A visit to Boymelgreen Developers’ Web site gives the impression that the firm, founded by Shaya Boymelgreen, is one of the most powerful real estate companies in New York — and a major player on the global stage.
The site notes that “in just over a decade, Mr. Boymelgreen has transformed his family business into one of the largest and most active development companies in New York City and a powerful global development and investment firm.”
The firm’s boilerplate also trumpets its joint venture with Africa Israel Investments and the “spectacular portfolio” that has resulted from it, as well as the “overwhelming success” of properties such as the condo conversion 20 Pine in the Financial District.
The site, frozen in a headier real estate time, depicts the firm as it was only a few years ago: riding high on the backs of an impressive joint venture and an ever-expanding field of investments. Now, however, Shaya Boymelgreen is beset with troubles.
Creditors are banging at the door, and hardly a week goes by in which the Israeli press does not print articles about the financial woes of the Brooklyn-based company’s sister firm, Boymelgreen Capital, which is based in Tel Aviv. Meanwhile, a host of legal actions have been taken against both Boymelgreen individually and the various companies he controls.
Although Boymelgreen’s development activities have often been controversial —activists, for example, ran a high-profile campaign against him a couple of years ago entitled “Brooklyn beware! Shaya is coming”— such controversies were predicated on the notion that Boymelgreen was a powerful player in the local arena. However, with only one development project — 10 Chelsea, a 111-unit rental project on 23rd Street and 10th Avenue — on tap in the city, it would be difficult to characterize him in the same way today.
While his Web site says that Boymelgreen Developers has 200 employees, Sara Mirski, the managing director of the company, said it now has 45 full-time employees based in the United States.
And, it’s clear that while Boymelgreen’s rise to the upper reaches of New York’s real estate world was indeed swift, his fall from those altitudes has been even faster.
Escalating problems
In April, the Israeli business news publication Globes ran an article saying that Boymelgreen Capital — which Boymelgreen created in 2006 to develop and manage real estate in Israel and elsewhere — was unable to make payments on its debt, particularly a loan of 600 million Israeli New Shekels, or about $146 million.
Globes quoted the director of Megamot College in Israel, Naftali Mendelovich, who represented 300 bondholders at a meeting about the firm, saying: “The company is effectively bankrupt. They don’t have a shekel on hand. To the best of my knowledge, Shaya Boymelgreen personally has no money for the company.”
Mirski told The Real Deal that Boymelgreen Capital is “negotiating extensions on existing loans, which would otherwise be in technical default. We have not missed any required payment to any lender.”
But Mirski noted that Boymelgreen Capital’s financial situation is not related to the situation at Boymelgreen Developers, as the two companies are distinct. “The health of Boymelgreen and its subsidiaries is in keeping with the ebb-and-flow of today’s global marketplace, and is in no way any worse than any other major player,” said Mirski.
Meanwhile, Globes reported later in April that Boymelgreen Capital was closing in on a deal to reschedule the payments on its debt.
Boymelgreen — who according to Mirski is now living and working in Israel — is, however, personally dealing with creditors here in the U.S. who want to be repaid.
In early April, TD Bank filed a lawsuit in New York State Supreme Court alleging that he was in default on a 2004 personal bank loan for $3 million. The complaint said Boymelgreen owed $2.7 million on the loan, and that the initial maturity date, February 2005, had been extended on six different occasions, most recently to February 2009.
“By letter dated March 2, 2009, Plaintiff advised Boymelgreen that one or more Events of Default had occurred and demanded the immediate payment of all outstanding principal, interest and fees due under the note,” read the complaint.
Mirski — who is based in Brooklyn — downplayed the significance of the suit.
“This summons was never officially served on Shaya Boymelgreen,” she said. “TD Bank has admitted they were ‘fast on the trigger’ in moving to suit while negotiations were ongoing. Their response was more a ‘sign of the times’ than a breakdown in our banking relationship.
“We’re working together harmoniously, and the bank has indicated that it will withdraw the action once the terms of the extension are agreed to.”
TD Bank’s lawyer said he could not comment on the lawsuit.
The TD Bank suit is not the only legal hurdle Boymelgreen is facing.
In early March, a summons was filed naming Boymelgreen, Africa Israel Investments and others as defendants. The plaintiffs are named as the Board of Managers of the Downtown Condominium, which is located at the luxury condo 15 Broad Street.
The summons, which was filed in New York State Supreme Court, says its aim is “to recover damages resulting from said defendants’ breaches of contract, fraud, negligence, and unjust enrichment in connection with the construction and sale of condominium units.” It seeks damages of $10 million.
The plaintiffs’ attorney, Steven Sladkus, a partner at the firm Wolf Haldenstein Adler Freeman & Herz, said “the parties are actively discussing the issues between them.”
While Sladkus declined to elaborate on the plaintiffs’ specific allegations against Boymelgreen and his partners — a complaint has not yet been filed — he said most of the issues concern 15 Broad’s construction.
Meanwhile, Boymelgreen recently found himself on the losing end of another legal skirmish last month, when a New York State appeals court ruled he had illegally sub-leased a building in Brooklyn to developer Forest City Ratner. The Prospect Heights building is within the footprint of Forest City Ratner’s stalled Atlantic Yards development. Boymelgreen originally inked a 49-year lease on the property in 1999 and then assigned the lease to Forest City Ratner. The building’s owner contested the lease assignment and the appeals court ruled it was illegal. Crain’s New York Business reported that millions of dollars in damages will be sought from Boymelgreen and Forest City.
