How the supertall at 111 West 57th St. became a labyrinth of offshore wealth

In 2002, Andy Ruhan, a British real estate mogul and racecar driver, fell out of the sky. His helicopter crashed in the West Midlands, and Ruhan, who suffered more than 100 fractures and serious burns, crawled through the fields to get help. He recovered, went on to build an empire that encompassed data centers, a game reserve and hotels, and reportedly amassed a personal fortune of over $250 million. But if you go by what his lawyers said in court last week, he’s dead broke.

Ruhan is facing off against his estranged wife in a U.K. divorce trial, and, like many magnates seeing a threat to their wealth, claims to be in financial trouble. He says he’s $5.5 million in debt and forced to live on his luxury yacht.

But if Ruhan really is a pauper, that would be news to Michael Stern and Kevin Maloney, the developers whose 111 West 57th Street he secretly bankrolled with more than $20 million.

Ruhan’s stake, confirmed to The Real Deal by several sources directly involved in the supertall Manhattan condominium project, is concealed within a labyrinth of offshore companies and behind the mask of a local partner, Arthur Becker. Two sources said that Ruhan took great pains to hide his involvement specifically to fly under his wife’s radar.

And his investment is just one component of the offshore wealth backing the $1.45 billion condo, which is slated to become the second-tallest residential building in the west. Tracing his path into the project allows a window into how overseas money fueled Manhattan’s luxury condo boom — and how it can complicate things if construction doesn’t go according to plan.

Attorneys representing both sides in Ruhan’s divorce trial did not respond to requests for comment. Maloney and Stern declined to comment.

Becker, ex-husband to fashion designer Vera Wang, denied Ruhan’s involvement. He said that his money “comes from various offshore trusts.” Asked who controls the trusts, and whether any are ultimately tied to Ruhan, he declined to comment.

“I do know my customers,” he said.

Ruhan the money man

It was March 2013. Michael Stern, at the time a 33-year-old developer prodigy, had just teamed up with his frequent collaborator Kevin Maloney to buy the land under the Steinway building for $131.5 million. The contract was the last in a series of deals that would give Stern’s JDS Development Group and Maloney’s Property Markets Group control of a prime development site on what had become known as “Billionaires’ Row.” They planned to build a condo tower that would dwarf Gary Barnett’s nearby One57 and cash in on the white-hot market for luxury apartments. There was just one snag: Stern and Maloney didn’t actually have the funds for a project of that size.

At the same time, however, Ruhan, reportedly in the process of separating from his wife, was looking for overseas ventures. The 50-something native of Ireland had by then made serious money on U.K. data centers. As of 2012, he controlled a global web of assets including a London hotel, a company laying deep-sea cables and a South African game reserve. He was also an avid motorcar racer, winning the GT Championship and scoring a board seat on the Lotus Formula 1 team.

In the U.S., Ruhan controlled the software company NaviSite, where Becker served as CEO from 2002 to 2010. It was Becker, sources said, who heard of the 111 West 57th project through acquaintances and brought in Ruhan.

After Stern and Maloney closed on Steinway in June 2013, Ruhan invested over $20 million in the project through a Delaware entity called Atlantic 57 LLC, according to several sources. In return, the LLC got a 26.3 percent stake in the tower — more than Stern and Maloney held combined.

TRD was unable to trace a straight line from Ruhan to Atlantic 57 LLC, but the entity bears his marks. He has a penchant for using the name Atlantic in entities he controls. A 2010 NaviSite press release, for example, noted that Ruhan held a stake in Unicorn Worldwide Holdings, a British Virgin Islands company, which was a managing member of Atlantic Investors LLC, which in turn held a stake in NaviSite. Meanwhile, his frequent business associate Simon McNally was at one point listed as secretary of a company called Atlantic Hotels Ltd.

Another major investor in the development was AmBase Corp., a small Connecticut-based holding company controlled by the Bianco family. AmBase had recently won a $180.6 million settlement from the federal government over the liquidation of its former subsidiary, Carteret Savings Bank, and needed to put the money somewhere. It paid $56 million for a 59 percent stake in 111 West 57th.

LLC frenzy

A series of capital calls between March 2014 and March 2015 expanded Stern and Maloney’s stake and diluted AmBase’s, but the fundamental structure remained the same. TRD was able to map the tower’s convoluted ownership with the help of court records, filings with the Securities and Exchange Commission, filings on the Tel Aviv Stock Exchange, and interviews with several insiders who spoke on the condition of anonymity.

