The West Village office of the now-defunct JC DeNiro & Associates was a prime location for luring wealthy passers-by to browse framed professional photos of $2 million condos.
The firm’s sleek, glass-enclosed and “very shiny offices” were one reason salesperson Andrew Goebel was attracted to the 30-agent company. So he was surprised one day in late 2007, when the shrieks of an enraged member of the cleaning crew disrupted his phone call to a client.
“The housekeepers would say, ‘When are we getting paid?’ said Goebel, who specialized in rentals during his nine months at the company, which is named for founder Jack DeNiro. “They would literally chase Jack down the street.”
As Goebel — who was fired from the company in the summer of 2008 after being told the company no longer needed a rental division — had begun to realize, JC DeNiro’s carefully cultivated glossy image concealed dire financial straits. (Goebel claims the company owes him nearly $18,000 in unpaid commissions and referral fees, which DeNiro disputes.) But just how dire things were did not become clear until more than a year later, when the company was evicted from its Chelsea offices after failing to pay more than $16,000 in monthly rent. Then, in April, it went out of business.
Like other boutique firms that have closed since September’s Lehman Brothers collapse, JC DeNiro was dealt a mortal blow by high overhead when the real estate downturn slammed into the city this fall. But JC DeNiro’s closure was particularly startling to the industry because of the firm’s high-end reputation and connection to actor Robert De Niro, who is Jack DeNiro’s nephew. (The two spell their names differently.) This month, The Real Deal takes a behind-the-scenes look at the firm’s downfall.
JC DeNiro’s decline appears to have been accelerated by disagreements and a protracted legal battle between co-founders Jack DeNiro and Christopher Mathieson, but experts say the company’s fall epitomizes the obstacles faced by a bevy of fledgling New York City companies, including Homestead New York and New York City Dwellers, which are now bankrupt or facing near certain closure after growing too fast as they rode the crest of an unprecedented real estate boom. The phenomenon has even extended to some larger, more established firms, like 214-agent Coldwell Banker Hunt Kennedy, which went out of business last month.
“People assumed that the boom would last forever, and they overexpanded,” said Charles Coutinho, the landlord at JC DeNiro’s Chelsea office. “It was workable when things were very good, but once the economy changed, it didn’t make sense at all.”
Some of the boom-time startup firms are still hanging on, but the current uptick in traffic likely isn’t enough to save many of them, said Marc Lewis, president of Century 21 NY Metro.
“A lot of companies are in the process of going out of business, but it hasn’t been announced yet,” he said. “There will be maybe 30 to 50 percent less brokers after the summer.”
In a phone interview, Jack DeNiro also predicted more closings, saying his business was irreparably harmed by the unprecedented force of the slump and that many other companies have been fatally wounded as well.
“The rest of the real estate industry in New York is very concerned about how long they’ll be able to stay in business,” he said. “I’ve been in the business for more than half of my life, and I’ve never seen anything like this. And neither has anyone else.”
Bills pile up
JC DeNiro’s demise was a surprise to the real estate industry, including the agents who worked there. Brokers arrived at work one day in mid-April to find an e-mail telling them to pack their things and leave by 6 p.m., said Goebel, now a sales associate at Metropolitan Commercial Partners.
“I didn’t think things were great, but I don’t think that I ever thought it was going to end,” said Iris Shorin, who was an associate broker at JC DeNiro until it shuttered.
But the closure certainly wasn’t a shock to the company’s creditors. Coutinho said DeNiro had been late on rent payments for the Ninth Avenue Chelsea office before ceasing payments completely in March 2009. (The Real Deal is also one of JC DeNiro’s creditors, awaiting past-due payment for advertisements.)
Coutinho said he still has not received rent for March or April and has not heard from DeNiro for months. The office is currently padlocked, and in the middle of this month, a marshal will come to change the locks, he said.
Goebel, meanwhile, said he has contacted DeNiro about pay he believes he is owed and is consulting with his attorneys to figure out his next steps. He and other sources said other former JC DeNiro agents also are owed money for past commissions.
“Where did the money really go is what I want to know,” Goebel said.
DeNiro, who has not declared bankruptcy, denied that he owes Goebel money but acknowledged that he owes money to others. “I’ve got some bills that need to be paid,” DeNiro said. “I’ll pay them when I get the money that’s owed me.”
Hatching a boutique firm
Jack DeNiro, now 84, first got his real estate license in New York in the 1960s and has been involved in various commercial and residential ventures over the years. However, by the time he met the younger Mathieson, DeNiro was living in Florida.
According to documents filed in the court case over their falling out, the two met in Boca Raton in August 2002 and decided to establish a boutique high-end residential brokerage in Downtown Manhattan utilizing a grant from the Lower Manhattan Development Corporation.
DeNiro agreed to contribute $10,000 in venture capital in exchange for a 60 percent ownership stake in the company, while Mathieson would be responsible for setting up the firm and tending to its day-to-day operations.
