Stakes go up for NYC’s real estate billionaires

Why fewer of them are making Forbes' list of richest Americans

Nov.November 01, 2012 07:00 AM

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The price of entry for Forbes magazine’s list of 400 wealthiest Americans is going up. The last person on this year’s list clocked in with a net worth of $1.1 billion — which was up $50 million from last year. However, New York City’s real estate titans are (with one big exception) keeping pace.

Indeed, most of the 10 New York real estate moguls who made the list, which was released in late September, saw their net worth increase in the last 12 months. Yet one big name dropped off this year: Steven Roth of Vornado Realty Trust.

So who led the real estate pack?

The highest-ranked New York real estate moguls this year were LeFrak Organization’s chairman, president and CEO Richard LeFrak, and the chairman and CEO of the Blackstone Group, Stephen Schwarzman. The two tied for No. 63 — each with an estimated net worth of $5.2 billion.

That was up from $5 billion for LeFrak in 2011, and $4.7 billion for Schwarzman.

LeFrak — who was listed “with family”— oversees a real estate portfolio that includes the 5,000-unit LeFrak City complex in Queens and 16 million square feet of property in Newport, the large-scale Jersey City development the firm created beginning in the early 1990s.

Schwarzman’s firm, meanwhile, has a U.S. office portfolio valued as high as $22 billion and totaling some 50 million square feet. But the private-equity giant announced this summer that it would be selling off most of those properties. It’s trying to capitalize on demand for real estate among investors looking for a safe harbor in uncertain economic times, according to an analysis by the Wall Street Journal.

At the same time, though, Blackstone closed the largest real estate opportunity fund ever last month at $13.3 billion. The company launched the fund in 2010 with a plan to raise just $10 billion and will now set to work investing the money.

Much of Blackstone’s real estate portfolio, including 1095 Sixth Avenue and the Waldorf-Astoria Hotel, was amassed by Jonathan Gray, its global head of real estate.

Gray, a boyish 42, was listed by Forbes this year as “One to Watch,” with a net worth estimated at $550 million.

The magazine pegs him as one of the potential CEO successors to Schwarzman.

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Property assessments  

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Forbes’s research takes into account each subject’s assets and, of course, their debt.

“The challenge, obviously,” said Luisa Kroll, the Forbes editor in charge of the list, “is often that in some of these real estate deals, they end up owning not quite as much as you think they own. And then, also, they might have levels of debt that might have been higher than we’d have first assumed.”

Still, while many of the real estate players on the list have diversified financial interests, most of their wealth stems from their real estate holdings.

LeFrak’s firm, for example, controls several hundred oil and gas wells, but those holdings accounted for a small slice of his $5.2 billion net worth.

“It’s almost all property,” Kroll said of LeFrak. “The other assets are really not that sizable in comparison at this point.”

Another example is Stephen Ross, the third-highest-ranked New York real estate player on the list. The chairman of the Related Companies had an estimated net worth of $4.4 billion and was ranked No. 83, up from the No. 114 spot in 2011, when his net worth clocked in at $3.1 billion.

While Ross owns the NFL’s Miami Dolphins, most of his wealth, according to Forbes, comes from properties and developments associated with Related, including the Hudson Yards project on the Far West Side and the Time Warner Center, where he lives in a penthouse.

No. 190 on the list this year (and No. 188 last year), Mort Zuckerman, chairman and CEO of mega-REIT Boston Properties, is the publisher of the Daily News and U.S. News & World Report. Those publications, though, pale in revenue generation compared to towers like the GM Building and 601 Lexington Avenue. Zuckerman lives in a penthouse at 950 Fifth Avenue, which he bought in 1986 for $8.5 million.

Perhaps the starkest case in point when it comes to making more money from real estate than from other investments is No. 128 on this year’s list: Donald Trump. Trump, who held the same spot last year, made more than $63 million over the last 12 months from entertainment-related ventures, but still derives most of his $3.1 billion fortune from properties like the Trump International and Trump Tower.


Arrivals and departures

Five other New York real estate titans made the list this year: Leonard Stern, chairman and CEO of Hartz Mountain Industries, who, despite maintaining a net worth of $4.2 billion, dropped to No. 89 on the list this year from No. 75 in 2011; Sheldon Solow jumped to No. 111 this year from No. 227 in 2011 with a big increase in net worth to $3.5 billion from $1.9 billion; and Jerry Speyer, co-CEO of Tishman Speyer, who leapt to No. 132 from No. 242 with a corresponding net worth increase to $3 billion from $1.8 billion. In addition, John Catsimatidis, the owner of the Red Apple Group, which controls Gristedes supermarkets and has real estate and other holdings, tied with Speyer, increasing his net worth from $2 billion in 2011; and Leon Charney, No. 360 this year, down from No. 331 in 2011, saw a slight dip in net worth to $1.2 billion from $1.3 billion.

All except Catsimatidis drew their net worths entirely from real estate.

For Stern — who bought a penthouse duplex at 459 West Broadway in 2010 for $16.5 million — that includes 38 million square feet of property in New Jersey and New York.

Meanwhile, Charney owns three Times Square buildings, including 1441 Broadway.

But given that $1.1 billion was the minimum net worth threshold for making the list this year, it appears that he could be knocked off in 2013 by fellow New York real estate players.

Catsimatidis got much of his bump on the list beyond real estate and the supermarket chain he’s famous for: His Warren, Penn.–based United Oil, which supplies his 300-plus gas stations, had a particularly good year, according to Forbes.

As for those moguls who did not make the list, it appears that Extell Development’s Gary Barnett and landlord Ruby Schron came closest. Barnett is one of the city’s most active developers, with projects like the International Gem Center and the mixed-use One57, New York’s tallest building with condos. At the much-hyped residential tower, apartments are selling for well into eight figures.

“I would be surprised if Barnett doesn’t approach billionaire status if successful with what he has on the table right now,” said one New York analyst.

Kroll said that Barnett would, indeed, be a contender for a future Forbes 400, but it was Schron, the elusive landlord of perhaps 20 million square feet in New York, who came the closest this year of any New York titan who did not make the list. She said Forbes pegged Schron’s net worth to be around $900 million this year — $200 million shy of the price of admission.

Schron’s sometimes business partner David Werner was also on the verge of making the list, according to Kroll. Schron and Werner’s involvement in turning the top 25 floors of the Woolworth Building into condos might put both over the top next year.

At the same time, there were big New York real estate names who dropped off after making the cut in previous years. The most high-profile example this year was, of course, Vornado’s Roth.

He just made the list in 2011, coming in at No. 397 with a net worth of $1.05 billion, down from $1.1 billion in 2010. But this year, Roth slipped off, largely because of drops in Vornado’s share price, Kroll said.

The company’s share price last month was trading at $78.68. (Forbes’ financial-magazine rival, Fortune, in October described Vornado’s share price as “treading water for the past couple of years.”)

Given the REIT’s 100 million square feet of property nationwide, including much of the Penn Station submarket, Kroll said she would expect Roth to make the list again.

Douglas Durst, the chairman of the Durst Organization, has also made the list with his family in the past — though not in 2011. But for Durst, who ceded day-to-day control of the company to his cousin Jodi three years ago, 2012 also proved to be too competitive.

But don’t count the Durst family out for 2013: With the expected topping out next year of One World Trade Center, the tallest office tower in America, which the firm codeveloped with the Port Authority, the family could once again make the Forbes 400.

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