From his 52nd-floor office at the corner of Fifth Avenue and 56th Street, Howard Lorber can look a few blocks north to his home at the classically styled Sherry-Netherland Hotel, then turn east to view his future apartment in the sky-piercing 432 Park Avenue.
For a man who believes in the indefatigable value of a strong brand, the two addresses provide a fitting metaphor for Lorber’s career trajectory.
The former is where the Douglas Elliman chairman met his mentor, Bennett LeBow, the man who guided Lorber through the deals that led him to the top of the city’s largest residential brokerage. The latter is the tallest condo building in New York, and arguably the most prominent on the real estate scene today; an address befitting a man who is shaping his brand into one identified with an array of new development projects across the city.
The Real Deal visited Lorber in his office to talk about his growing hand in crafting the New York skyline, and how he climbed to this height in his career.
A brain for business
“Good at math” is how Lorber describes his 21-year-old self, who graduated from Long Island University in 1970 with a degree in sociology. The son of an electrical engineer who succeeded in the post-war building boom, the Bronx-born Lorber had no business background, but his first job was as a stockbroker and his second was in the insurance business. “And then I sold real estate,” recalls Lorber, “so all sales-oriented businesses.”
By the early 1980s, the mogul was already seasoned at buying and selling companies. But during a chance encounter in 1983 at the bar at the Sherry-Netherland — a luxury hotel that was an icon of old, grand New York — lightning struck, when Lorber met Bennett LeBow, a corporate raider who was to make his fortune taking Western Union through bankruptcy.
Lorber started setting up pension plans and handling insurance for the financier, who saw the promise in a 140-year-old telegraph company that seemed at first glance obsolete and mossed over with debt. To avoid dragging the storied Western Union name through the mud — in Lorber’s words, to protect the brand — the company changed its name to New Valley and declared bankruptcy in 1991.
“Basically, what we were left with was a company with a lot of money and no business,” Lorber said. In 1994, reborn with a new focus on money transfers, the old Western Union was sold, making LeBow a killing of some $400 million. New Valley LLC became Lorber’s base of operations — the company today owns 70.6 percent of Elliman, in addition to a series of real estate investments.
Not bad for “good at math.” But ask almost anyone who knows him well and they’ll likely tell you that Lorber — a man who spends his time in his office glued to his Bloomberg terminal — has one of the sharpest business minds out there.
“The best explanation I can give you is, he is a quick study,” said attorney Brian Ziegler, who brought Lorber the deal to buy his first brokerage stake in 2000. “He’ll take a look at a situation or a financial statement, or look at a business plan, and he really digs down below the surface on a very rapid basis. He gets what’s going on and understands where the trouble is, and understands how to correct it.”
Click to enlarge
Gone fishing
Lorber’s incisiveness extends not only to business, but to his own strengths and weaknesses.
For example, Lorber’s first deal with prominent developer Steve Witkoff came in 2011, when the partners purchased one of the International Toy Center buildings at Madison Square Park, which they’ve since converted into 125 luxury apartments.
The two had known each other for decades; early in his career, Witkoff practiced law and worked on some of Lorber’s first real estate deals in the mid-1980s.
The way they tell the story, Witkoff came to Lorber with a proposition to buy the Toy Center out of bankruptcy. The latter agreed to come on board, but declined to go bid on the building.
“I didn’t go to the auction, because I know I’m not that good at auctions,” Lorber said. “The ego gets involved and you keep bidding higher and higher.”
Instead, Lorber went fishing.
Witkoff, meanwhile, was joined by his 17-year-old son and his business partner, Scott Alper, at the Midtown law office of Schulte Roth & Zabel, which represented the seller, Lehman Brothers.
Witkoff & Co. were up against several industry heavyweights: Harry Macklowe, the CIM Group, SL Green and L&L Holdings. “We look like the sad sister act compared to these guys,” recalled Witkoff. “Everyone’s there with institutional capital. We’re there alone.”
Bidding started at $180 million, and when it went up to $185 million, Wikoff called Lorber to see what he thought of the price.
“He said, ‘If you like it, I like it,’” Witkoff recounted.
The price went up again, this time to $187 million. Another phone call, a few more words of encouragement. Up to $189 million, another call.