When asked whether DeNiro’s famous nephew Robert, the founder of the Tribeca Film Festival and a well-known advocate for Lower Manhattan, played a role in helping to secure an LMDC grant for the startup company, Jack DeNiro declined to comment.
According to one source close to the situation who asked to remain anonymous, relations are cool between Jack DeNiro and the “Raging Bull” star, whose son Raphael is a managing director at Prudential Douglas Elliman. Jack DeNiro and the movie star have few business ties, despite the actor’s activity as a developer, the source said.
“Robert De Niro did development,” said the source. “Why wouldn’t he give [exclusive sales contracts] to JC DeNiro? Why wouldn’t Raphael come to work at JC DeNiro? It didn’t seem from their actions that there was any good relationship there whatsoever.”
Either way, Mathieson set up shop at 65 North Moore Street in Tribeca and began growing the business, buoyed by the high-flying real estate market of the time.
On Mathieson’s watch, the business expanded rapidly, opening three more offices by 2005 in prime storefront locations in the West Village, Chelsea and the Upper West Side, on Broadway between 81st and 82nd streets. By 2006, the company had scored exclusive sales and marketing contracts at the Morgan Lofts Condominiums at 11 East 36th Street and 163-unit project District at 60 Ann Street, where the average apartment sold for $823,000.
“They really grew during [those] couple of years,” said former JC DeNiro employee Steven Kopstein, who left the company to start his own company this summer. “It was exciting to be part of that.”
The explosive growth seemed to be due, in part, to the sheer force of Mathieson’s personality.
Mathieson is “a really great salesperson,” said Kopstein. “He’s extremely dynamic, just a really kind of inspirational person to be around.”
Mathieson also had an eye for aesthetics, Kopstein said, outfitting his sleek new offices — or “galleries,” as the company called them, with “shabby chic” desks, buying expensive ads and making sure that listings were shot by professional photographers.
“Christopher had a good eye for that stuff,” Kopstein said. “He had this way of making things seem exclusive.”
For example, Mathieson made headlines in May 2007 when he hired nightlife queen Amy Sacco, the founder of Bungalow 8, to serve as a “lifestyle consultant” at District.
Cultivating a high-end image remained important at JC DeNiro even after Mathieson left in the fall of 2007, said Goebel, who started working there in November of that year.
To help mold the firm’s image, said Goebel, brokers were encouraged to price their listings artificially high to entice sellers and land exclusive listings.
If a price came in too low, he said, they were told to “run different comps,” he said.
For example, Goebel said he planned to list a cond-op at 50 Lexington Avenue at $750,000, but “they made me list it at $998,000.” It eventually sold for $807,000, added Goebel, who said he is owed a commission of $12,250 for the sale.
DeNiro disputed Goebel’s claim.
Despite JC DeNiro’s glamorous appearance, all was not well behind the scenes.
By September 2007, a year before the credit crisis had begun to wreak havoc on the New York City real estate market, relations between Mathieson and DeNiro had gone sour and Mathieson left the company.
A month later, Mathieson filed a lawsuit against DeNiro in federal court in the Southern District of New York, claiming that his former partner had unlawfully seized control of the business. In a counterclaim, DeNiro said Mathieson had been misappropriating company funds for his own use.
The two painted very different pictures of how their once fruitful partnership began unraveling. Mathieson claimed DeNiro unjustly altered his commission agreement, claiming the company was in “bad shape” financially, though statements from the company’s bank account at the time showed averages of $500,000 and a gross income for June 2007 of $967,897.02, the company’s highest gross ever, according to the suit.
Moreover, “DeNiro advised Mathieson that he was not going to let Mathieson make more money than him,” the suit alleged.
Mathieson’s suit also claimed that DeNiro was experiencing “severe financial difficulties” with his own real estate ventures in Florida, resulting from “declining market conditions, overruns, delays, hurricanes and litigations, and that DeNiro was liquidating his assets, including his primary residences.”
The suit further alleged that as a result of these difficulties, DeNiro set in motion a scheme “to divest Mathieson of his position” and to divert the firm’s “liquid assets to himself.”
Mathieson said DeNiro improperly transferred $130,000 by wire from JC DeNiro’s corporate bank account to a separate corporate account for one of his developments in Florida, “improperly commingling JCD’s liquid assets with unrelated (and failing) development projects originated by DeNiro in Florida.”
Other, bizarre facets of the case include Mathieson’s claim that DeNiro “stole Mathieson’s car from the New York City parking garage where it was parked” by lying to the parking lot attendant, the suit said.
For his part, DeNiro claimed he expelled Mathieson from the partnership for mismanaging company funds.
Mathieson failed to pay the company’s federal and New York taxes, worker’s compensation insurance premiums, photographer, architect, public relations representative and the office supply company, DeNiro’s countersuit claimed.
