Many in New York real estate don’t recognize the name Sarah Korein. But those who do remember a woman cut from the same cloth as Leona Helmsley — a shrewd, no-nonsense businesswoman who cobbled together a real estate portfolio that would rival the holdings of today’s most powerful landlords.
Korein largely operated out of the public eye and was a notoriously crafty negotiator. In the 1960s, when she wanted out of a contract to buy the Osborne rental apartments at 205 West 57th Street, she reportedly leaked the prospective sale to the New York Times, telling the paper she would demolish the property, in a bid to anger the current tenants. The next day, when the tenants rushed her office, she feigned kindness and offered them the opportunity to buy the contract. They did, netting her a $250,000 profit on the flip.
Though Korein died in 1998, her very private family is now once again at the center of a major New York real estate brouhaha, thanks to a ground lease it owns at the landmarked office building Lever House at 390 Park Avenue.
It is because of the so-called economically nonviable terms of that 99-year lease that developer Aby Rosen is staring down foreclosure at the property. Those terms are said to have made it nearly impossible for him to refinance a $110 million CMBS loan on the property. When a fair market value-based mechanism resets the ground lease in 2019, the anticipated ground rent would increase from $6.15 million a year to a staggering $20 million a year — and the property generates just $16 million to $18 million a year in net operating income, according to Trepp.
Special servicer CW Capital filed to foreclose on the loan late last year. “This is a relatively common tactic by loan servicers to try and push negotiations along,” said Edward Dittmer of Morningstar Credit Ratings, whose company is tracking the loan.
“With all of the complexity surrounding this deal, it could be a while before we see any resolution on that loan. Of course, the way these things go, the parties could announce a settlement in two days or two years,” he said.
For Rosen, losing control of Lever House, long considered one of the gems of his company RFR Holding’s Manhattan portfolio, would be a major hit, especially since the firm reportedly plowed nearly $70 million into refurbishing the building. The developer has been trying to renegotiate the terms with the Koreins.
Today, the family is led in the negotiations by Jim Korein, the grandson of Sarah and an investor in both real estate and real estate tech, according to his LinkedIn profile. Jim is the son of Sarah’s late son Julius, a neurologist.
Rosen declined to comment for this story. The Koreins declined to discuss the negotiations, with Jim saying only that “the Korein family is committed to preserving and maintaining Lever House as an iconic landmark.”
But the family seems unlikely to want to part with its interest in the property.
”My mother called it her Mona Lisa,” Korein’s daughter, Elysabeth Kleinhans, told the Times of the property in 1999.
The issues associated with renegotiating ground leases have been in the spotlight recently, thanks to several well-publicized scuffles between owners and their tenants. Forest City Ratner has clashed with the city over the terms of a ground lease for an entertainment complex the developer operates on West 42nd Street. And SL Green Realty could see landlord Ashkenazy Acquisitions significantly hike its rent for a ground lease at 625 Madison Avenue, since it would be worth tens of millions more based on its value as a development site.
Potentially complicating matters is a previous business deal Rosen had with the Koreins. In 2013, RFR was forced to hand over the keys to the landmarked Swiss Center at 608 Fifth Avenue, which sits on land owned by the Koreins, to Vornado Realty Trust. Vornado reportedly took over RFR’s mortgage with $8.5 million still owed to another lender.
Meet the Korein clan
So, who exactly is this low-key family who has one of New York City’s most best known developers sweating?
“There are New York families that are under the radar that have accumulated vast real estate portfolios. They’re one of them — it’s pretty amazing,” said Mark Gordon of Tribeca Associates, who worked with the Koreins on a sale in 2002. “I don’t think they feel like they need the attention.”
The Korein family matriarch Sarah was born in Germany, grew up in Palestine and later emigrated to New York after World War I. Her vast real estate portfolio started with the 1931 purchase of of her family’s own walk-up apartment in Flatbush, Brooklyn for $6,000 but expanded to include properties such as the Delmonico Hotel (now Trump Park Avenue), the ground lease at One Penn Plaza, 430 Park Avenue, 295 Madison Avenue and 220 and 240 Central Park South.
In 2005, she sold a 124-unit, 150,000-square-foot residential building at 220 Central Park South to the Clarrett Group for $132 million. That building was eventually razed to make way for Vornado’s new Billionaires’ Row mega-tower. The family still owns the neighboring building, 240 Central Park South, where Jim lives.
While the family owned the properties jointly, Sarah was said to be the brains behind the operation and morphed from a Hebrew teacher at a nursery school into a force within the real estate industry. She quickly became the subject of much admiration, particularly among female real estate agents, who saw her as a pioneer.
Though she appeared delicate, Korein was a tough negotiator who would keep prospective buyers in different rooms in her office, then jump from one to another bargaining for the best terms. “It was a question of price,” Izak Senbahar told The Real Deal of a 2001 deal he lost out on for the Delmonico — to none other than now-President Donald Trump.
Korein was also known for her use of the nonamortizing mortgage, paying slightly higher interest rates but nothing on the principal. The strategy allowed her to free up cash for other investments. By the time the loan came due, her properties had accrued so much value that paying off the debt was a cinch. She built only one ground-up development during her decades in real estate, the Elysabeth at 35 East 38th Avenue, and it was not a success.
She lived at 240 Central Park South and kept her Rolls Royce in the nearby garage at 220 Central Park South. “She’d lean out of the Rolls and say, ‘Get me a pizza,’” recalled her friend Marcia Rose Yawitz of Eastern Consolidated.
Korein acquired the fee interest in Lever House from the Goelet family in the mid-1980s. The Goelets were three brothers descended from Peter Goelet, an ultra-wealthy 19th century ironmonger who used profits from the Revolutionary War to buy up Manhattan real estate. According to news reports, the family fortune was valued in excess of $60 million as early as 1902. That’s roughly $1.5 billion in today’s dollars.
“I remember when she bought it,” Yawitz said. “She loved the building. Her idea was she never wanted to really manage anything, so she always net leased the buildings. She’d say, ‘Listen Marcia, my tenants are doing this or that,’ as if she was collecting the rent herself.”
Most of all, Korein hated parting with property.
“She sat shiva over every sale,” her friend Larry Ackman once told the Times.
“She loathed selling anything,” Yawitz said. “People would think they’d made a deal with her because she’d shake their hands, but she was really just saying goodbye.”
Now, the lease is likely worth more than ever. The approval of the Midtown East rezoning earlier this week means that the family can sell and transfer their unused development rights at the Lever House site to other developers, though the value of those rights is unclear.
Today, Korein’s daughter Kleinhans heads a theater production outfit, while Jim heads the real estate business. He also prefers to remain in the shadows, much like his grandmother.
He’s spoken to TRD only once, when his daughters convinced him to donate an apartment at 240 Central Park South as a prize for one of the contestants on “America’s Next Top Model” in 2009.
“People seem to be very tuned in to this show,” he quipped.
(To view more properties owned by RFR Holding, click here)