“I don’t really care what you buy the building for. Do whatever you want. I’m fishing,” Lorber told his partner. “Call me back when you got it.”
Witkoff finally won the property for $190.8 million and called Lorber to tell him the news.
“Good, you would have been a shmuck if you didn’t,” Witkoff remembered his partner telling him.
With all but three of the building’s 125 condos sold, the two are more than satisfied. As originally penciled out, Lorber and Witkoff thought the purchase would be a good deal if they could sell the units at $1,750 per square foot. Lorber said the properties have been selling at an average of $3,000 a foot.
“So it was a pretty good deal at $1,750 a foot,” he said. “Now it’s an unbelievable deal.”
The value of a brand
In some ways, Lorber seems out of place among the outsized personalities at Elliman. After all, the stable at the city’s largest brokerage includes “Million Dollar Listing” stars Fredrik Eklund and Luis Ortiz, and has seen the likes of maverick powerbroker Dolly Lenz and self-promoter Michael Shvo pass through.
By contrast, Lorber is a boardroom executive, and while best known in the industry as the chairman of Elliman, he has led several surprisingly diverse businesses, from the Brooklyn-born hot-dog stalwart Nathan’s Famous to tobacco company Liggett Group.
The executive chairman and largest individual shareholder of Nathan’s, Lorber said that the company taught him a valuable lesson in business.
“Nathan’s was an interesting one, because it was a very good lesson about the value of a brand,” he said. “Nathan’s was a great name with not very good management. The brand name was much bigger than the actual company was.”
Lorber said he turned the company around primarily by installing stronger managers — a tactic he later employed with Elliman.
“If you have a great brand name it’s almost impossible to kill,” he said. “So I love buying great brand names that have not such good management, because if the management was great, how much can I add to the equation?”
The story of how Lorber came to Elliman begins with the aforementioned attorney Ziegler, managing partner at the Long Island-based corporate law firm Certilman Balin. Ziegler had represented Lorber in the 1980s, when he was putting together real estate syndications to buy rental properties to convert them to co-ops.
Another client of Ziegler’s was Dottie Herman, who was running the struggling Prudential Long Island Realty, and had asked the attorney to find someone to buy part of the company.
“I saw the landscape,” said Herman, whose company at the time sold homes from the Hamptons to Queens. “Public companies were coming into the business and you couldn’t compete with them.”
Ziegler said he took the deal to a few people he knew. One who passed on it was Sterling Equities Chairman Fred Wilpon, most known these days as the principal owner of the New York Mets. Lorber purchased about a third of the company in 1997 for $1.7 million and eyed an expansion into Manhattan.
Around 2002, Lorber approached an associate he knew named Andrew Farkas, who at the time was the CEO of Insignia Financial Group, which owned the Manhattan-based white-shoe residential firm Elliman and the commercial brokerage Edward S. Gordon, and pitched a deal to buy the residential side.
Lorber said he was rebuffed, until a chance meeting about a year later in his 56th Street office building.
The two men got on the elevator and Lorber watched as Farkas got off on a lower floor. Lorber asked the building’s receptionist who was on that floor, and learned it was the office of Blum Capital Partners, which then controlled the majority of the commercial brokerage CB Richard Ellis.
“And so I said, ‘Ah, Andrew must be selling Edward S. Gordon to CB Richard Ellis, but they’re not going to want their residential business,’” Lorber recalled. “So I called his office phone, knowing he wasn’t back yet, and I left a message that said, ‘Andrew, I know what you’re doing. I want to buy the residential business. Call me.’”
Herman said that while all she initially sought was a partner with deep pockets, she ended up with one who helped her realize her dream of expanding to the city.
“Frankly it was a good thing, because Howard’s very bright,” she said.
Bankrolling building
In mid-September, Lorber mingled with guests at the sales launch for 11 Beach Street —the residential conversion in Tribeca built by prolific developer Ziel Feldman — and he brought Elliman firepower with him.
In attendance were celebrity broker Eklund and his partner, John Gomes, who are marketing the 27 condos and townhouses along with top producers Melanie Lazenby and Dina Lewis.
But if the asking price for the first three apartments of roughly $2,000 per square foot wasn’t wholly remarkable, the launch was unique in one aspect.
One of the investors in the project is New Valley.
