Glenwood’s golden formula

<i>As others built condos during boom, the developer stuck with rentals -- and is now jockeying to expand</i>

From left: Gary Jacob, who oversees site acquisition, financing, leasing and financial projections for Glenwood; Barclay Tower at 10 Barclay Street, constructed by Glenwood Management in 2005
At 90-something years old, Leonard Litwin has outlasted most of his real estate rivals. He builds his high-end rental towers to do the same.

The soft-spoken chairman of Glenwood Management has been constructing and operating luxury apartment buildings in Manhattan for almost 50 years, and he hasn’t sold one yet.

Glenwood’s focus exclusively on rentals might have looked myopically old-school during the recent real estate boom, when new development condos and condo conversions drove sales prices into the stratosphere.

But it looks pretty wise in this down market.

“Glenwood is a quintessential New York builder that has always very conservatively leveraged their investments,” said Robert Knakal, chairman of Massey Knakal Realty Services. “If there’s one lesson to come out of this downturn — every downturn — it’s that when times are good, leverage enhances return, but when times are bad, leverage can be very punishing. And if you don’t have excessive leverage you are in a great position to take advantage of the marketplace.”

That’s just what Glenwood appears poised to do.

While some developers are now scrambling to turn their unsold condos into rentals, Litwin’s company leased up, with apparent ease, the first tower of Emerald Green, its massive 569-unit project that opened at 320 West 38th Street in September. The firm began leasing the second tower in the rezoned Hudson Yards in January, and has so far rented out 57 of 212 market-rate apartments.

The apartments are going so fast, in fact, that Glenwood recently stopped offering concessions to lure new tenants to the building.

Meanwhile, the company is slated to begin construction on a new project later this year — and it’s looking for new properties.

That’s not to say the recession hasn’t hit Glenwood hard. At one point late last year, vacancy rates had more than tripled, and rents in some of its buildings are still down around 20 percent.

But the company’s restraint during the boom has positioned it to weather the downturn better than most — and to take advantage of low land prices to bargain-hunt.

“We build with reasonable leverage and a smart cash flow; if we had put a lot of equity into a condo that was distressed right now, that would have been a problem,” said Gary Jacob, Glenwood’s executive vice president, during an interview last month with The Real Deal at the firm’s Grand Tier at 1930 Broadway, a 232-unit luxury building across the street from Lincoln Center.

Glenwood largely sat out the buying frenzy of the 2000s because condo speculators had driven land prices so high that it became prohibitive to build a rental building. The numbers, Jacob said, just didn’t “pencil out.”

“We couldn’t compete for land,” he noted. “The only area that made sense was the far West Side.”

Now, with little leverage and a steady income from some 25 mostly high-end Manhattan apartment buildings, Glenwood has plenty of cash on hand. (Jacob declined to provide revenue numbers, but one report in the New York Post estimated the company’s monthly revenue to be north of $25 million.)

Later this year, Glenwood is slated to start construction on a new 25-story, as yet unnamed, 200-unit building down the street from Emerald Green, on 39th Street between Eighth and Ninth avenues.

In addition, Jacob said, the firm is actively shopping for a site for its next rental building.

“We’re negotiating for several parcels right now,” he said. “And we’re looking for more. We would love to have another property near Lincoln Center. We would like additional property on the far West Side, or West Side.

“We have company equity available to us,” Jacob added. “If we needed institutional equity it would never work; the rates of return are too low. But we are buying for the long-term.”

Rental rebound?


Glenwood’s plans to go ahead with construction may seem striking in light of current market conditions. But there are some signs of hope in the overall rental market.

Doorman vacancies across the city are down 9.65 percent from January, according to the Real Estate Group New York’s February rental market report. Rents, however, continued to fall, with one- and two-bedrooms in doorman buildings down around 5 percent from last February.

But several industry insiders say they are seeing indications that the luxury rental market, which had been hurting, is picking up.

Victoria Shtainer, a senior vice president at Prudential Douglas Elliman who brokers luxury rentals, said she noticed inventory declining and a shift away from concessions. “Honestly, there is not much inventory in the higher-end market,” she said.

Sofia Song, vice president of research at StreetEasy, a real estate data Web site, also said that the rental prices on some of the city’s highest-end units, with rents of $20,000 or more a month (some of which Glenwood owns), are actually climbing.

