The Real Deal New York

Aby Rosen’s brazen battles

With Donald Trump in the White House, is the flamboyant RFR co-founder the last true celebrity developer in town?
By Konrad Putzier | July 01, 2017 01:00PM

Aby Rosen (Photo by Sasha Nialla)

Would Aby Rosen agree to an interview? Yes, his publicist said on a recent Thursday. Then came the catch: He was traveling and might be hard to pin down. The publicist wouldn’t say where he was, but in Rosen’s case there’s an app for that.

The following Monday, the developer posted a selfie to his Instagram account, which has just short of 16,000 followers. It showed him tanned and unshaven, wearing sunglasses and a Panama hat, with the Sardinian coastline in the background. “Monday in Heaven” read the caption.

Rosen TRData LogoTINY, co-founder of the high-profile New York property firm RFR Realty, is no stranger to grand vacations. The 57-year-old real estate mogul has also never been one to shy away from a good public fight. He famously called Tom Wolfe an anti-Semite in 2008 after Wolfe mocked Rosen’s physique during a heated construction dispute. Several years later, he forklifted a massive bronze statue of the Virgin Mary — with the inside of her pregnant belly exposed — onto the lawn of his Long Island estate over outcries from his neighbors.

But even by his standards the husband and father of four has been involved in a lot of drama lately. Since the beginning of 2016, Rosen paid a $7 million fine to settle a tax-evasion probe, booted the storied Four Seasons restaurant from the Seagram Building, defaulted on the ground lease mortgage on Lever House, and almost saw his Upper East Side rental home hit the foreclosure auction block. And then there was the anti-Trump poster.

Last August, Rosen installed a more than 20-foot-tall billboard at RFR’s 337 Lafayette Street development site in Noho that read “Vote Your Conscience!” — a nod to Sen. Ted Cruz’s refusal to endorse Donald Trump. While other real estate players kept their heads down during the election campaign, following the unspoken industry rule to never antagonize those in power, Rosen was the only one to publicly and dramatically take a stand.

Monday in heaven

A post shared by abyrosen (@abyrosen) on

The fact that he was business partners with Trump’s son-in-law, Jared Kushner, on the $375 million Watchtower acquisition and subsequent office conversion in Brooklyn Heights only added to the intrigue.

Rosen refused to speak about the stunt at the time. But when The Real Deal reached him by phone in his hometown Frankfurt after his Italy trip, he broke his silence.

 “Trump wasn’t the right choice for the country that I believe in,” said Rosen, who has donated to Democratic politicians since the 1990s, according to OpenSecrets, and says he is concerned about income inequality, Transatlantic relations and the future of the country in general. “And if you look around: It hasn’t gotten better, but worse.”

Rosen said he spoke about the poster with Kushner — whom he claims to keep in touch with even after the 36-year-old real estate scion decamped to the White House — and that the two argued about Trump’s platform in the run-up to the election. “We always talk about ‘This is right, this is wrong, you’re in the wrong camp, I wouldn’t have done that,’” he said.

“He knows where I stand, I know where he stands,” Rosen added. “Deep down I think he has more of a Democratic mindset, but you know maybe [the Republican party] is a good party to be with right now … What you make out of that, that’s going to be the judgement.”

A man of principles

Rosen, who is still involved in the 1.2 million-square-foot Watchtower, said he “felt good” about putting up the sign and that he did it because he’s not afraid to speak up for what he believes in.

But George Arzt, a well-connected Democratic consultant, said he isn’t buying it. “You’ve got to understand that Aby has an ego at least as large as Donald’s and that he loves controversy,” Arzt said, noting that Rosen picks fights with people “for no reason.”

“He loves a good fight. It’s the way he feels relevant today,” he added. “It’s sort of marketing.”

Arzt has his own slant, however. He met Rosen during the great Tom Wolfe skirmish and the two were on opposing sides. At the time the developer was planning to build a 30-story apartment tower atop the Gagosian Gallery on Madison Avenue on the Upper East Side. Wolfe, who lived nearby, was part of a neighborhood group that opposed the project and the group hired Arzt to do lobbying work on their behalf.