New Valley is itself owned outright by the publicly traded holding company Vector Group, the company founded by LeBow, which Lorber heads as president and CEO. LeBow remains chairman.
As of Sept. 30, Lorber held a 4.8 percent stake in Vector — around $108 million worth of a stock that has jumped nearly 34 percent over the past year alone.
With sales of $546 million in 2013, New Valley accounts for just 35 percent of revenue in Vector, which generates most of its cash through its majority ownership of Liggett Group, a manufacturer of low cost, generic cigarettes.
But Vector is pretty liquid — it’s got about $380 million in cash on hand and $370 million in marketable securities — and is looking to pump more money into development projects.
In fact, since 2011, New Valley has poured more than $131 million into projects, including residential developments in New York City and Miami Beach. The portfolio also includes approximately 5,500 apartments in and around Baltimore County, Maryland; hotels in Manhattan, St. Barts and Bermuda; and hundreds of acres of land in Palm Springs, California, and Italy.
There may be no other investor in the city who brings to the table the same attributes as does Lorber, who, as the head of a firm with more than 4,000 brokers, has an unparalleled view on the market.
“He’s one very sophisticated guy, with his finger on pulse of the market,” Witkoff said. “I don’t think you can be in the real estate business today anymore without having your finger on the pulse. It’s just too complex and comprehensive a business to just throw a dart at the map.”
Witkoff continued, “Ultimately, Howard’s got money in deals and he’s an investor. I’m never just talking to a broker. He’s a man with broker sensibilities.”
New Valley’s skin in the game varies from project to project, and can range from as much as $23 million to as little as a few hundred thousand dollars.
Andrew Heiberger, founder and CEO of rival brokerage Town Residential, said Lorber’s appeal as an investor may go beyond the size of the check he’s cutting.
“The concept is that if Howard Lorber would invest in the project, then the Douglas Elliman sales team would support it,” he said.
“I don’t think in most scenarios that the joint venture is so attracted to his equity investment,” he added, pointing out that in many cases New Valley isn’t investing huge sums of money. “I don’t think the reason is they need his $6 million.”
If Lorber seems busy, it may be because he has plenty of opportunity.
“He’s incredibly active. I mean, he’s partners with a lot of guys and sees a lot of deals in New York,” said hotelier Ian Schrager, who is working with Lorber on three different developments. “I think being in Elliman gives him an early look. He gets to see a lot of deals and he gets to see them early on.”
Perhaps most prominent among New Valley’s investments is the one at 701 Seventh Avenue, also known as 20 Times Square, the 39-story mixed-use tower that will be anchored by Schrager’s 452-room Marriott Edition, which is slated to open in 2017. It will also include 40,000 square feet of entertainment space, several restaurant floors and 76,000 square feet of retail. The building will be wrapped in a 20,000-square-foot LED billboard, the largest in Times Square. All told, the retail and billboard combination could bring in revenue upwards of $50 million a year.
New Valley put up $11.3 million for an 11.5-percent stake in the project.
Among his most interesting ventures is his deal with Shvo. The mercurial broker-turned-developer, who was a top producer at Elliman — he logged $300 million in sales in 2003 after only four years in the business — but made a very public exit in 2004, is building a soaring condominium at 125 Greenwich Street that will nearly rival the height of One World Trade Center. New Valley put in $10 million, one of an array of investors that provided equity for the project. Lorber’s involvement in the project surprised some observers, but Shvo recently told TRD they always had a “great” relationship.
“We see each other almost daily at Cipriani, and Howard likes the project,” Shvo said. “He believes in the project. I think he believed in the vision, which I think is the most important thing.”
Lorber also runs in circles with some of the wealthiest people in town, a boon for a guy who sells real estate.
“The world calls Howard Lorber,” said longtime Elliman broker Leonard Steinberg, who moved to Urban Compass in June. “He’s very connected to a lot of opportunities. He gives out great listings to brokers.”
The chairman is known as something of a kingmaker for handing out those choice assignments to Elliman agents. Lorber maintained he has a hands-off management style, but can nurture talent where he sees it.
“I am very involved with a lot of brokers,” he said. “I find that I’m very good at taking a good broker and making them a superstar. I’m not that great at taking a brand-new broker and making them good.”