By far the most widely known real estate dispute of 2010, a planned mosque near the World Trade Center site, incited a nationwide uproar this summer.
Sharif El-Gamal, a 37-year-old real estate investor, purchased 45 Park Place — a site two blocks from Ground Zero — in July 2009 with plans to build a 15-story community center including a swimming pool, a 500-seat auditorium and a mosque.
After the first public presentation of the project at a community board meeting in May, opponents attacked the idea of locating a mosque so close to the site of the 9/11 terrorist attacks. The uproar quickly spread, with the likes of President Barack Obama (who supports it) and current GOP torchbearer Sarah Palin (who opposes it) weighing in.
Much of the debate is rhetorical, since the New York City Landmarks Preservation Commission denied the building landmark status last month, clearing the way for the developer to move forward with the as-of-right project. Also, El-Gamal has a strong supporter in Mayor Bloomberg. Bloomberg and other supporters of the center say the issue is being exploited to tap into voters’ ugliest anti-Muslim stereotypes as the midterm elections approach. (note: clarification)
Politics aside, real estate experts are expressing skepticism about the project’s feasibility, given El-Gamal’s relative youth and the fact that he has yet to secure financing. The controversy will only make fund-raising for the $100 million project more difficult, they say.
“The difficulties of building any edifice in Manhattan in 2010 are significant,” said David Schechtman, a senior director at Eastern Consolidated. “One that is surrounded with political turmoil is going to be all the more challenging.”
For his part, El-Gamal has been steadfast in his commitment to the project, emphasizing the need for an additional mosque and community center in Lower Manhattan. He recently told the New York Times: “We are very confident that we will be able to arrange the right mix of borrowing and private investment.”
2. Anthony and Peter Malkin vs. Vornado Realty Trust
Anthony and Peter Malkin, the owners of the Empire State Building, went head-to-head last month with Steven Roth’s Vornado Realty Trust over dominance of the New York City skyline.
The rivals were ensnared in a dispute over Vornado’s proposal to build a 1,216-foot-tall Office Building On Seventh Avenue And 33rd Street, two blocks away from the 1,250-foot Empire State Building.
The Malkins lobbied hard for the city to reject the proposal, claiming the 67-story tower — known as 15 Penn Plaza — would obscure views of the Empire State Building. Vornado, meanwhile, pledged to provide $100 million in transit improvements at Penn Station, and said that the project would provide critically needed office space and create thousands of jobs.
A war of words erupted. The Malkins proposed a 17-block zone surrounding the Empire State Building in which no competing towers could be built, commissioned a public opinion poll, and took out a full-page New York Times ad. But their efforts fell on deaf ears when the City Council green-lighted the project in a 47-to-1 vote.
The Malkins were “protecting their investment” by trying to maintain the dominance of the Empire State Building on the Manhattan skyline, said Dan Fasulo, managing director of Real Capital Analytics.
“The postcards of New York are going to look different,” he said. “Any one of us in the same shoes would have done the same.”
An additional twist heaped widespread attention on the dispute. Shortly before beginning the push against Vornado, the Malkins rejected requests from the City Council as well as the Catholic League for the Empire State Building to be lit blue and white in honor of the 100th birthday of Mother Teresa, an icon of Catholic charity. The move sparked protests and generated worldwide publicity.
City Council Member Peter Vallone Jr. told The Real Deal the dispute over 15 Penn Plaza might have gone largely unnoticed were it not for the attention surrounding the Mother Teresa decision. While he voted for 15 Penn Plaza on the merits, he added: “In my mind [it] will always be Mother Teresa Tower.”
3. The Corcoran Group vs. Prudential Douglas Elliman
No discussion of real estate rivalries is complete without mention of Corcoran and Elliman. The city’s two largest residential real estate firms are “the Coke and Pepsi of the sales companies,” said one real estate broker, adding that agents are “constantly going back and forth” between the firms.
The two brokerages keep tabs on each other’s growth, said one former employee, who added: “They’re always trying to one-up each other.”
Since the downturn, the rivalry has taken on a new twist as frustrated developers tried to goose sales figures by switching sales teams. Developers at three high-profile projects — Manhattan House, Miraval Living and Georgica — traded Elliman’s Development Marketing Group for Corcoran’s new development division, Corcoran Sunshine. Meanwhile, Elliman took over for Corcoran Sunshine at Arris Lofts in Long Island City.
When The Real Deal ranked the city’s largest firms in May, Corcoran still trailed Elliman with 1,047 agents, but it was narrowing the gap by adding agents. Elliman, in turn, lost agents, dropping from 1,513 to 1,462.
