In 2007, little-known Brooklyn-based developer David Bistricer became a prime punching bag for federal, state and local officials.
Casting a wary eye at the over-leveraged apartment complex Stuyvesant Town, a slew of elected officials sought to block Bistricer’s bid to buy Starrett City, the massive rent-regulated Brooklyn apartment project, for what was then considered the astronomical price of $1.3 billion, or $221,000 per unit.
The aggressive campaign against Bistricer — in which his opponents repeatedly cited a 1990s state order banning him from selling co-ops and condos — gave the public its first impressions of the previously under-the-radar landlord. The effort succeeded, and the sale was blocked.
But just as his reputation was taking a public beating, Bistricer — who heads his family business, Clipper Equity — had an astounding piece of good fortune.
While jockeying to buy a Brooklyn hospital building in Prospect Park South, Bistricer met another major (and also low-profile) New York developer, Joseph Chetrit, who ended up becoming a crucial partner in his New York deal-making.
Since then, with Chetrit and on his own, Bistricer has been on a tear, buying up at least eight properties for a total of $1.7 billion. That includes the $1.1 billion Sony Building, as well as complicated residential conversions like Cabrini Medical Center in Gramercy.
And in July, sources said Bistricer — who also runs two other real estate investment firms, Berkshire Capital and Morgan Capital — was among the gaggle of developers circling the Empire State Building, all of whom offered prices north of $2 billion for the iconic 102-story tower (see related story, “Empire State Building: a buyer’s manual”).
Meanwhile, Bistricer is hunting for more deals, even as some industry players say he’s already taken on too much at once. One rival, who did not want to be quoted being critical of a competing developer, said Bistricer is “over his skis.”
In response to that, Bistricer told The Real Deal: “When I ski, it’s very conservative. Hence, I am not over the skis. Each investment stands on its own, usually with 70 percent debt [to equity] or no debt.”
He added that he plans to keep forging ahead. “We are looking at deals, but they have to make sense,” he said.
Bistricer’s fans and critics alike say he has a good eye for sussing out tricky deals where he can make an impressive return — often by converting office properties and other buildings into apartments.
Such conversions are often more difficult and riskier than ground-up new construction, said Neal Weinstein, a commercial real estate attorney and partner at the law firm Ingram Yuzek Gainen Carroll & Bertolotti.
“If you look at any deal [Bistricer] bought, there was some value-added component — it was not just a straight cap-rate [purchase],” added Rosewood Realty Group’s Aaron Jungreis, who has served as the broker on several properties Bistricer has purchased, including the Bossert Hotel in Downtown Brooklyn. “The Sony Building — they are doing a whole redevelopment. Cabrini Medical Center, a whole redevelopment. The Bossert Hotel was basically a vacant hotel [which] they bought and they are restoring. So there is always some value-added play.”
Today, Bistricer and his wife, Ester, live in the Borough Park section of Brooklyn, where they raised their five children, who are now in their 20s and 30s. The couple is active in the Orthodox Jewish Yeshiva community, donating more than $70,000 to nonprofit groups in 2012, including Yeshiva Simchas Chaim, a school in Sheepshead Bay, federal charity records show. Underscoring his low-key style, Bistricer heads his family’s business from an office in a Borough Park residential rental building, which the clan has owned for decades.
The business started with Bistricer’s parents, Moric (who also goes by Morris) and Elsa. During World War II, Moric hid from the Nazis in Budapest, and Elsa was sent to the infamous concentration camp Bergen-Belsen in Germany, according to David’s son Jacob, who goes by “J.J.” They emigrated from Brussels in 1951, bringing two-year-old David with them.
Once in New York, the couple began buying and selling buildings, starting with properties on West End and Fifth avenues. By the late 1970s, Bistricer had joined the firm, and with his parents, owned at least a dozen apartment buildings in Brooklyn with hundreds of units, an analysis of property records by TRD found. The family business now spans three generations: Moric, now in his 90s, is still active in the company, while J.J. joined the firm in the mid-2000s.
In 1987, Bistricer and his parents partnered with real estate investor Jacob Schwimmer, paying $11 million for 101 Wadsworth Avenue, two towers with 480 apartments near the George Washington Bridge.
