How have New York’s wealthiest property moguls weathered the downturn?
Billionaires have had to deal with the weakened market, too. Of course, their definition of economic pain might be a bit different, as is clear from the annual Forbes ranking of the richest Americans.
Several wealthy New York real estate moguls once again make the list of the 400 richest Americans.
This month, The Real Deal looked at each of those moguls to further examine their real estate holdings and their investment strategies over the last few years, particularly during the downturn. Here is a breakdown, with insight provided by Dan Fasulo, managing director and head of research at Real Capital Analytics.
(Net worth: $4.3 billion)
Background: Richard was appointed president of the LeFrak Organization — a family-run company since it was founded in 1901 — in 1975. In a 2007 New York Times profile he was described as a “genial, straightforward and even-keeled tycoon.” The LeFrak Organization has left an indelible mark on the New York metro region, having built hundreds of buildings with tens of thousands of apartments. And, according to Forbes, Richard has a higher net worth than any other real estate mogul in the city.
Strategy: LeFrak has always been a conservative investor, and with such expansive and reliable holdings, he seems to have more or less sat out the downturn. “They are not building anything on spec as far as office space goes, and they are only doing built-to-suits. They were building a lot of rentals and condos during the height but they put on the brakes immediately,” Fasulo said. While the LeFrak Organization has stayed in the New York-New Jersey area, it did buy a medical building in Beverly Hills in 2008 (paying a premium $866 a square foot) and it has a luxury condo development on Hollywood Boulevard.
Signature properties: 40 West 57th Street, Lefrak City in Queens, and the massive Newport development in Jersey City.
Portfolio: 22 million square feet of residential and 13 million square feet of commercial space.
Minus: They may look back and regret being too conservative, according to market experts.
Plus: Sold Queens and Brooklyn portfolio for $250 million before the crash.
(Net worth: $3.5 billion)
Background: The former head of a pet supplies company, Stern made his first foray into real estate in the late 1960s, when he bought a huge portion of the then-undeveloped Meadowlands for $10 million. The investment paid off more than twentyfold. From there he made a foray into media, purchasing the Village Voice in 1986 and a few other alternative weeklies before selling them all in 2000 and focusing on real estate.
Strategy: One of the more under-the-radar billionaires in New York City, Stern and the Hartz Group did little to up their profile during the downturn. They still have some land available for development at their Meadowlands property, but all in all they’ve remained pretty quiet. “When you are this rich and own so much property at such a low cost basis, you don’t really have to take risk. There is no reason,” said Fasulo.
Signature properties: 667 Madison, Soho Grand and Tribeca Grand.
Portfolio: More than 38 million square feet of office, industrial, hotel and retail properties nationwide.
Minus: May regret not making more moves over the past two years.
Plus: They’ve maintained strong leasing at their existing New Jersey properties.
(Net worth: $3.1 billion)
Background: Detroit-born but Miami-raised, Ross is a former tax attorney who has become one of New York’s most prolific and high-profile developers. He founded his company in 1972, working in affordable housing. But over the last 15 years, he’s built more than 20 residential towers in the city, ranging from the Brompton on the Upper East Side to Superior Ink on the West Side Highway. Real estate development remains his bread and butter, but he’s diversified his holdings, including purchasing the Miami Dolphins last year for $1 billion.
Strategy: Related has been aggressive during the downturn and continues to look for deals. With two top executives at the company, Ross created SJB Bank to buy up failed banks. Meanwhile, the company purchased the mortgage on the 26-story 1775 Broadway with an eye on tearing it down and redeveloping it. Related filed to foreclose on the property, prompting a battle with owner Joseph Moinian, who defaulted on the loan. But the move may have backfired: Moinian hit Related and its partner Deutsche Bank with a lawsuit late last month, alleging that they engaged in a predatory scheme to take over the building. Related denies the allegation.
Signature property: Time Warner Center.
Portfolio: Tens of millions of square feet nationwide.
Minus: Lost out to the Durst Organization in the hotly contested bidding war for a stake in 1 World Trade Center.
Plus: In 2008, Related paid a stunning $1 billion for the Hudson Yards, the 26-acre swath of undeveloped land on the Far West Side, with plans to build 12 million square feet of office towers, residential buildings and parks. Development plans are on hold, but last month Related president Jeff Blau said the company will consider construction within 18 to 24 months and that it’s receiving corporate interest for commercial space. Meanwhile, long-percolating plans to redevelop Penn Station — a co-venture with Vornado — appear to be moving forward.
(Net worth: $2.4 billion)
Background: A two-time Emmy nominee, Donald Trump needs no introduction. Having followed in the footsteps of his father, Donald has turned what was once a real estate development company into an internationally recognized brand.
Strategy: While he nearly went into bankruptcy in a previous recession, he seems to have survived this one relatively unscathed. “I think I became much more conservative,” he said in a recent interview with The Real Deal when asked about the recession he endured in the early 1990s. “We’re sitting on a lot of cash and I’m looking to buy, whereas in the early ’90s I can honestly say it was the exact opposite. So I either learned something or was luckier.”
Signature properties: Trump Tower, 40 Wall Street and Trump International Hotel and Tower, among others.
Portfolio: Several million square feet (hard to gauge because he holds partial interest in many properties).
Minus: The Trump Soho condo-hotel opened this spring following earlier community backlash, and so far has endured a tough sales market. In August, a group of 15 buyers sued Trump along with the other developers at the project and the sales team, alleging the Trump Soho team misled them by reporting inflated sales figures.
Plus: Trump has made several golf course acquisitions — including one in Aberdeen, Scotland, where he is planning a $2 billion development project — expanding an already diversified portfolio.