In addition, even with fewer agents, Corcoran bested Elliman in both the total value of its Manhattan listings and the median price of its listings.
Elliman, meanwhile, topped Corcoran in the total number of Manhattan listings.
But as the recession has necessitated cost-cutting measures at the large firms, both have lost key people to smaller companies. Andrew Gerringer, head of Elliman’s Development Marketing Group, left the company for the Marketing Directors in April. Meanwhile, Corcoran agent Laura Denise Milkowski and Elliman partners Cris Herrera and Maura Jarach joined Brown Harris Stevens. In the Hamptons, top Corcoran agent Diane Saatchi left to join the boutique firm Saunders & Associates.
4. Harry Macklowe vs. SL Green
The 350,000-square-foot office tower 510 Madison Avenue became the subject of a bitter legal dispute between rivals Harry Macklowe and SL Green this spring.
Macklowe built the speculative glass tower in 2008, but the property was damaged by fire, and anchor tenant Jay Goldman & Sons, an investment firm, began battling him to get out of its lease.
After overleveraging during the boom, Macklowe famously lost most of his Manhattan portfolio, including the crown jewel, the General Motors Building, in 2008. So he fought tooth and nail to hang on to 510 Madison.
In December 2009, with Macklowe in a vulnerable state, SL Green acquired the senior mortgage on 510 Madison for $170 million, and the senior mezzanine loan for $15 million, then attempted to foreclose. Macklowe retaliated by suing SL Green and accusing it of reneging on prior agreements.
“Defendants arranged for this purchase for the sole predatory purpose of increasing their leverage in refusing to honor the explicit extension set forth in the loan documents,” the lawsuit said.
Macklowe ultimately won extra time to work out a deal.
While SL Green officials told The Real Deal in June that the firm forecloses only as a last resort, some experts said the company was pursuing a “loan-to-own” strategy to snap up the property when it was not actually for sale.
“SL Green is an owner and operator of premier office buildings,” Fasulo said. “Whether you call it predatory or something else, they wanted the building.”
After months of hostility, Boston Properties, headed by real estate mogul, publishing magnate and Macklowe pal Mort Zuckerman, stepped in and bought the tower for about $280 million. As part of the deal, Macklowe will serve as project consultant, and may receive additional compensation based on the performance of the property.
It’s unclear whether SL Green will attempt to challenge the sale, but the firm reportedly stands to make $50 million on discounted loans it purchased once the deal closes.
Plus, “Who wants to go to war with Mort Zuckerman?” Fasulo asked. “He owns newspapers.”
As for the relationship between Macklowe and SL Green, he said, “They won’t be joint-venturing anytime soon.”
5. Massey Knakal vs. Eastern Consolidated
Everyone knows that Cushman & Wakefield and CBRE are fierce rivals on the global real estate stage, but there’s another rivalry brewing in the under-$100 million building sales sector.
That market is currently one of the most competitive segments of the real estate industry; as the market for building sales picks up, most of the action is taking place in the lower- and mid-price-point arena (see “Building-sale bounce”). Within this universe, investment sales firms Massey Knakal and Eastern Consolidated are constantly going head-to-head, pitching against each other and competing for business in New York City, insiders said.
“There is a lot of overlap between what we cover and what Eastern covers,” said Bob Knakal, cofounder of Massey Knakal.
Over the last decade, the two have been close competitors in the property sales arena, though Massey Knakal tends to do a higher volume of smaller deals. Between 2001 and 2009, Massey Knakal completed 2,014 transactions for $9.42 billion in sales, according to the CoStar Group, while Eastern did 481 transactions for $8.17 billion in sales.
However, in 2009 Massey Knakal widened the gap, doing 151 transactions for $626 million in sales, while Eastern did only 15 transactions for $137 million.
But Eastern is making up for lost time, said Peter Takiff, the firm’s chief financial officer. He said the company’s transaction volume so far in 2010 is double last year’s total, due in part to several development and distressed debt deals.
“We’re doing a number of things in the distressed debt area and we’ve had a number of deals that have closed in that area,” he said. “We’ve also had a number of development deals, whereas last year nobody was doing any development deals.”
Schechtman, who is senior director of Eastern’s turnaround and distressed group, said: “Never in my career or in Eastern’s history have we been more confident about the increase in market share.”
(note: correction appended)
Brokers from both Massey Knakal and Eastern Consolidated said the relationship is one of mutual respect.
