Sybil Goldrich was 19 years old in 1959 when she invested a “substantial” amount of her savings with Morton Olshan, an accountant who’d go on to become the patriarch of one of New York’s top real estate families. Now, over half a century later, Goldrich is suing Olshan, his children and the real estate giant Olshan Properties for what she describes in a lawsuit as the family’s “scheme to enrich themselves” at the expense of early investors who are losing money.
According to the suit, Goldrich was among the group of Morton’s clients and friends that helped him purchase six buildings early in his career. The two in which she has a stake are a 96-unit building at 347 West 55th Street on the West Side of Manhattan and a 137-unit building at 52 Clark Street in Brooklyn Heights. While Goldrich received a share of the buildings’ annual income for many years – sometimes as much as six figures – the payments stopped around 2008, she claims in the suit. That year, current CEO Andrea Olshan sent a letter describing difficulty in retaining tenants as a reason for diminished payments.
“Mrs. Goldrich is no longer a teenager and, like many others who are now aging and who gave Morton money for the buildings, she would like to realize the value of her long-ago investment in the form of a sale profit or steady income from these valuable buildings,” Goldrich’s lawyers state in the suit, filed Dec. 10 in New York State Supreme Court.
Morton founded Mall Properties in 1967. Today, the company owns and/or operates 11 million square feet of retail properties, five million square feet of office space and more than 19,000 multifamily units and 1,100 hotel rooms, according to its website. Morton’s daughter Andrea was named CEO in 2012. This January, the company was renamed Olshan Properties.
Meanwhile, Goldrich and other investors have continued to pay taxes on “phantom income,” or revenue the buildings generated that they have not seen. At the same time, the suit argues, the Olshans have profited from owning and managing those very same buildings. In 2009, the suit states, Morton hired Janoff & Olshan — another firm he started — to manage certain limited liability corporations that legally own the buildings in question. (Goldrich, as an investor, is a member of the LLC.) By tapping Janoff & Olshan, the suit states, the Olshans were engaging in “textbook self-dealing.”
For example, Olshan Properties (via Janoff & Olshan) would earn an advisory fee of one percent for any mortgage or refinancing; a guarantee fee of 1 percent in the event a guarantee was provided by the company; and additional compensation of 10 percent of the total cost of capital improvements or repair for each apartment. “The Olshans never sought or received the informed consent of the other owners of the two buildings to enter into an agreement that serves their interests at the expense of the buildings and other owners,” the suit states, referring to the buildings on West 55th Street and Clark.
The Olshans didn’t immediately respond to requests for comment. In addition to its real estate portfolio, Olshan Properties is investing $4.7 billion in commercial real estate projects through the Longview, RCG Longview and Normandy Venture Partners equity funds.
Beyond the management contract, the suit also accuses the Olshans of attempting to buy out investors “in a manner evocative of villains in old films like ‘Shane’ and ‘It’s A Wonderful Life,’” by giving investors lowball offers for their ownership stake.
In 2013, for example, Andrea and her brother Michael purchased a seven percent stake in 52 Clark from a recently-widowed investor for $17,500, a “tiny fraction” of the building’s worth, according to the suit. The suit also cites the company’s successful track record, and notes that property values have soared in the decades since Golrich’s 1959 investment. Today, for example, the building at 52 Clark Street has a fair-market value between $34 million and $56 million, and 347 West 55th Street has a fair-market value between $25 million and $43 million, according to the suit.
Morton, the suit states, “now sits atop a vast real estate empire worth billions of dollars and is far more interested in the dynastic passing of that empire to his children and enriching them at the expense of those who trust him with their money long ago.”
While the Olshans aren’t interested in selling –Andrea Olshan told The New York Times in September that the value of owning real estate “is being able to operate it” – Goldrich “would prefer a significant sum of cash to phantom income,” the suit states. She would, the suit adds, “prefer a significant sum of money to losses.”