The novelist, meanwhile, penned an op-ed in the New York Times that called the planned tower out of place and began with the words “Chin up, tummy out, Aby Rosen.” The developer took offense and later accused Wolfe of “an anti-Semitic undertone,” which in turn offended the novelist, who called Rosen’s comment “sad and pitiable quite in addition to being preposterous in the extreme.”

Arzt recalled one Landmarks Preservation Commission meeting at which Rosen and Wolfe got so heated up that they had to be held back by their respective entourages. “It’s mind-boggling that he would get into a fight with someone [close to] 80 years old, especially with an icon like Tom Wolfe,” he said. The Democratic consultant also claimed that the developer would physically bump into him whenever he passed him at public meetings for the project. Rosen called such accounts of the animus overblown and said he doesn’t recall moments of physical tension. In the end, however, he lost that fight and moved on to other projects.

Rosen’s friends and colleagues refuted the idea that he is hot-headed and attention hungry. Developer Izak Senbahar of the Alexico Group, who has known Rosen for years (RFR bought debt on Senbahar’s Mark Hotel on the Upper East Side last year) called him an “astute guy with good aesthetic sensibility.” He also dismissed the notion that Rosen randomly looks for fights.

“Sure, he’s got an ego. “I don’t think that you are going to be a mover and a shaker without that characteristic,” said developer Roy Stillman, who has known Rosen for close to a decade.

“Now the question is how do you channel it?” Stillman added. “Aby has done a very good job of channeling his ego into production and into forward movement, whereas other people channel their ego into negativity.”

High noon at Lever

Still, Rosen has seen his share of dirt. And while his public spats may capture tabloid headlines, the battles that really matter to his real estate empire often happen in private. One of the most important ones yet is now being waged at the 21-story Lever House office tower at 390 Park Avenue.

When RFR took control of the landmarked building in 1997 and signed a 99-year leasehold on the property, it catapulted the real estate firm into the big leagues.

But now Rosen, his business partner Michael Fuchs and their associates are in danger of losing control of the modernist glass box tower. Under the terms of the ground lease, the rent RFR pays to the building’s landlord, the Korein family, is set to adjust in 2023 to account for a drastic change in property values.

Manhattan land prices have increased by more than 100 percent in the past six years, from $322 per buildable square foot in 2011 to $681 per foot in 2016, data from Cushman & Wakefield shows. Due to that explosion in land values, the ground lease rent at Lever House will rise from $6.15 million to $20 million, according to the commercial mortgage-backed securities research firm Trepp. The building’s current tenants, including Alcoa and Stifel Nicolaus, bring in about $16 million to $18 million per year, which means RFR would lose money on the leasehold.

Wake up America

A post shared by abyrosen (@abyrosen) on

Faced with this scenario, Rosen and Fuchs failed to find a lender to refinance a $110 million CMBS loan that expired in March 2015. The debt is now in default and Wells Fargo, the loan’s trustee, recently filed for foreclosure.

“When I signed the lease, I knew there would be a risk of when the rent gets adjusted,” Rosen said, noting, however, that he “never thought land would be that expensive.”

RFR is now negotiating with the Koreins to change the terms of the leasehold, a must if the firm wants to hold on to the building. Rosen said he is optimistic that they will reach a deal — in part because he believes he’s the best operator for the building and that the Koreins have no interest in bringing in someone else.

“It’s not a big building, so there’s only so much you can achieve in rents there,” Rosen said about the 267,000-square-foot tower. “I’m not Houdini. If I can’t make it, nobody else can make it.”

But the stakes are low, Stillman argued. RFR has reportedly paid upwards of $30 million to renovate the property since buying it. Rosen and Fuchs took out cash after securing the CMBS mortgage sponsored by Credit Suisse First Boston in 2005 and Trepp data shows the building generated about $105 million in operating income between that year and 2015.

