The baffling behavior of the Rings

Stuart ElliottAs a business publication, we usually write about people who try to make money.

So it’s interesting when you come across members of the real estate community who, from the outset, seem to have a completely different goal in mind.

I’m talking about the ongoing saga of the notorious Ring brothers, who reporter Adam Pincus writes about in “’Ringing in’ a new era.” The brothers, Frank and Michael, co-own 14 prime office buildings, most of them in Chelsea and Gramercy, that are mysterious relics of a bygone era. As sharks circle, the coveted portfolio sits nearly 90 percent vacant in the middle of the tightest commercial market in the country, and the buildings have fallen into less-than-prime condition.

The brothers, who are both in their 60s, have never gotten their act together to decide what to do with the buildings after taking over control from their father around three decades ago. Now, a brief, failed attempt to change course and renovate may result in them eventually losing control of the properties.

Up until The Real Deal first spoke to Frank Ring, who runs F.M. Ring Associates, a few years ago, no major media outlet had questioned why so many buildings sat empty.

This month we look at why a portfolio that could bring in $40 million in rent annually, if leased up, could, according to sources, instead lose $1 million this year. Why didn’t the brothers initially sell the estimated half-billion-dollars worth of real estate, rather than leaving a vast fortune on the table? (“I wish I could make as much money as Frank Ring has lost,” quipped one broker.)

Some say the firm is notoriously difficult to negotiate with, making it virtually impossible to ink leases.

The big question: Why?

“The [buildings] have been neglected,” one broker told TRD in a web story last year. “I’m not quite sure why. I’m not sure anyone knows why.”

Forgive my psychoanalysis, but the answer may be more psychological than economic. To me, it seems like a version of “Grey Gardens”  — the famous documentary about Jacqueline Onassis’s aunt and cousin, who lived in a decaying Hamptons mansion for years — albeit a buttoned-down, corporate take on the story.

There seems to be an irrational preservation of the past, too, the real estate equivalent to Norman Bates saving his mother’s corpse in “Psycho.” Or a hoarding like that by Manhattan’s famed Collyer brothers (look them up), not of junk, but of valuable space.

Indeed, it was the Rings’ father Leo who began accumulating Manhattan office properties in the 1940s. When he passed away in the 1980s, Frank began managing the portfolio. In the West 20s, “F.M. Ring Associates” is still emblazoned on the sides of numerous buildings. The large, fading mural-like advertisements look like something from an earlier time, as reporter Gabby Warshawer noted in an earlier piece. Maybe the brothers wanted to keep their space mostly untouched as a memorial to Leo.

That would make more sense than their ostensible economic reasons, anyway. Frank Ring, who has claimed that the properties are more valuable if they stay vacant due to tax reasons, has implied that tenants who left have been hard to replace. He said if the brothers had sold during the boom, they might have invested the profits in the stock market or with Bernie Madoff and lost it all.

The fate avoided, Frank Ring said, involved “seeing our entire equity disappear.”

Michael Ring — who also worked at Helmsley Spear for 40 years — finally broke out of Grey Gardens when the properties were on the verge of becoming cash negative. He signed an agreement with the Tabak brothers last year to buy out a controlling portion of his stake and renovate the properties. But at the last minute, he tried to back out.

Yet the door had been opened, and the Tabaks (reportedly advised by broker Doug Harmon) are trying to wrest control through clever legal maneuvering. Developer Gary Barnett has also edged his way in. The sharks are circling, and that’s where we pick up with “’Ringing in’ a new era.” Check it out.

Meanwhile, there are plenty of other great stories to feast on in this issue — about people who are making money. Our in-depth story about real estate executive compensation  — sure to be discussed around the water cooler — is “Paycheck confidential.” There is a first-ever survey of the most profitable office buildings in Manhattan in “NYC’s skyscraper kings.” And check out our closely followed annual ranking of the biggest Manhattan residential brokerages, “Manhattan’s top firms.” Enjoy the issue!