Marriage and divorce
The condo at 15 Broad was among the high-profile developments Boymelgreen completed with Africa Israel, which now operates under the name AFI Group and is headed by billionaire Lev Leviev.
Boymelgreen and Leviev, whom The Real Deal profiled in its February issue, joined forces in 2002 and quickly set about developing thousands of condo units in New York and elsewhere.
Their projects included other developments in the Financial District such as 20 Pine Street and 23 Wall Street; 84 Front Street and 85 Adams Street in Dumbo; 88 Leonard Street in Tribeca; a hybrid hotel-condo project in Boerum Hill; and a number of projects in other parts of the country, including Miami and Las Vegas.
Leviev had a 65 percent stake in the company, which operated under the name “Leviev Boymelgreen.”
Boymelgreen, for his part, had already completed several developments in New York before then, including small- to medium-size condos in the East Village and Williamsburg, as well as the 21-unit 67 Front Street condo in Dumbo.
The two, both of whom are said to be deeply religious and involved in the Chabad Lubavitch movement, reportedly met on a kosher cruise.
The partnership, however, dissolved in early 2007, in part, according to news reports, because of Boymelgreen’s desire to pursue developments in Miami that Leviev opposed.
One Brooklyn developer who asked not to be named said of the joint venture: “Boymelgreen was just a small-time Brooklyn developer, and Leviev used him to gain a foothold in the U.S. market. Boymelgreen used Leviev’s capital to build big projects, but when the partnership dissolved, Boymelgreen was more or less left high and dry.”
Asked for his response to the Brooklyn developer’s comment, Mirski said there is no bad blood between the two firms.
“The partnership was ideally symbiotic and financially advantageous to both parties. Leviev was able to ‘gain a foothold in the USA’ and we were able to launch an aggressive acquisitions program with an additional influx of capital,” she said. “We’re satisfied with the termination results … and wish Mr. Leviev and his company all the best in his future endeavors.”
A spokesperson for AFI Group declined to comment on the relationship.
‘Deal junkies’
One industry analyst blamed the partnership’s dissolution on Leviev and Boymelgreen being “deal junkies.”
The analyst said Boymelgreen is someone “you put in the same category as a Kent Swig or a Yair Levy, people who accounted for a big chunk of the run-up in land prices. They did OK at first, but then they went crazy buying things for insane prices and didn’t get out early enough. Looking back, he grew too fast and was too optimistic.”
In a press release Africa Israel sent out after the split between the two was finalized, the company said it was gaining control of projects that included 23 Wall Street, 88 Leonard Street and a planned development in Gowanus, Brooklyn.
Boymelgreen was assuming control of projects including 10 Chelsea and their Boerum Hill condo-hotel. Meanwhile, projects including 20 Pine Street, 15 Broad Street and Dumbo’s 84 Front Street were to be kept under joint ownership.
For 20 Pine Street, the shared control would not be lasting. As The Real Deal reported in February, AFI assumed full ownership of the building after more than 50 buyers banded together to protest construction delays. The project reportedly has been a victim of slow sales and rumors about its financial insolvency have been circulating.
No stranger to controversy
The flap over 20 Pine may appear minor when viewed alongside some of the other controversies Boymelgreen has faced in his career.
In 2006, the Laborers Eastern Region Organizing Fund, part of the Laborers’ International Union of North America, which represents construction workers, launched a campaign called “Brooklyn beware! Shaya is coming.”
As part of the campaign, the fund posted fliers around Brooklyn stating that work conditions at Boymelgreen’s sites were unsafe, that the quality of his construction was poor and that he did not use union labor. The group employed attention-grabbing stunts like cruising around Brooklyn in a truck with a banner that said “Shaya is coming,” said Nicole Vecchione, a researcher with the union fund.
“This campaign went further than most because there was a lot that needed to be addressed about Boymelgreen,” said Vecchione.
“He had to finally react, because reputation-wise things were going way bad for him,” she added.
Vecchione said Boymelgreen ended up negotiating with her group and ultimately using union labor at some of his sites.
Mirski said controversies like the “Shaya is coming” campaign are “part and parcel of being in the business.” She added, however, “I also think that the ‘Shaya is coming’ campaign was inappropriate and slanderous.”
Some see a visionary
While Boymelgreen clearly has his enemies on the grassroots level, several commercial brokers active in Brooklyn describe the developer as an extremely warm man.
Chris Havens, CEO of commercial brokerage Creative Real Estate Group, who worked with Boymelgreen on a leasing deal, said the developer is “a charmer who is just very nice — and he completed an enormous amount of product.”
Ofer Cohen, the founder and managing director of the commercial firm TerraCRG, also described Boymelgreen as a “really nice guy” and said he thought Boymelgreen would survive his current troubles.
“He had a lot of vision and always saw opportunity in places where nobody figured people would want to live,” said Cohen.
“I’m sure he’ll find a way to make his way out of the current crisis,” he said. “People who have gone through this cycle before know how to make it through.”
At present, Boymelgreen Developers has only two projects on tap in the United States, both of which, according to Mirski, are awaiting financing and a better market: 10 Chelsea, adjacent to the High Line, and a 240-unit condo in Houston, Tex.
“We’re waiting like everyone else in this business for market conditions to improve before re-entering the market,” said Mirski.