At about the same time, Bistricer told TRD, the family made a major investment in a then-private company called Coleman Cable, which manufactures electrical wire. Coleman, which is based in the suburbs of Chicago, went public in 2007. Today, the family owns more than 5.5 million shares, or approximately 30 percent of the company. As of last month, their stake was valued at about $100 million.
Not all of their investments turned out quite so well, though.
In the ’80s, the Bistricers were among the many developers converting New York City rental buildings into co-ops. But some of the work they did on those conversions landed them in hot water: In 1994, then-New York Attorney General Oliver Koppell charged in a lawsuit that Moric, Elsa and David had failed to properly inform buyers about financial aspects of the sale of co-op units at the Fort Tryon Apartments in Washington Heights, and at several projects in Brooklyn.
The developers defended themselves. “Our attorney failed to disclose a refinancing that benefited all condo owners,” Bistricer told TRD via email.
Still, a state judge ruled in 1998 that the family had erred, and prohibited them from selling co-ops and condos.
Starting in 2001, the restrictions began to be loosened after a series of court-approved consent orders between the AG’s office and the Bistricers. In a 2009 consent order obtained by TRD, the state lifted almost all restrictions on the Bistricers, allowing them to freely sell co-ops and condos. (The document also noted that the AG’s office had not received any complaints regarding financial improprieties in connection with the family.)
Bistricer disputed the AG’s version of events, however, saying: “At no time was I ever prohibited from selling co-ops or condos.”
“In the political effort to deny the Starrett City application … the AG said things that were not correct,” Bistricer wrote in an email to TRD. “The agreement that we made voluntarily is that we would seek permission prior to filing an offering plan — which we did on several occasions, and in each case, the AG accepted our plans.”
Still, while the family continued to operate a large portfolio of apartment buildings, property records show that they purchased little or no real estate in New York City for nearly 15 years leading up to and during that AG litigation.
Bistricer said his firm has been “active for many years without hiatus,” but declined to provide examples of any deals during this period.
Regardless, the family jumped back into major acquisitions in 2002, with the purchase of two Downtown Brooklyn office buildings, 141 and 250 Livingston Street, for a combined $40 million.
Then in 2005, the Bistricers took their investment in Downtown Brooklyn a step further with a pioneering gamble to bring residential units to the area. They paid $74 million for the former New York Telephone Company building, a 27-story Art Deco office building at 365 Bridge Street. In 2006, they formed Clipper Equity, which set about converting it into the 219-unit BellTel Lofts condominium.
Bistricer quickly followed the BellTel deal with the purchase of 59 rent-regulated apartment buildings in East Flatbush called the Vanderveer Estates. Using family money — which he and J.J. said bankrolls all of their deals — he bought the run-down buildings for $138.2 million from Emmes Asset Management and a California pension fund. The idea was to fix them and attract higher-paying tenants.
But the Vanderveer led to more bad publicity.
The property had more than 10,000 housing code violations when Bistricer bought it, according to commercial broker Tim King, who represented the seller in the Vanderveer deal. In 2010, the development, by then renamed Flatbush Gardens, landed Bistricer on a list of Worst Landlords put out by Public Advocate — and current mayoral candidate — Bill de Blasio. Bistricer has substantially reduced the number of housing code violations, but some 1,500 remain, sources said.
J.J. said the company has spent about $16 million rehabilitating elevators and making other upgrades at Flatbush Gardens.
“A lot of time and effort went into” improving conditions there, his father said. “I think it is a remarkable achievement.”
Kenneth Fisher, a partner at the law firm Cozen O’Connor and former City Council Member, put it this way: “He got a bad rap over Vanderveer because it was a deeply troubled project long before he got involved.”
Bistricer ran into a different type of trouble at BellTel. Sales there began in 2007, just as the economy was stalling. The developer rotated through several marketing teams before gaining traction with buyers. But today the project is 95 percent sold, according to Susan de França, CEO of Douglas Elliman Development Marketing, which is currently handling sales there. (The units that have sold in the last 180 days fetched an average of $761 per foot, far higher than the $550- to $650-per-square-foot asking price in 2010, according to the real estate listings website StreetEasy.)
King said Bistricer was ahead of the curve with BellTel, buying it in 2005, when the area was still primarily office buildings rather than housing.