In other words: Rosen and Fuchs likely already made a hefty profit on their investment, while the leasehold they could lose to foreclosure is worth little in its current form.

One commercial broker who knows Rosen well and spoke on condition of anonymity, however, said the Lever House default highlights a broader problem in the market.

Lever House hit foreclosure in January

“This is going to be one of the biggest stories over the next 10 to 20 years,” the broker said. “You’re going to see these land leases that people made where there are market resets that all end in catastrophe for the leaseholder.”

Rosen has a similar attitude towards ground-lease arrangements. “I don’t like them, I don’t buy them anymore,” he noted. “Leaseholds suck. If you talk to people who own leaseholds — the movie never ends well.”

Party boy builder

Rosen was born to Holocaust survivors in Frankfurt and spent his childhood and early adulthood in the central German city. He met Fuchs in kindergarten in the mid-1960s and the two — who were both ambitious sons of real estate developers — have stayed close since.

In 1987, Rosen and Fuchs moved to New York and soon after launched their own property firm. The two started out buying office and retail buildings with the help of German financial institutions. Over the next three decades, they built a sizeable portfolio, acquiring the leasehold on Lever House and purchasing the Seagram Building for $375 million in 2000. RFR also began developing hotels — initially in a partnership with Ian Schrager — and Manhattan rental apartment buildings.

Today, the firm holds stakes in 89 properties around the world with a combined estimated value of $11.1 billion, according to data provider Real Capital Analytics. RFR’s portfolio includes 14 office towers and five apartment buildings in New York, as well as assets in Stamford, Seattle, Miami, Las Vegas, Tel Aviv and Germany.

But even as Rosen climbed the ranks of the property business, the flamboyant and outspoken expat kept his distance from the New York real estate industry’s low-key, secretive social circles.

“First and foremost, Aby is an artist,” said Thor Equities CEO Joe Sitt, who considers himself a close friend. “And then, secondarily, he’s an art collector, a restaurateur, a developer, a real estate investor.”

Over the years, Rosen has thrown dozens of extravagant parties, collected works of art worth tens of millions while spending much of his time with artists, actors and other luminaries, and eventually became the closest thing to a real estate celebrity since Trump.

And as with “the Donald,” journalists developed a strange obsession with the way Rosen looks and speaks (“silver composer hair,” “arrogant eyebrows” and “Kissingerian” were some of the descriptions given to him.) But mostly he kept feeding them good stories.

There was his 2005 wedding with socialite Samantha Boardman, his 2006 spat with Wolfe, and a 2007 Lever House party where Rosen, wearing a Nehru jacket, schmoozed with Heather Graham and Salman Rushdie under a giant Damien Hirst installation of sheep carcasses — to name a few.

“What Aby Rosen really wants to be is a party boy,” the New York Times wrote in 2013.

Perhaps implausibly for a man with that kind of track record, and for a man who likes to send selfies to thousands of Instagram followers, Rosen contends that unlike Trump he doesn’t crave the attention.

“People write what they want to write. I am not looking for coverage,” he said. “If I wanted to do that, trust me, I’d do a much better job than I am right now.”

Dramatic displays

Whether he seeks the attention or not, Rosen is a recurring character in the tabloids. And many of the stories involve him being confrontational in some form.

In 2014, Vanity Fair published “A brief history of Aby Rosen’s public clashes,” with gems such as the time he faced off against thousands of Orthodox Jewish protesters while trying to build a hotel on an ancient Jerusalem burial ground, the time he allegedly locked ATVs in a garage to block a police investigation into his sons riding them through restricted Hamptons dunes, and the time Old Westbury’s planning board forced him to turn his Virgin Mary statue so that local children wouldn’t be horrified by fetus Jesus.

Since that article was published, a few items could be added to the list. Among them: Rosen’s order to remove a famous Pablo Picasso curtain from the iconic Four Seasons at the Seagram Building and his ultimate decision not to renew the restaurant’s lease after a tiff with its owners.