“Peter and Daun and all the folks over there are great people,” said Knakal, referring to husband-and-wife team Peter Hauspurg and Daun Paris, who head up Eastern. He added: “If I lose an opportunity to list a property, I’m always happy to see that they would get it.”
Still, rivalries in the field are often intense. “I’ve been training my whole career for this market,” Schechtman said. Whether it’s Massey Knakal or any other firm, he said, “bring it on.”
6. TF Cornerstone vs. Rockrose
In 2009, brothers Henry, Thomas and Frederick Elghanayan split their flourishing family business into two companies: Rockrose, with Henry at the helm, and TF Cornerstone, headed by the two younger brothers.
Compared to other real estate family disputes, the Elghanayans’ split appeared — in public, at least — comparatively amiable, with the brothers reportedly using a coin toss to divvy up the company’s portfolio of 8,000 apartments, development sites and office buildings.
But while the breakup may not have been particularly bitter, the two companies are natural competitors, with residential rental properties in the same markets and similar expertise.
“Our relationship with TF Cornerstone is solid,” said Kathleen Scott, Rockrose’s vice president of leasing. “We definitely consider them competition, but no more so than other developers that have buildings in the same areas that we do.”
The two firms are both well capitalized and “looking actively at development deals,” one source said, noting that the two companies are being offered the same types of investments. “They finally got through the separation and they’re starting to look to make offers and get more aggressive.”
So far, the two camps appear to be neck and neck. Both have had to offer concessions at their rental properties: In June, Rockrose’s 576-unit South Street Seaport rental building, 200 Water Street, finished leasing after offering tenants two months of free rent. Meanwhile, TF Cornerstone has reduced prices at its new rental, 505 West 37th Street, though the company says it is now around 80 percent leased.
A liability for TF Cornerstone may be the View condominium in Long Island City, where prices have fallen in a tough climate for new condos. Rockrose, by contrast, isn’t currently selling any new condos, though it has development sites in Long Island City.
“TF Cornerstone is continuously investigating opportunities in all areas and markets. We consider all companies seeking out those same opportunities to be healthy competition and look forward to providing superior and distinct properties,” said TF Cornerstone’s chairman, Thomas Elghanayan, in a statement.
7. The Edge vs. Northside Piers
This fall, the most talked-about new development condo projects will not exactly be new. Few residential condos are now being built, and large projects that hit the market during the last two years — think Apthorp and Sheffield — still have many units to sell.
“The trend for this fall will be to see what old projects will come back with a new look and new pricing,” said Shaun Osher, the founder and CEO of the residential brokerage Core.
Perhaps the fiercest competition among these old-is-new developments is the match-up between Northside Piers and the Edge in Williamsburg. Both are large, luxury condo towers right next to each other on the waterfront. And both are revving up for a strong sales push this fall. “Anyone that comes to Williamsburg probably looks at both of our projects,” said Scott Avram, senior project manager at Toll Brothers City Living, developer of Northside Piers.
Initially, sales at the less expensive, 450-unit Northside Piers outpaced those at the Edge, which has 565 apartments.
Avram said Tower 1 at Northside Piers has only about five units left, while 270-unit Tower 2 has sold just under 40 percent of its units.
Meanwhile, Edge developer Jeff Levine of Douglaston Development said the complex has sold about one-third of its total apartments.
However, the price gap between the two projects narrowed this summer with a price cut at the Edge that brought some units down to approximately $700 per square foot, Levine said. (Prices at Northside Piers now start at $400,990 for a 600-square-foot studio, or around $660 per square foot, according to Streeteasy.com.)
Levine said now that amenities at the Edge — including a spa, basketball court and golf simulator — have been completed, “we’ll be stepping up our marketing.”
8. Gary Barnett vs. Donald Trump
Even if they are not sworn rivals, Gary Barnett’s Extell Development Company has been a thorn in Donald Trump’s side since 2005. That was when Extell and the Carlyle Group bought the 77-acre parcel overlooking the Hudson River that the Donald had owned for 30 years.
Trump’s grand plans to develop the area were largely stymied by neighborhood opposition. And at the time of the Extell purchase, Trump owned only a 30 percent interest in the property, while his Hong Kong-based partners, the Cheng Group, owned a controlling 70 percent.
The Donald mounted a series of legal challenges against the sale. The last came in 2008, when he accused Extell and Carlyle of orchestrating an unlawful purchase of the site. “I can understand Trump being … jealous,” said one source. “He started that whole West Side project and then lost it. [The Cheng Group] decided to sell the remaining chunks to Extell. Trump didn’t want that.”
