City-Spaces shutters following state probe

By C.J. Hughes | April 06, 2011 10:36AM

City-Spaces’ 803 Ninth Avenue office (photo: Loopnet)

City-Spaces, a real estate brokerage that failed to pay employees during the real estate
downturn and then changed the firm’s name to gloss over that fact, has closed its doors.

In March, founder Israel Horowitz shuttered the firm’s one remaining office, at 803 Ninth
Avenue in Midtown, and said goodbye to his last 20 employees. At its peak, the firm,
which was founded in 2005, had four Manhattan offices and 150 employees, Horowitz
said.

The reason for the closing had to do with the $10,000-a-month rent for the Ninth Avenue
storefront, which was too steep, Horowitz said. But the nail in the coffin was an
investigation launched recently by New York’s Department of State, in Albany, which
regulates brokers’ licenses.

In January, according to Horowitz, officials there informed him that his license to buy
and sell apartments was technically limited to the business that had been operating at the
City-Spaces office at 1342 Second Avenue, on the Upper East Side, which closed last
year.

Though Horowitz essentially tried to take that license with him when he relocated to
Ninth Avenue, state officials told him it was not transferable and voided it, according
to Horowitz. A State Department official confirmed that Horowitz had lost his license
and suggested that any transactions that took place after that Upper East Side office closed could have been illegal said Susan Watson, General Counsel for the State Department.

And even though Horowitz won’t be fined or punished now for any possible wrongdoing, “That doesn’t mean there couldn’t be in the future,” Watson said.

For his part, Horowitz said he was uninterested in applying for a new license and decided to leave the industry entirely, giving his employees about two weeks’ notice.

“I didn’t have the drive and motivation any more,” said Horowitz, explaining that the
profit each month at his firm, which dealt mostly with rentals, was $5,000 to $10,000.
Today, he’s working with Cows Gaming, a technology company that makes apps for
mobile devices.

Agents who were let go said they left on good terms and were paid all the money owed to
them
.
But the firm had gotten into trouble in 2009 when it failed to pay agents’ commissions.

The reason employees were stiffed was because of cash-flow problems, Horowitz said.
Before Lehman Brothers’ collapse in fall 2008, 70 percent of the firm’s deals were
commission-based, meaning brokers took 11 percent of a year’s rent as a fee. And that
fee was paid by renters when they were handed their keys.

After the collapse, though, the fees fell to about eight percent, and were “OP” — that
is, “owner paid,” by the landlord — which meant for a far slower payment schedule.
Indeed, three months could elapse before brokers collected their payment, which made
running a business very difficult, Horowitz said.

Around the same time, in June 2009, Horowitz had to shut down his 2,000-square-foot
office at 174 Second Avenue and the East Village office on East 11th Street. Then, he swore that the company was in good shape and wouldn’t be experiencing
further downsizing.

And the fallout in terms of public image seemed brutal. Before the payment problem
came to light, the firm was named Citi-Spaces but rebranded itself as City-Spaces to
escape bad publicity, he said.

Some of the firm’s agents are still unemployed, like Howard Hauptman, who said he
might join the Star Group NY, a new residential and commercial firm founded by ex-
City-Spaces broker Yotam David.

Others seem to have gotten out in the nick of time, like Autry Pruitt, who left in January
and is now a commercial broker with firm BP Vance. In 2009, Pruitt was one of
those employees who did not receive a paycheck, for two months “though eventually
[Horowitz] paid everything he owed me,” he said.

Thomas Shie and Mike Rauh, who also left this winter before the firm shut down,
launched a new firm, Metroscape NYC. The firm, which has 15 agents, is based at 164
East 88th Street, in the office of BP Vance, which is a partner, Shie said.

Metroscape focuses on rental housing for New York University and Parsons students,
said Shie, adding that the firm also has an office in Xianen, China, from which it hopes to
recruit Chinese investors for Manhattan condos.


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