“In hindsight, he was very prescient,” King said. “There was not nearly as much residential interest in the area as there is today.”
Bistricer’s big public debut with Starrett City could not have gone much worse.
The federal government had backed loans at the complex and would need to sign off on a deal to sell it. But Governor Andrew Cuomo, who was then the state’s AG, suggested that the government block the sale because Bistricer had a “troubling history.” Others quickly piled on, a fact that Bistricer attributes largely to troubles at another large housing complex: Stuyvesant Town, where Tishman Speyer’s plan to convert rent-regulated units to market-rate units famously backfired.
“The Starrett City sale came on the heels of Stuyvesant Town [and] politicians were concerned about another large complex converting to free-market rents,” Bistricer said.
When asked if the family was glad federal officials blocked the deal, in light of the fact that Tishman eventually lost Stuyvesant Town, J.J. said they don’t dwell on it.
“We are the type of investors [who] don’t look backward,” he said. “There is no point in speculating.”
Indeed, despite being pummeled in the press over Starrett City, Bistricer kept quietly negotiating other deals.
In 2007, after the Starrett City deal fell apart, Bistricer had the inside track at the Brooklyn Hospital Center site at 123 Parkside Avenue, which was being sold through a bankruptcy auction. He was chosen by the court to make an initial “stalking horse bid” of $15 million for the property, and ultimately partnered with Chetrit on the winning $15.6 million bid. Chetrit did not respond to a request for comment.
“Two smart real estate [investors] decided, ‘Why not join forces?’” J.J. said.
NGKF Capital’s David Noonan, who was involved in brokering the Brooklyn Hospital auction as well as two of Bistricer’s other deals, said the investor moves quickly.
Bistricer “is a guy who can walk into a building and decide he is going to buy it and can execute a contract in a matter of days,” Noonan said.
Living on the edge
Following a three-year quiet spell during the recession, Bistricer has gotten aggressive.
In Bistricer’s first post-recession deal, in September 2010, he partnered with Manhattan-based Rieder Holdings. The partners paid $72 million for the 197-unit apartment building 752 West End Avenue on the Upper West Side, which they initially began converting to condominiums. Instead, though, they changed course, and flipped the building in June for $120 million. “We got a very good price,” Bistricer said. “That was the only time we actually did that — sell in the middle of the sales process.”
But Bistricer’s main partner these days is the extremely press-shy Chetrit Group, which he’s partnered with on seven of his last eight deals.
Despite all of the business they’ve done together, Bistricer said there is “not such a formal structure” between the two companies.” He would not elaborate on their division of responsibilities, but J.J. said: “We think alike. We come from a similar background — a family business — we invest our own money, we are not syndicators. We work on deals together and we enjoy it.”
The acquisitions they’ve made are mostly commercial buildings ripe for conversion to residential condos (see accompanying chart on page 65).
That includes 123 Parkside, where Bistricer and Chetrit last year filed new building plans for a design by architect Karl Fisher, city records show. The city’s Department of Buildings approved the plans in April, and the developers last month filed for the demolition of one of the buildings. J.J. said the firm plans to begin marketing the first phase of the project, 119 rental apartments, later this year.
The two also teamed up to redevelop the Hotel Chelsea in 2011. But after battling with tenants there, they reportedly sold it to the boutique hotel brand King & Grove last month.
Chetrit and Bistricer’s most high-profile deal, of course, is the Sony Building, which they bought for $1.1 billion in March and plan to convert to a hotel and condos, with retail at the base.
Real estate professionals say office-to-condo conversions are difficult because the interior of the building must conform to an entirely different layout. And the Sony Building, which is a massive 850,000 square feet, is as tricky as they come.
And in a deal that recalls BellTel’s pioneering spirit, Bistricer and Chetrit are also developing a mega residential project in a remote section of Greenpoint. The duo paid $25 million for a site at 77 Commercial Street, where they are planning to build a 300,000-square-foot apartment tower. They’re also reportedly considering buying the parcel next door.
King predicted that Bistricer will get the same results in Greenpoint that he did in Downtown Brooklyn. “The stuff that is at the edge today,” he said, “will be in the thick of it in three years.”