To rub salt in the wound, Barnett’s forthcoming Carnegie 57, located across from Carnegie Hall on 57th Street, is now slated to surpass Trump World Tower as the tallest residential building in New York City.
Barnett called Trump’s lawsuits against him “a waste of everybody’s money.”
But Barnett said he doesn’t consider the two men rivals and said they have “a good relationship.”
“We get along well,” Barnett said. “I wish he wouldn’t sue people at the drop of a hat, but that’s Donald — what are you going to do? He likes to sue people.”
As far as Carnegie 57, Barnett said: “Nobody’s trying to build taller than the other guy. You build what makes sense for the location. I think Donald would agree with that.”
Trump, too, said he and Barnett have a “nice relationship” and he doesn’t harbor negative feelings toward him regarding Riverside South.
“I don’t think of him as a rival, but I think of him as a talented guy who’s doing a good job in New York,” Trump told The Real Deal.
Trump’s anger surrounding the fate of the Riverside South parcel appears to be alive and well, but he reserves his invective for Columbia University President Lee Bollinger. Columbia had been close to buying land on the Hudson from Trump for an expansion of its campus, but that deal fell through when Bollinger took over.
Bollinger is “terrible,” Trump said. “He could have made such a great deal for Columbia and he blew it.”
The land was later sold to Extell instead.
9. One World Trade Center vs. 11 Times Square
SJP Properties’ new office building in Midtown, 11 Times Square, is currently “the only significant block of brand-new Class A office space available,” according to Real Capital Analytics’ Fasulo. Law firm Proskauer Rose recently signed a 406,000-square-foot lease there, but the 1 million-square-foot building has some 500,000 square feet of space still up for grabs.
While leasing a new building in the current market has its challenges, it’s also “a pretty enviable position to be in,” to have no other identical product currently on the market, Fasulo said.
But One World Trade Center — the centerpiece tower under construction at Ground Zero — is starting to rain on 11 Times Square’s parade. When it’s completed in 2013, One World Trade Center will contain about 2.6 million square feet of office space. Publishing giant Condé Nast recently signed a letter of intent to occupy 1 million square feet there.
Meanwhile, the two buildings, the biggest new development office towers in Manhattan right now, are competing for tenants like Bank of America, which is reportedly looking for 1 million feet of space, UBS, and Bank of New York Mellon. “All these major corporations really desire 21st-century office space,” Fasulo said. He noted that 11 Times Square is now move-in-ready, which may give it an edge over One World Trade Center for tenants ready to move now.
An advantage for One World Trade Center is that while both towers are asking about $70 per foot, the downtown skyscraper can get net effective rents down to the high $50s because of government incentives, sources explained.
Another competitor for One World Trade Center is Vornado’s recently approved 15 Penn Plaza. Vornado has said it will not begin construction on the building until it finds an anchor tenant.
10. CW Capital vs. Pershing Square Capital/Winthrop Realty
The fate of 11,200-apartment mega-complex Stuyvesant Town and Peter Cooper Village has been in question ever since its most recent owner, a partnership led by Tishman Speyer, defaulted on its mortgages in January.
Then last month, Bill Ackman of Pershing Square Capital and Boston-based Winthrop Realty made an aggressive play to gain control of the complex, which has become something of a poster child for the hysteria of the mid-2000s real estate boom.
Ackman and his partners paid $45 million — a mere 15 cents on the dollar — for a $300 million mezzanine loan, then filed to foreclose on the property in a bid to take control of Stuy Town. If they succeed, they intend to assume the complex’s nearly $4.5 billion in debts and begin a voluntary, non-eviction co-op conversion on the rental property to generate cash to pay off its loans.
However, they’re up against a hard-nosed adversary. The property’s special servicer, CW Capital, had been planning a foreclosure of its own until Ackman stepped in. Taking issue with Ackman’s plan, CW Capital took legal action to stop the auction.
The closely watched battle will continue to play out this fall, with the two parties due in court on Sept. 2.
Despite the problems at Stuy Town, the high-profile complex is still sought after by investors, as Ackman’s risky play shows, experts explained. “There is a lot riding on this,” one broker said. “It’s enormous. It seems like an all-or-nothing kind of bet.”
Eastern Consolidated’s Anton said the dispute is a classic case of “tranche warfare,” where investors in different slices of the capital stack compete for control of a property. In today’s market, such rivalries are becoming increasingly common, he said. “Tranche warfare is alive and well,” he said.