Inventory, meanwhile, is dropping.

That contrasts with the sales market, where prices continue to edge down slightly, even as inventory falls, Song noted.

Glenwood’s experience mirrors these trends.

The company has been hardest hit on York Avenue, where rents have fallen as much as 20 percent and remain relatively anemic, Jacob said. (Glenwood has a slew of buildings on that East Side corridor.) But rents in its highest-end building, the Grand Tier, are already beginning to rebound.

At the bottom of the market, around December 2009, rents at Grand Tier had fallen from $85 to about $75 a square foot, or about 12 percent, Jacob said.

However, Glenwood has rented about 10 apartments at the Grand Tier over the last two months, with an average price per square foot of $82.

The overall vacancy rate at the company’s roughly 25 Manhattan buildings peaked at about 3 percent, and now stands at a low 2 percent, Jacob said.

Several firms that also rent buildings in Glenwood’s general price range, including Related and TF Cornerstone, did not return calls inquiring about the recession’s impact on their rents.

Even if difficult conditions continue, however, Jacob said that Glenwood can grow its portfolio because the company builds with its own equity, and never takes mezzanine loans or uses outside partners.

In addition, it’s one of the few firms that avoided any exposure at all to the condo market. “We’re in a good condition to withstand the pressures of the down market,” he said. “We will adjust prices to the market.”

An industry dean


Glenwood has another advantage that may help it weather the downturn: Its nonagenarian owner has weathered multiple downturns before.

Company officials say Litwin, whom associates say remains “spry” and “active,” still runs the show and regularly comes into the office. And associates say he’s personally keeping an eye out for development opportunities.

Litwin’s daughter Carole Pittelman serves as an executive vice president of the company, overseeing construction projects. Meanwhile, Jacob oversees site acquisition, financing, the leasing division and financial projections. However, Litwin is still “very hands-on in all details of new construction,” said Jacob.

“He pores over architectural plans, and he is not satisfied until he’s improved the closet space, the layouts and the lobby design,” Jacob added.

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Over the years, Litwin has stuck with his rental formula, even when it was not in vogue, ultimately carving out a niche for high-end apartments.

Rents in Glenwood buildings vary from the mid-range — one-bedrooms at Emerald Green rent for $2,350 — to the higher end of the market — one-bedrooms at the Grand Tier go for $4,995, with penthouses reaching $30,000.

But in all their buildings, the company focuses on providing the types of finishes one might expect in a high-end condo. Its lobbies and public spaces are designed by top-quality decorators like John Saladino, and often feature fountains, Italian marble and vaulted ceilings. Most buildings include a lap pool, locker rooms, a fitness center, a lounge and playrooms.

“They’ve always built to a certain standard,” said Gary Malin, president of Citi Habitats, who has been placing tenants in Glenwood buildings for years. “Others don’t spend those type of resources.”

That approach has made Litwin a billionaire, as well as a behind-the-scenes powerhouse in the industry. In 2006, Forbes listed him on its 400 richest Americans list, with an estimated worth of $1 billion.

“Calling me a billionaire is shocking,” he told Forbes at the time. “My wife will be surprised.” (According to Bloomberg News, Litwin lost an undisclosed amount of money with jailed Ponzi schemer Bernie Madoff.)

Despite Litwin’s business success, he has eschewed the limelight, and rarely grants interviews. He declined to be interviewed for this article.

“[He] is very quiet, he has a low voice,” said Steven Spinola, president of the Real Estate Board of New York. “You would never hear him tell you that he has great buildings.

“Most of my members have reasonable egos. I don’t think Lenny Litwin understands what it is to have an ego. I have never seen him take credit for anything.”

But longtime industry insiders aren’t fooled.

Richard LeFrak, chairman, president and CEO of the LeFrak Organization, referred to him as “one of the last great builders.” And, Burt Resnick, a competitor who heads Jack Resnick & Sons, called him a “giant.”

Duke of York


Litwin got his start as a subcontractor: The Litwin family owned and operated the Woodbourne Cultural Nurseries in Melville, Long Island, and often provided landscaping services to other builders.

Leonard and his father, Harry,å started out constructing two-story buildings in Long Island, developed a six-story, 105-family building in Briarwood, Queens, and moved to mid-rise buildings in places like Riverdale, Jacob said.

