Like other taxi moguls who owned the properties where they parked their fleets, Victor Weingarten parlayed the wealth he made in the yellow cab business into another booming industry: real estate investment.
Weingarten, who accumulated so many medallions starting in the 1970s with his brother and cousin that they became known as the Three Wise Men, is also a real estate investor in New York City and beyond.
But as the well-documented troubles in the taxi business put the squeeze on owners following the medallion crash of 2014, so too have Weingarten’s real estate ventures felt the pinch.
Weingarten is facing foreclosure on an Upper West Side apartment building where he and his partner Simon Baron Development have struggled to execute a plan to turn rent-stabilized apartments over into free market units.
And according to a pair of Russian brothers who claimed the taxi chief owes them $18 million, the declining value of Weingarten’s medallions is partly to blame for his real estate woes.
“Weingarten’s cash flow situation has suffered greatly, and with the demise of the taxi industry with the increase in alternatives such as Uber and Lyft, Weingarten has reduced liquidity,” attorneys for Arkady and Maksim Guzovskiy wrote in a lawsuit filed last year.
A representative for Weingarten declined to comment. Simon Baron – headed by Jonathan Simon and Matthew Baron – did not respond to requests for comment.
The partnership is in default on a $19.6 million mezzanine loan on its 16-story, pre-war apartment building at 166 West 75th Street, according to a notice announcing a public auction for the debt next month.
Including a senior mortgage, the property has about $50 million in debt on it. But sources said the market believes it isn’t worth that much. And the property is arguably less valuable now than it was last month before the state passed sweeping changes to the rent-stabilization laws that make it more difficult to increase rents on regulated units.
“They’re willing to cut their losses and walk away from it,” one source familiar with the property said.
Simon Baron bought the 160-unit doorman building – a former SRO hotel converted into apartments – in 2013 for $13.4 million, property records show. But they’re really just managing the project for a “silent” investment group headed by Weingarten, which, according to the Guzovskiy lawsuit, owns slightly more than 96 percent of the equity in the project.
The Guzovskiy brothers say they met Weingarten – whose family is Russian and speaks the language – in 2011 through mutual friends in Miami. They partnered with him on the West 75th Street project, as well as a condo conversion Simon Baron is heading up on the Upper East Side.
The plan for the rental building – rebranded as AMSTRDM – was to deregulate the property’s stabilized units: Simon Baron claimed it spent $15 million on a gut renovation that included new mechanical equipment, cosmetic upgrades to common areas and apartment renovations.
When the developer bought the building, 144 of the 159 rental apartments (or slightly more than 90 percent) were rent stabilized, according to property records. That number is now down to 67, or about 42 percent of the building’s units.
But Simon Baron hasn’t been able to remove rent stabilized tenants without hitting bumps.
When the landlord moved to evict a pair of tenants it claims were behind on their rent, Simon Baron said it discovered a stipulation the previous landlord had entered into with the renters that entitled them to $250,000 in damages and a right to exercise a $3.5 million buyout if eviction proceedings were initiated.
The developer claims it was not aware of the stipulation when the company bought the building. And after a judge found in favor of the tenants, Simon Baron sued its lawyers at Belkin Burden Wenig & Goldman tasked with evicting the tenants, accusing the law firm of malpractice and “utter failure to properly represent” the landlord. (A judge in August of last year dismissed the suit and awarded the law firm more than $55,000 in counterclaims.)
Simon Baron also sued a married couple while they were in the midst of buyout negotiations. The couple earlier this year filed a lawsuit, claiming landlord left a hand-written note outside their door that said: “If you love your children, leave the building.”
The Guzovskiys claimed that Weingarten’s depreciating taxi business came to bear on his real estate investments around 2016, when Simon Baron put out a capital call for the condo conversion project at 12 East 88th Street.
Weingarten’s investment group couldn’t come up with the cash needed to keep the project afloat, so he leveraged the AMSTRDM building with “a massive loan that he improperly used to prop-up” the condo project, according to the Guzovskiy brothers.
“Weingarten has orchestrated ‘take from Peter to pay Paul’ movements of millions of dollars within his real estate projects,” attorneys wrote in court filings on behalf of the brothers, who accused Weingarten of taking advantage of their lack of understanding of English-language business laws. “[He] is as sophisticated as he is ruthless.”
(The Guzovskiy brothers claim they lent Weingarten $18 million with the understanding that they would be paid back in one year. Weingarten’s attorneys produced documents in court that showed the loan would be paid back only when the real estate projects turned a profit. A judge earlier this year threw out the lawsuit with prejudice, and the brothers have filed an appeal.)
A source familiar with the project, on the other hand, said it was Simon Baron that orchestrated the plan to use the debt from the West 75th Street rental building to fulfill the capital call on the East Side condo project.
The mezzanine lender on West 75th Street, Benchmark Real Estate Group, hired a team led by David Schechtman at Meridian Investment Group to market the debt for sale at a foreclosure auction scheduled for Aug. 12.
Benchmark and Schechtman declined to comment.
But Simon Baron and their partner may be looking back now and realizing they could have gotten out of the project in a better position earlier.
The owners in 2015 put the building up for sale asking $115 million. Sources said they turned down offers of $80 million and a few years later turned down offers in the mid-$60 million range.
Simon Baron is one of a handful of developers facing what industry experts expect to be an increasing number of foreclosures as the residential market continues to struggle.
Ceruzzi Properties and SMI USA recently recapitalized their luxury condo development project 520 Fifth Avenue in order to stave off a foreclosure auction initiated by lender Mack Real Estate Credit Strategies.
And earlier this month, the senior lender on 125 Greenwich street, United Overseas Bank, filed to foreclose on project being developed by China Cindat, Davide Bizzi’s Bizzi & Partners, Howard Lorber’s New Valley and investment firm Carlton Group.