Editor’s note: Real estate crime time

Stuart Elliott The Real Deal
Stuart Elliott

political bombshell exploded in Albany last month and the debris is covering the New York City real estate industry.

In a series of stories this month, we examine the fallout surrounding the arrest and indictment of the once-powerful speaker of the state Assembly, Shelly Silver.

First we take a close look at the investigation being spearheaded by U.S. Attorney Preet Bharara, who has already singled out so-called Developers 1 and 2 for their inappropriate relationships with the ex-speaker. Bharara has vowed to continue his investigation, a fact that has some political and real estate players on edge.

We also survey the most powerful real estate lobbyists in both the city and state and examine what’s next for the industry on the state level now that Silver is out.

Meanwhile, looking more globally and less parochially, what’s the latest amenity for ultra-rich foreign condo buyers in Manhattan? Huge, industrial sized washers and dryers. The reason? To launder all that ill-begotten cash they are funneling into New York City real estate.

Ba-dum-bump!

Of course, I’m joking, but last month’s massive, five-part New York Times series about international buyers clearly implied that Manhattan real estate is rife with money laundering.

The front-page series was an interesting exposé of more than a dozen foreign buyers with shady backgrounds who have secretly purchased apartments at the Time Warner Center, hiding behind LLCs. But frankly, it was not all that surprising to those in the industry.

Sign Up for the undefined Newsletter

There is also more in the issue than stories about the industry’s shadowy underbelly.

Our main cover story, which starts on page 40, is a deep look at the Chinese investors who are sending billions to New York. With China’s economy cooling, it’s no secret that investors there are looking for deals elsewhere and, increasingly that elsewhere is New York. We take apart everything from the individual apartment purchases to the building buys and development.  We also examine the army of gatekeepers — from Chinese wealth managers to lawyers — who New York players must connect with if they want to get in on the deals. And reporter E.B. Solomont gives a blow-by-blow account of how the Chinese insurance company Anbang ended up buying the iconic Waldorf-Astoria hotel from the powerful Blackstone Group for a cool $2 billion. Let’s just say there were lots of 15 hour flights between NYC and Shanghai.

Also check out reporter Rich Bockmann’s profile of Bruce Eichner. The colorful real estate developer is busy building the tallest residential buildings in both the Flatiron District and Harlem, but has a mixed track record in New York and Las Vegas real estate.

“His very name,” Bockmann writes, “is one mentioned in real estate circles as a portentous omen: Some say an Eichner building rising out of the ground is a harbinger of a market about to turn south.” Decide for yourself on page 36.

And don’t miss our ranking of the priciest Manhattan office leases of 2014. The top 10 deals will generate a massive $8 billion for their landlords. Leading the charge was Credit Suisse with a renewal at 11 Madison Avenue, worth $1.7 billion over the next 20 years. That was one of a slew of monster deals at the Sapir and CIM-owned tower, which sits in the heart of the white-hot Midtown South office market.

Lastly, check out the story about Zestimates, those automated property values generated by real estate website Zillow, on page 34. While TRD has reported about their inaccuracies in New York, it turns out the problems go beyond the city’s borders. (Zestimates have a “median error rate” of about 8 percent nationally and 11 percent in Manhattan.  That amounts to a $110,000 error on a $1 million apartment here.)

It’s hard to believe this billion dollar company — which had 73 million unique visitors in December, or about one in five Americans — could be so far off base. Imagine launching a rocket or erecting a building with an 11 percent margin of error. That might not be the perfect analogy, but a home purchase is usually the biggest investment a buyer makes in their life, so basing a decision off those figures is seriously worrisome.

Enjoy the issue.