Can Aby keep his star power?

Rosen fights to preserve the trophies on his shelf

In both real estate and art circles Aby Rosen’s reputation precedes him. The 48-year-old, silver-haired Rosen is a legendary art collector and boldfaced name who has successfully parlayed his flashy style and social status into a hefty real estate portfolio anchored by the iconic Lever House and Seagram Building — both on Park Avenue.

Until recently, Rosen has methodically placed smart bets, buying low and then upgrading his buildings and turning them into some of the most exclusive properties in New York.

Over the years, Rosen’s vast art collection has figured prominently in his commercial office buildings — at Lever House he’s displayed works by provocative British artist Damien Hirst — and in his emergence as a hotel and residential developer.

But now the realities of the economy appear to have dragged even the larger-than-life Rosen back to reality.

Last month, Rosen and his long-time partner Michael Fuchs were sued by two of their lenders — ING Real Estate Finance and Swedbank — who claimed that the duo are personally on the hook for nearly $145 million on a defaulted loan in connection with the Shangri-La, their latest hotel project. The partners told Crain’s that there was no truth to the claim that they were personally liable.

With Sir Norman Foster signed on as the architect, the planned 63-story Shangri-La on Lexington would likely have been the next trophy on Rosen’s real estate vanity shelf. But that now seems like a forgotten dream.

As The Real Deal has reported, Rosen was unable to refinance the loan by an April 8 deadline, so the loan was called into default. The suit is a major blow to Rosen, who fought against significant opposition to develop the hotel.

“I thought that was going to be a great project, it’s a shame,” said Dan Fasulo, managing director of research at Real Capital Analytics. “It’s another situation where Aby Rosen is on the hook for the loan.”

Shangri-La officials declined to comment on the New York hotel, but Judy Reeves, a spokesperson for the company, confirmed that the chain is “reviewing” all of its North American projects.

What’s more, that is not the only project that RFR Holding, Rosen’s company, is facing trouble on. Lehman Brothers — which had issued the initial loan on the Shangri-La project in New York before it was taken over by its current lenders — filed suit in April to foreclose on the Continental Downtown Bayside, a Miami property owned by Rosen and hotelier Ian Schrager, after an $18.6 million loan defaulted in October 2008.

RFR is also facing a separate lawsuit on a Palm Springs, Fla., development site, where the developer owed $21.7 million.

Despite those setbacks, Rosen helped pull off a monumental coup by opening one of the last major hotel projects in South Florida since the downturn.

Last month, Starwood Hotels and Resorts launched the W South Beach and the Residences at W South Beach, a 409-unit hotel and condo project owned by Tristar Capital and RFR and developed by the Related Cos.

The investors managed to close on a $370 million construction loan from Hypo Real Estate in January 2007, during the early stages of the South Florida downturn.

Rosen declined to comment for this story, but David Edelstein, principal of Tristar Capital, credits Rosen with making sure the financing and construction came through in a market where most hotel financing is nonexistent.

“We moved quickly, we attacked the markets and we were able to get it executed before the big downturn,” said Edelstein. “Aby and Michael have always had a hand in the South Beach market going back to the Delano days.

“He’s probably one of the two or three most visionary developers in the world.”

Establishing RFR

Rosen, who was born in Germany in 1960, met his lifelong friend and eventual business partner Michael Fuchs in kindergarten.

Both were the children of Holocaust survivors and had fathers who were real estate developers after the war.

Rosen and Fuchs both arrived in the U.S. from Germany in 1987. Rosen had just graduated from law school at Frankfurt University, and found a job working for Jones Lang Wootton, a British real estate firm with an office in Manhattan.

He quickly immersed himself in the New York social scene, establishing relationships with the likes of Ian Schrager, the co-founder of Studio 54 who would later resurrect his career as a major player in the hotel business.

Rosen also became a fixture on the ’80s art scene, supporting artists like Jean-Michel Basquiat, Keith Haring and other post-Warhol figures.

Meanwhile, in the wreckage of the 1987 crash, Rosen and Fuchs launched RFR. Together they acquired a number of distressed commercial projects, including 830 Third Avenue, 400 Park Avenue and 345 Park Avenue South.

By 1994, RFR Holding joined forces with South African developer Trevor Davis to become one of the city’s fastest-growing residential real estate developers under a partnership called RFR Davis.

The team developed thousands of rentals in the 1990s. And by 2003, Rosen was the moneyman behind Schrager’s burgeoning hotel empire and was helping to bankroll Schrager’s luxury residential developments as well.

As his career was taking off, Rosen had married his first wife, Elizabeth Wechsler — the daughter of Joel Wechsler, managing director of Edward S. Gordon, one of the city’s largest commercial brokerage firms. The pair had two children before divorcing in 2004.

In 2005, Rosen married Samantha Boardman, a high-profile socialite and licensed psychiatrist, whose sister, Serena, is a broker at Sotheby’s International.

Pieces of art

What made Rosen and Fuchs stand out among their contemporaries in real estate was their ability to acquire and manage exclusive, highly coveted buildings.

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Lever and Seagram, for example, are two of the so-called “country club” buildings in Manhattan’s Plaza District that commanded upwards of $200 a square foot during the pre-Lehman Brothers heyday.