They broke ground on their first major project in Manhattan in the late 1950s. Comprising almost an entire city block at 500 East 77th Street, the 843-unit Pavilion was the largest building in the city when it was completed in 1962. It constituted a major change for staid York Avenue, which had few postwar towers. Glenwood itself was incorporated as a company in 1961.

The Pavilion featured a circular driveway, columns and lush landscaping. Its luxury drew celebrity residents, including David Eisenhower and Julie Nixon Eisenhower. (Nowadays, Glenwood’s celebrity tenants include Mike Piazza and Alex Rodriguez.)

After gaining his Manhattan foothold with the Pavilion, Litwin — and Glenwood — didn’t stray far. Over the course of the next 20 years, Litwin built up the surrounding area with such single-mindedness that he acquired the nickname “the Duke of York (Avenue).”

Among the projects that followed: the 23-story Cambridge at 500 East 85th Street, in 1970; the 23-story Caldwell at 1520 York, in 1972; and the 38-story Somerset, at 1365 York Avenue, in 1977. All told, the company built seven more towers in the area, five of which are on York.

“Once we start in a neighborhood, we have a philosophy of creating a neighborhood environment,” Jacob said.

The company took that approach in the 1980s, when it expanded on the Upper East Side into the Gracie Point area with the Barclay in 1985, the Hamilton in 1986 and the Brittany in 1994.

After that, the firm aggressively branched into others areas of the city.

“I started to hear from young people that they wanted to be in areas that were grittier than the Upper East Side,” Jacob said.

Glenwood answered by building the Paramount Towers on East 38th and 39th streets. But the company soon decided Downtown would be “the next frontier.”

In 2000, the company acquired parcels of land at Liberty Plaza and Barclay Street, and a 151-unit building it purchased from the Battery Park Authority.

The World Trade Center terrorist attacks threw a monkey wrench into construction plans. But eventually, the company moved ahead after obtaining low-interest, tax-free Liberty Bonds from the state.

Glenwood used $95 million in bonds to help build a 287-unit building at 10 Liberty Plaza in 2004, and an additional $138 million in bonds to build Barclay Tower, a 441-unit building erected in 2005 across the street from the Woolworth Building.

But the use of the bonds became controversial and drew unwanted attention. The Daily News noted that Glenwood’s haul represented nearly 30 percent of the state Liberty Bonds doled out for rental housing below Canal Street, and wryly dubbed them “Litwin Bonds.” The article noted that he had donated $772,350 to state elected officials over the previous five years.

Litwin declined to comment at the time. But in 2007, the New York Times noted that he had given more than $1 million to state candidates and political parties in the previous 18 months alone, taking advantage of a loophole in the state campaign finance laws limiting donations from individuals to $150,000 by funneling the money through 15 limited liability companies.

That included $155,000 to the Senate Republican leadership, and 23 of the state Senate’s 33 Republicans.

He also gave money to then-governor Eliot Spitzer and Attorney General Andrew Cuomo, both Democrats, and their Republican opponents.

“This loophole allows a small elite to give massive campaign contributions,” the article noted, “increasing the perception that they have undue influence.” The Times added that “Mr. Litwin and Glenwood Management have shown keen interest in a number of issues under consideration in Albany, hiring lobbyists to represent their interests on land-use and environmental questions.”

Certainly, Litwin has needed zoning changes to make way for some of his new buildings, and he has been a vocal advocate on behalf of the real estate industry. He also at one point hired former Senator Al D’Amato to lobby on his behalf on estate tax issues.

While he has consistently refused to comment, his allies dismissed such criticism.

“If they don’t like the [campaign finance] system they should change it,” said LeFrak.

West Side story


Driven by a vision of West Side growth, Glenwood began assembling parcels for Emerald Green in 2006.

Leasing the buildings, however, started up during the Great Recession. Even the company has acknowledged that the units hit the market at a “less than ideal time.”

Still, Barry Hersh, a clinical associate professor at the Schack Institute of Real Estate at New York University, said that Glenwood’s decision to begin construction on a new project demonstrates they are “very comfortable with their product.”

“They are very savvy about their market,” Hersh said.

He added, “And they know their market niche.”