One important caveat: The ownership structure of Stern And Maloney’s entity, 111 West 57th Control LLC, was partly pulled from AmBase’s court filings and a prospectus for Stern’s proposed bond offering in Israel in December 2014. But the bond sale never went through, and it’s not clear how the actual ownership of this particular entity differs from the proposal. Moreover, parts of the ownership structure may have changed between 2015 and 2017.

Still, several real estate attorneys said the byzantine structure is not uncommon for large condo projects.

“This does not strike me as out of the ordinary,” said lawyer Joshua Stein. “Even if it’s changed, the likelihood is it’s not going to be that different.” Edward Mermelstein, who often works with foreign investors, said he has seen “much more complicated” funding arrangements.

Had Stern raised the bonds, his Israeli investors would have funded a British Virgin Islands company called JDS Ltd., which would have owned 111 West 57th Street JDS LLC, which held a 50 percent stake (later increased to 51.1 percent) in 111 West 57th Street Control LLC, which held an 89.3 percent stake in 111 West 57th Street Sponsor LLC, which held a 37.84 percent stake in 111 West 57th Street Partners LLC, which as of mid-2017 owned 111 West 57th Mezz 1 LLC, which owned 111 West 57th Holdings LLC, which owned 111 West 57th Property Owner LLC, which owned the actual property.

The ownership structure for 111 West 57th Street (Credit: The Real Deal)

As the chart above shows, Stern wasn’t alone in owning his stake through a web of LLCs. And if the building’s ownership structure isn’t enough to reckon with, the project’s debt (shown in blue in the chart) dials up the complexity.

In June 2015, the developers landed a $400 million mortgage from AIG and a $325 million mezzanine loan from Apollo Commercial Real Estate Finance (ARI), a mortgage real estate investment trust managed by private equity firm Apollo Global Management, to finance the construction. Both are U.S. companies, but in reality, much of the money funding the loans came from overseas.

In late 2015, ARI sold $200 million of the mezzanine debt to an Apollo fund managing the money of Qatar Investment Authority, Qatar’s wealth fund, as TRD first reported this August. ARI sold another $50 million to a different Apollo debt fund, keeping $75 million on its books.

As a public company, ARI’s investments are backed by its shareholders. In the third quarter of 2015, QIA bought $348 million worth of shares in the mortgage REIT through a private placement. In a statement at the time, ARI CEO Stuart Rothstein said Qatar’s investment gave the company “dry powder to capitalize on new investment opportunities.”

A lawsuit, a foreclosure and an alleged plot

The funding structure began to unravel amid cost overruns and a dispute between AmBase, the project’s largest shareholder, and Stern and Maloney. In April 2016, AmBase sued the developers for $105 million, alleging they used unnecessary capital calls to dilute its stake in the project. Stern and Maloney denied this, alleging that AmBase shirked its responsibility by refusing to help keep the project afloat.

In December 2016, in a bid to plug the hole in the budget, the developers lined up a $100 million mezzanine loan from Boston-based hedge fund Baupost Group with a floating interest rate of around 17 percent in the first year, according to sources and court filings. But AmBase refused to okay the funding, insisting that the developers buy out its stake instead. Amid the impasse, the mezzanine loan fell out of balance.

In late June of this year, Apollo sold a $25 million slice of the loan to Robert Schwartz and Joshua Crane’s real estate investment firm Spruce Capital Partners. Spruce immediately filed for foreclosure, a move that AmBase unsuccessfully sued to block. On Aug. 30, Spruce took over the building. Several sources said talks between Spruce, Stern and Maloney are underway, and that all three along with Becker’s group will likely keep a stake in the property’s new ownership.

AmBase, which accused Spruce, Stern and Maloney of conspiring to cheat it out of its stake, could still derail everything. It vowed to appeal the foreclosure, and its April 2016 lawsuit is still ongoing.

Ruhan, meanwhile, has other things to worry about. Last week, his attorney told the divorce court about an alleged plot to murder him. According to the Daily Mail, British police investigated the alleged plot in 2016 and made arrests, but charged no one. His estranged wife, Tania Richardson-Ruhan, Told The Court that she had  voluntarily submitted to police questioning about the plot, but added that the police “didn’t accuse me of anything.”

Richardson-Ruhan’s attorney, Sally Harrison, tried to keep the court focused on the central theme of the divorce battle: money.

“You will have to decide whether the husband – who on any account has been a phenomenally successful entrepreneur – has fallen spectacularly from grace so that now he has nothing,” she told the judge. Harrison singled out what she described as Ruhan’s “dishonesty, the way in which he partially discloses matters and often gives an incomplete history of his financial dealings.”

This is the first of two stories about the latest troubles behind 111 West 57th Street. Stay tuned for more in TRD’s November issue.