Scott Singer, executive vice president of the Singer & Bassuk Organization, a Manhattan-based financial brokerage, notes that Rosen took advantage of his access to foreign capital, which allowed him to put together deals while his rivals sat on the sidelines.

“He moved forward with major acquisitions at a time when many many other investor-developers were hesitant, and turned himself into a major force in New York real estate,” said Singer.

In a 2007 interview with The Real Deal, Rosen said buying those two buildings was probably the greatest achievement in his career.

“Those are two of the greatest office buildings in America, I think,” Rosen said. “They are basically pieces of art. It fits exactly what I want to do — meld the art and the architecture together.”

RFR acquired the 38-story Seagram Building from the Teachers Insurance and Annuity Association in 2000 for $375 million, beating out a rival bid by Tishman Speyer Properties. Rosen turned over the tenant roster in the building, which was designed by German architect Ludwig Mies van der Rohe and is home to the Four Seasons Restaurant, to bring in high-profile financial services companies like Wachovia Bank, Centerbridge Capital Partners and Lightyear Capital.

Meanwhile, Lever House, a modernist icon at 390 Park Avenue with one of the city’s first glass curtain walls, began to suffer after Lever Brothers, the soap company for which it was built, announced plans to move out and consolidate in Greenwich, Conn.

In 1997, RFR acquired a 49-year lease with two 25-year renewal options on the landmark building, allowing Unilever, Lever’s parent firm, to remain in a 40,000-square-foot space.

Rosen then invested more than $30 million in upgrades and raised asking rents. He quickly signed aluminum giant Alcoa to a 20-year lease for 51,000 square feet of space, and converted the lobby and outdoor plaza into a gallery featuring the works of Jeff Koons, Haring and Hirst.

However, the current economic downturn seems to have placed a dent in his most prized possession. The Lever House restaurant, which Rosen opened in the building in 2003, quietly closed down for several months of “renovations” in April. It remains unclear when it will reopen.

Warning signs

After landing Lever and Seagram, Rosen joined forces with Schrager to create a partnership that would expand Schrager’s hotel empire and launch the two into the luxury boutique sector.

The two acquired the lease on the Gramercy Park Hotel in 2003, and embarked on a gut renovation. They also collaborated on other residential projects including ultra-luxe 40 Bond Street.

It was the 2007 purchase of Equity Office Properties’ Stamford, Conn., portfolio for $850 million that was one of Rosen’s biggest deals, and possibly the riskiest of his career.

The deal, which Rosen made at the height of the market, included 1.8 million square feet and seven buildings of prime commercial space. The portfolio boasted a collection of tenants that, at the time, were considered some of the best names in finance, including Merrill Lynch, Citigroup, Fortis Capital and Towers Perrin.

“The market was superheated and he wanted to get into the market, and acquired arguably one of the best portfolios in downtown Stamford,” said Paul Jacobs, executive vice president at CB Richard Ellis.

Rosen planned to invest millions towards tenant upgrades, but Wall Street’s 2008 crash left the finance-magnate of Stamford heavily exposed.

A few months ago, Real Capital Analytics estimated that the value of Rosen’s portfolio had fallen by between one-quarter and one-third, dropping in value to somewhere between $575 million and $650 million.

Jacobs said despite the weakness in the market, Rosen appears committed to the space.

“Incredibly, he’s doing what he said he was going to do from the day he bought it, and that is put money into it,” said Jacobs. “He’s taking it to another level.”

Rosen also still has his hands in several residential condo projects.

Last year, he announced plans for 350 West Broadway, a high-end property in Soho with eight units starting at $9.7 million. It’s unclear how many units are under contract.

In addition, Rosen is waging a very personal battle with Upper East Side residents who want to block his proposed luxury tower at 980 Madison, where he enlisted Foster to build a glass tower on top of the Parke-Bernet Gallery building. The outrage led author Tom Wolfe to refer to Rosen as “chin up, tummy out,” according to published reports, while Rosen allegedly accused Wolfe of anti-Semitism, which Wolfe virulently denied.

Still, Rosen was trying to make some significant changes to his commercial portfolio before the crash.

Sources say he placed 17 State Street, an office tower in Lower Manhattan, on the market early last year, only to pull it because of a lack of credible offers.

And, in April, he put the East 71st Street mansion that formerly housed the Salander-O’Reilly Galleries on the market with Sotheby’s International Realty for $75 million.

The property set a record for single biggest residential listing in New York. Rosen, who bought it in 2004 for $15.5 million, boasted in published reports to have turned down two offers for $60 million.

The New York Observer quoted him as saying, “In hindsight I should have taken it, but I didn’t. So what’s the difference?”

Meanwhile, in February, Rosen quietly cut the price of his 3 East 94th Street townhouse, which he had listed in September 2008, by 20 percent to $23.75 million. He originally bought the property in 2005 for $8.8 million, and documents filed with the city show he extended the maturity on the property loan by 12 months to December 2009.

While Rosen may have to wait a while to get the price he wants for these properties, observers believe he is in a strong position to withstand the downturn due to the timeless nature of his trophy assets.

“Buildings like the Seagram never go out of style,” said James Meiskin, president of Plymouth Partners, a Manhattan-based tenant representation firm. “They’re never subject to the vicissitudes of the market like all of the other product.”