The Real Deal New York

Menachem Stark’s portfolio revealed

In wake of murder, a tally of the developer’s properties
By Adam Pincus | March 01, 2014 07:00AM
054 Stark se FINAL.indd

Click to enlarge (Menachem Stark photo credit: Eli Wohl)

Two months after the burned body of Brooklyn developer Menachem Stark was found at a gas station in Great Neck, L.I., the motive behind his murder remains opaque. Now law enforcement officials and lawyers are looking to the real estate portfolio Stark amassed during the last boom for clues.

Sources say Stark and partner Israel Perlmutter owned around 1,000 apartment units. For this story, The Real Deal combed through city property records and the real estate database PropertyShark and identified 832 of those existing or planned units by address at 37 locations. The two bought most of those units and the development sites they sit on between 2000 and 2008 for more than $61 million, according to TRD’s analysis. (Click here for an interactive map of the properties.)

The pair started selling and transferring most of those properties beginning in 2009, many of them to associates. In the immediate wake of his murder, investigators suggested Stark may have been involved in dubious foreclosure transactions with people he knew. But the NYPD did not respond to requests for comment last month.

The largest apartment building that remains in the Stark-Perlmutter portfolio, 100 South 4th Street, a 74-unit Williamsburg rental, is at the center of a bankruptcy court dispute. The lender is alleging that more than $1.7 million is missing from a checking account that the pair controlled.

The 39-year-old Stark was married with seven children and a member of the close-knit Satmar Hasidic Jewish community. He was abducted on Jan. 2 outside his Williamsburg office and his body was discovered the next day in a dumpster. As of late last month, police had not publicly identified any suspects.

While members of the Hasidic community defended Stark, a slew of property violations quickly emerged, leading some media to depict him as a slumlord. Other sources told TRD he was simply a developer in over his head in a challenging market and a number of his properties had significant violations when he acquired them.

Insiders told TRD that Stark and Perlmutter had a three-pronged real estate strategy of buying old residential properties and fixing them up; buying industrial properties and converting them to residential rentals, and developing ground-up apartment buildings. The duo, sources say, was one of roughly 20 small non-institutional groups who own at least 1,000 apartment units in Brooklyn. These groups typically buy, manage and resell properties with a combination of their own equity along with equity from friends, family and some larger investors.

Stark and Perlmutter began slowly. They bought their first six properties between 2000 and 2003, including the 51-unit 315 Seigel Street in East Williamsburg.

In the next two years, however, they ramped up, diving into a hot market and acquiring 12 properties for more than $18 million combined. They also picked up a 20-year lease on an industrial building converted into residential units in East Williamsburg.

In a move that likely boosted their credibility, in 2005 they obtained a $1 million loan from Galster Funding. The private lender, which is owned by veteran investors Stanley Gallant and Jack Sternklar, is well-known in the Brooklyn multi-family world.

Sources say that loan undoubtedly helped them acquire more financing. Between 2006 and 2008, they snapped up 17 properties for a combined $39 million, the most prominent of which was a package of buildings along North 9th Street in Williamsburg, TRD’s analysis found.

However, Stark and Perlmutter became quick victims of the downturn. The two fell behind on mortgage payments and in 2009, lenders began filing foreclosure lawsuits.

TRD’s review found nine foreclosure cases filed against at least 17 of their properties. To stave off those foreclosures, they filed for bankruptcy protection through their holding companies in at least six of those cases, the analysis found.

After a four-year selling spree, only eight of their 37 properties remain under the direct control of partners, which now includes Stark’s estate, TRD found. (For a full list, see the story online.) However, an associate, and according to multiple sources, Stark’s brother-in-law, Abraham Bernat, picked up at least 12 of those properties for $29.3 million, including 120 South 4th Street, a 20-unit Williamsburg rental that he bought out of bankruptcy for $11.7 million, city records show. Bernat, who did not return a call seeking comment, served as an officer on several of Stark’s properties.

Perlmutter could not be reached for comment.

But Abraham Katz, an engineer who knew Stark for 15 years and who city records show lent him money on several buildings, said he was “a great guy and a sweetheart.”

“In ’04, ’05, ‘06, everybody was ‘buy, buy, buy,’ ” Katz said. “They got caught by the banks. He was typical, it happened to all the big guys, but he was a little guy. He was a lovely guy.”