreement and fired him in April. And yes, folks, our reporter viewed the video in question to write the story (though since no face appears, the identity of the, uh, star is still disputed). Despite the prurient allegations, Khodadadian has re-launched his old firm, Great Neck, N.Y.-based Skyline Properties, he told TRD in June. Unfortunately, there is still some bad blood between him and Eastern – a revised lawsuit filed in October revealed they are still in dispute over commissions on about $80 million worth of transactions, as TRD reported.

 

Sweetheart tax break subpoenas

Extell's Gary Barnett and One57

Extell’s Gary Barnett and One57

In June we learned that five large real estate developers –Silverstein Properties, Extell Development, Thor Equities, Alexico Group and the Witkoff Group – received 421a tax abatements to build in underdeveloped neighborhoods, despite their projects being located in the Financial District, Midtown and other coveted areas. The plot thickened as it came out that the state legislature had pushed through a special law allowing the breaks – and Extell had donated thousands of dollars to Governor Andrew Cuomo’s campaign just the day before. Outrage ensued. By July, a state anti-corruption task force called the Moreland Commission had subpoenaed correspondence between some of the developers and their political allies in the capitol. The Moreland’s damning December report called Albany “a pay-to-play political culture driven by large checks.” Moreland also recommended thorough campaign finance reform.

 

“Poor door” deemed poor choice
Extell’s Gary Barnett got slammed again by the August revelation that its Upper West Side project, at 40 Riverside Boulevard, included a separate entrance for the lower-income residents, which was quickly dubbed the “poor door,” and resulted in complaints of classism from local advocates and then-City Council Speaker Christine Quinn. Just a week after the kerfuffle began, fellow City Council member Robert Jackson unveiled a bill requiring that developers who receive any form of affordable housing subsidy to build luxury homes provide the same services for all tenants.

 

RXR misses out on Worldwide Plaza

Scott Rechler of RXR

Scott Rechler of RXR

Scott Rechler’s RXR Realty was poised to purchase the 1.8 million-square-foot Hell’s Kitchen office building Worldwide Plaza before recent Manhattan market entrant American Realty Capital swooped in to snap up the deal at the last minute. American Realty bought a 48.9 percent interest in the building in November, with an option to purchase the whole shebang later for $1.45 billion, reports show. RXR didn’t take the slight lying down, however, immediately launching a lawsuit seeking to block the sale of the 59-story asset. RXR had been working with American Realty as a joint investor, until American Realty allegedly began talking directly to George Comfort, the founder of George Comfort & Sons, one of the building’s owners. At the end of October, a judge ruled RXR could not stop the sale. Comfort testified that RXR wasn’t ready to close the deal, but American Realty was, Law360 reported.

 

Vornado’s J.C. Penney problem
Three years ago, mega-landlord Vornado Realty Trust bought nearly 10 percent of discount retailer J.C. Penney. But the company veered into difficulties, reporting staggering losses in late 2012, even with Vornado brass Steven Roth on its board. This September, Vornado opted to cut its losses and sold the rest of its interest, having already ditched a portion of their stake earlier that year, and Roth resigned from the board. Vornado reportedly nabbed the shares at around $20 per, but sold them at $13 per share. Related to the haircut it took on J.C. Penney, the REIT had a very rough third quarter, with profits dropping 57 percent to $104.3 million from $241.3 million, as TRD reported. Some also speculated that the debacle was the root cause of the departure of former CEO Michael Fascitelli, last April.

 

Christine Quinn’s mayoral meltdown

Christine Quinn

Christine Quinn

A year ago, City Council Speaker Christine Quinn was almost a shoo-in to succeed Mayor Michael Bloomberg – who considered her something of a protégé — in 2014. However, despite the business community favoring Quinn — and real estate heavy hitters, including execs at the Related Companies, Silverstein Properties and SL Green, donating to her well-funded campaign — she managed to sink her bid and finish third in the Democratic primary, with a mere 15 percent of the vote.

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