“This destruction of a masterpiece is New York’s Palmyra,” one outraged patron wrote under a Rosen Instagram post after the Four Seasons shut its doors in July 2016. The restaurant will be replaced by two new eateries — one of them merely called the Grill, which Trump White House advisor Reed Cordish is backing.

The Four Seasons drama, which led to dozens of Rosen-related headlines, was one of several spectacles within the past year and a half.

Last month, Rosen’s six-story rental home at 5 East 80th Street — which he’s been leasing from the country of Niger for the past 15 years — just barely escaped the auction block. A New York judge ruled in favor of one of Niger’s creditors on more than $40 million in owed payments and the limestone townhouse was deemed to be the poor country’s largest asset in May. But Niger was granted a last-minute reprieve on June 13 when a federal judge issued a stay of execution, postponing its obligation to pay.

One person familiar with the matter told TRD in May that the RFR co-founder pays well below market-rate rent for the Upper East Side home and that he plowed several million dollars of his own money into renovating it. Rosen said he plans to buy the property if it hits the auction block and argued that the long-term, below-market lease makes the property unattractive to any potential buyer other than himself.

And then, of course, there’s Eric Schneiderman’s tax-evasion inquiry into more than 200 works of art that Rosen had purchased between 2002 and last year. The developer agreed to pay a $7 million settlement in May 2016 after the New York attorney general claimed he had ducked taxes on the $80 million worth of collected pieces.

“We are committed to rooting out tax abuses wherever we find them, especially in the art world, where the difference can be hundreds of thousands — if not millions — of dollars in lost tax revenue,” Schneiderman said at the time.

A spokesperson for Rosen responded in a statement that the settlement “relates to an uncertainty as to whether some of Mr. Rosen’s transactions were done as a private collector or as a dealer based on how artwork can be displayed for sale.”

Fighting slow sales

At Rosen’s 100 East 53rd Street luxury condominium tower, the developer is facing off against a very different kind of adversary: A sluggish residential market.

When RFR and its partner China Vanke began construction on the 63-story glass tower on the corner of Lexington Avenue in early 2014, high-end condo sales were soaring.

In March 2015, the partners raised the projected sellout to $867.9 million from $762.8 million, according to an offering plan submitted to the AG’s office at the time. Sales then launched in January 2016 and the penthouse got stamped with a hefty asking price of $65 million.

But with 202 new condo units approved each month on average in 2016, the surge in new supply has since outpaced demand for luxury pads.

Sources close to the 100 East 53rd project said sales had been slow until very recently, when the developers cut prices at several units by 10 to 30 percent. Rosen declined to disclose how many units he sold other than saying he sold enough to have the offering plan declared effective, meaning more than 15 percent. StreetEasy lists 15 sales at the 94-unit building.

“There’s not a single developer that’s not negotiating on price,” said Compass president Leonard Steinberg, whose firm is handling sales in the building. He claimed the tower is “more challenging” to sell because food amenities will be a big part of the appeal but have not yet opened.

One residential broker, speaking on the condition of anonymity, noted that the building’s location, more than half a mile from Central Park, would have been better suited for a hotel or office tower.

That project, and the other headaches of the past year and a half, may explain why Rosen has taken so many vacations in between tense negotiations (though that could have all to do with his party boy tendencies). In addition to his trip to Europe this summer, the developer has also visited snowy Icelandic slopes, Swiss ski resorts, Colorado mountain peaks, and the white sand beaches of St. Barts — all in the past six months.

Still, Rosen said he has no regrets about 100 East 53rd. When asked whether he thinks the condo tower will still turn a profit, or whether it’s now a question of not losing money, he replied: “We’ll try, you know, that’s what we do. The market might come back and prices might go up again. I don’t know, I don’t have a silver ball.

“If I have to sell them low, I’ll sell them low,” he added. “I’ve never been a stubborn owner.”