The suit said Mathieson used company funds to pay his personal expenses, parking tickets and “excessive commissions to himself.”
Mathieson was later hired as a senior director of marketing at Halstead Property but subsequently left, citing health problems.
Reached by phone, he said: “During the time I was at JC DeNiro, I enjoyed working with all the agents and staff and brokers. I wish them all success in the future.”
The legal battle between DeNiro and Mathieson likely hastened the company’s decline, Coutinho, the Chelsea landlord, said.
The overly aggressive expansion was likely the nail in the coffin.
Coutinho said the firm paid $2,000 to $3,000 a month in fees and utilities at its two adjacent Chelsea spaces in addition to rent, and estimated that when the company had four locations, its combined monthly overhead could have been as high as $50,000.
“If we leave aside the personal falling out between the two of them, it’s just a case of overreaching,” he said. “You’re talking about four stores in four years — that’s a pretty good expansion. I’m sure they couldn’t manage it.”
While Mathieson and DeNiro slugged it out in court, brokers were kept mostly in the dark, Goebel said, but it was clear that something was draining company finances.
The Upper West Side office closed suddenly in the summer of 2008, around the time Coutinho said the firm started to fall behind on rent for the Chelsea office.
“The money just started disappearing,” said Goebel.
He also noticed that requests to listing brokers from other firms to show properties were spurned. When he called to inquire about showing an apartment, he said the response was: “‘I don’t work with DeNiro,’ click.”
Kopstein, who by the summer of 2008 was managing the Upper West Side office, also said his payments from the company were sometimes late.
“I didn’t always get paid on time, and some vendors said they weren’t getting paid,” he said, adding that he was kept out of the loop.
“I didn’t see any finances,” he said. “There was an accountant in Florida who paid all the bills.”
By the time DeNiro and Mathieson settled the suit in January 2009, the already weakened company was grappling with a far more formidable enemy — the economic downturn and credit crunch in the wake of the Lehman Brothers collapse.
“It was like an avalanche,” said Shorin, the former associate broker. “We went to sleep one night in August [and] then woke up in October with 100 feet of snow on us.”
The months December through March were, she said, “the four slowest months that anybody could remember.”
A former employee said the company may have suffered from a lack of hands-on leadership after Mathieson left, especially since DeNiro was managing the company from Florida.
“There was a huge vacuum of deals,” the source said, adding that the economy intensified the company’s pre-existing management problems.
“A good market can cover up a lot of mistakes,” the source said.
The few deals that were taking place were in rentals and sales priced below $1 million, so JC DeNiro’s reliance on high-end sales listings suddenly became a major handicap.
“Their philosophy was ‘exclusives are gold,'” Shorin said. “But exclusives started to be on the market a very long time.”
That’s a problem many brokerages in the city are experiencing, as evidenced by the closure of Coldwell Banker Hunt Kennedy. That firm faced different challenges than JC DeNiro because it is much larger and managed by debt-plagued real estate company Realogy.
Still, like JC DeNiro, CBHK was caught without a backup plan when the sales market took a dive.
“Any sales company that didn’t do rentals would have had a very hard time in the last six months,” said Bruno Ricciotti, a principal at Bond New York. “The companies that are diverse are the ones that will do the best.”
Not only was JC DeNiro not doing any new deals, DeNiro claims, it wasn’t getting paid for the ones it had already completed. At District, for example, the company had sold 120 apartments, DeNiro said. But when the credit crisis forced prices down and made mortgages elusive, some buyers started walking away from their deposits, leaving brokers without their commissions.
“It was hundreds of thousands of dollars down the drain,” DeNiro said.
According to StreetEasy, about 75 units at District have closed.
The company’s cash flow was negative by the time it closed, said DeNiro, who said he is optimistic that he will be able to pay back his outstanding bills.
“I decided I [didn’t] have the money to continue this type of operation,” he said. “I’m not on a cause to prove anything. I’m going to make money or not be in business.”
The high cost of overhead in New York City is a challenge for small new firms that don’t have infusions of capital to keep them afloat when times get tough, he said.
“To operate in New York is not inexpensive,” he said. “The small companies don’t have the resources to stay [in business].”
Some say JC DeNiro and other newly hatched firms were also reckless, expanding too quickly into expensive retail office space. Indeed, Homestead New York — the boutique sales and rental brokerage that closed in January after four years in business — started with an office at 102 Fulton Street and expanded to the Upper East Side and 54th Street in Midtown. “When [Homestead] opened that 54th Street office, I questioned how long they could possibly last,” said one industry source who asked to remain anonymous. “I’m surprised they lasted as long as they did.”
Kopstein added: “The storefronts weren’t cheap. That works in a strong market, but when it goes slow, you have to pay all those rents. It’s a cautionary tale for any real estate company.”