(Net worth: $2 billion)
Background: As the owner of the Daily News and U.S. News and World Report, Zuckerman comfortably wears several professional hats. Canadian born, Zuckerman is active in philanthropy and politics. He founded Boston Properties in 1972 after working for a venerable Boston-based real estate development firm, Cabot, Cabot & Forbes.
Strategy: When it comes to real estate, Boston Properties has been among the most aggressive. “We are talking about billions of dollars of purchases in the downturn,” said Fasulo, who called the $2.9 billion GM Building acquisition in 2008 a “no-brainer.”
Signature properties: The GM Building and Boston’s John Hancock Tower.
Portfolio: 50 million square feet.
Minus: Overextending. In the fourth quarter of 2008 the company reported $188 million in write-downs related to the three Midtown skyscrapers it purchased from Harry Macklowe for $1.1 billion. At one point in 2008, Boston Properties’ share price fell 49 percent year-over-year, Crain’s reported. But it has since rebounded.
Plus: Acquiring the GM Building, which meant beating out a bunch of bidders in a down-to-the-wire bidding war. Also, last month, the company signed an agreement to buy the iconic 62-story John Hancock Tower in Boston for $930 million, or around $550 a square foot.
(Net worth: $1.8 billion)
Background: A current titan on the New York City philanthropy scene, Speyer married into the Tishman family and, with his father-in-law, Robert Tishman, established Tishman Speyer in 1978. Currently, Speyer shares leadership responsibilities there with his son, Rob.
Strategy: No one can accuse Tishman Speyer of being timid. It bet big and lost big on Stuyvesant Town and Peter Cooper Village in what was one of the biggest, if not the biggest, failures of the downturn. But they are still standing, which speaks to their ability to shield themselves when things go south. “It looks like they will come through fine,” said Fasulo. “They have been able to restructure and recapitalize their assets, and at the same time they are deleveraging some assets, and they are back out there and are active again.”
Signature property: Rockefeller Center.
Portfolio: More than 80 million square feet of commercial and residential space worldwide.
Minus: Defaulting on the $5.4 billion purchase of Stuy Town. As has been beyond well-publicized, the property went back to lenders this year. It was recently appraised at only $1.9 billion.
Plus: Despite the Stuy Town flop, the firm actually had relatively minimal exposure and defaulting did not sink the ship. The company sold $10 billion in property at the top of the market and remains on firm ground.
(Net worth: $1.3 billion)
L.H. Charney Associates
Background: Charney is not your typical self-made real estate tycoon. He’s worked as a prominent entertainment attorney, as an author and as an adviser to President Jimmy Carter. He once considered a career as a vocalist and he’s been described as the “unsung hero” of the Middle East Camp David Accords under Carter. And he’s a major Times Square property owner.
Strategy: Charney has been pretty quiet of late. His one significant move was a dud: In 2007, he joined with George Comfort & Sons and Fortis Property Group to buy 119 West 40th Street for $182 million. He is now facing foreclosure on a $160 million senior mortgage there. But his strong connections to Israeli investors (his wife is Israeli and, according to press accounts, he’s close with top Israeli politicians) mean he should never be counted out.
Signature property: One Times Square.
Portfolio: 1.5 million square feet.
Minus: The 119 West 40th Street foreclosure.
Plus: He makes good predictions. In January he told Forbes the stock market would climb by 12 percent in 2010. The Dow is up about 14 percent since then.
(Net worth: $1.2 billion)
Background: Solow, a Brooklyn-born son of a bricklayer, bet the farm on a Manhattan high-rise On West 57th Street in 1972 and won big. Over the years, Solow’s litigious nature has become a hallmark of his real estate career. In June, the New York Times reported that Solow, who is rumored to be in poor health, is back to work after a short absence.
Strategy: It doesn’t get much bigger than Solow’s $4 billion East River project, where he has plans to erect seven towers on nine acres along First Avenue. But despite the fact that the project won approval, the Solow juggernaut has shown some distressing signs with development stalled there and steep vacancy at 9 West 57th Street.
Signature Property: The Solow Building at 9 West 57th Street.
Portfolio: Tens of millions of square feet.
Minus: Solow was slapped with an $85.7 million court judgment brought by Citigroup in March, and may be on the hook for as much as $111 million plus interest.
Plus: Earlier this year he sold a small piece of the land on his 9.2-acre East Side parcel to the city’s School Construction Authority for $33 million.
(Net worth: $1.1 billion)
Vornado Realty Trust
Background: A notoriously shrewd investor, Roth started out scooping up retail properties in New Jersey and then went on a buying spree in the early 1990s, picking up stakes in Manhattan skyscrapers, including such gems as One Penn Plaza and 731 Lexington Avenue — the current home of Bloomberg LP.
Strategy: According to Fasulo, Vornado has not been as active as they wanted to be during the downturn and missed out on a couple of opportunities that competitors SL Green and Boston Properties seized upon. That said, there is anticipation that Vornado is poised for some significant moves. It recently closed on a first round of financing for a new $1 billion real estate fund. And last month, Crain’s reported that it purchased 150,000 square feet of retail space in the Lucida condo on the Upper East Side from developer Gary Barnett for $190 million.
Signature property: 731 Lexington Avenue (Bloomberg Tower).
Portfolio: Over 100 million square feet.
Minus: Vornado hasn’t bought a full building since 2007. Earlier this year, Boston Mayor Thomas Menino called the REIT’s failure to develop a Beantown site in a timely fashion “reprehensible.”
Plus: In August, Vornado won approval from the City Council to commence construction on a 1,200-foot skyscraper at 15 Penn Plaza. The company also recently bought a 9 percent stake in retailer JCPenney, which has 450 shopping centers nationwide. “If they can get access to that prime real estate, they can potentially unlock all that value,” said Fasulo.