Brooklyn’s old-school investors
A look at the other old-school Brooklyn developers amassing mega portfolios in the borough
The behind-the-scenes wrangling that has played out over the past two years to control 49 Dupont Street, the massive development site in Greenpoint, is not so different from the white-knuckle deal-making common in Manhattan.
In the jockeying over the Brooklyn property, one low-key investor named Joseph Brunner inked a contract in 2012 to buy the site for $23.3 million. In a complicated and opaque fashion — and with other suitors competing to get in on the action — the deal took until last month to finally close. And in a twist, Brunner has now found another investor to flip it to for almost double what he paid: $48.5 million.
But unlike in Manhattan, where the buyers and sellers are often household names in the real estate industry, the players in this Brooklyn deal and many others are largely unknown to the broader New York City real estate industry. In many ways, the murder of Menachem Stark, the Brooklyn landlord and investor, has shined a light on this under-the-radar coterie. Many had never heard of him until he was kidnapped and killed. But his death illustrated what an active real estate world he was part of.
Like Stark, many in the group are also members of the borough’s large Hasidic Jewish community. While these players may prefer to operate in relative obscurity, they now find themselves in one of the hottest markets in the city.
“They are not all over the press like SL Green or Extell Development, but they are extremely well-known in the development community in Brooklyn,” said Sean Kelly, a managing director at Brooklyn-based commercial firm CPEX Real Estate.
Berel Nagel, a salesperson with the Brooklyn-based commercial brokerage Kalmon Dolgin Affiliates, echoed that point.
“They are not trying to be secretive or trying to be non-corporate,” he said. “It is just the way they do business. It is the hamish way of doing things,” he continued, using the Yiddish word for homey.
This month, The Real Deal looked at some of the most active, yet under-publicized players in the market who have amassed portfolios estimated at tens of millions of dollars and more.
The corporate creep
By all measures, the development and sales market is on fire in Brooklyn. Massey Knakal Realty Services shows that the total investment sales dollar volume in the borough in the first quarter was up 213 percent from the same period a year ago, to $1.67 billion, including $327 million in development sales alone.
But in contrast to the last boom in Brooklyn, this time institutional money has joined the fray. Firms with hundred-million-dollar funds like Meadow Partners, Kushner Companies and SL Green have all poured cash into Brooklyn.
As a result, these corporate entities are now sometimes buying from, and interacting with, these low-profile players. And despite the entry of the institutional buyers into the market, these old-time Brooklyn players — who often do not come to the table with fancy degrees and MBAs — still regularly do deals through ad-hoc arrangements. For example, Stark, who along with his partner Israel Perlmutter amassed a portfolio of Brooklyn buildings that at one time had about 1,000 units, played multiple roles in his various deals from moneyman to project manager. And the same holds true for others.
Three of those other players — Brunner, Bo Jin Zhu, and Chaim Miller — had a hand in the 49 Dupont Street deal in Greenpoint.
Brunner, a nimble Williamsburg-based developer, inked a contract in 2012 with Joseph Folkman, the then-owner, to buy the 10 parcels that together have about 360,000 square feet of development potential, real estate sources told TRD. Although sources connected to the deal declined to identify any of the involved parties, when the sale closed last month for $23.3 million, the title transfer revealed Brunner as the buyer.
By way of background, Brunner is not just a developer, but also a lender, providing Stark and Perlmutter $1.5 million in 2007 for the redevelopment of 100 South 4th Street in Williamsburg, which they converted into a 73-unit rental building. And he partnered with Chaim Gross and Martin Friedman to buy 110 Green Street in 2010 for $58.2 million, where they completed construction and sold it three years later for $72 million to Meadow Partners. Brunner also owns several other buildings, including the rental 619 Hancock Street in Stuyvesant Heights and the industrial building 390 Liberty Avenue in East New York.
In addition, Zhu, a Queens-based developer, was also identified as part of the Dupont deal. Lending documents show him as an “authorized signatory” in the purchase, suggesting that he may be buying it from Brunner for what sources said was $48.5 million.
Insiders said the enigmatic Zhu, who is originally from mainland China, either has bought or plans to invest equity in the site.
Zhu, who is most active in Manhattan and Queens, is also involved in another Brooklyn project, at 29 Ryerson Street in Clinton Hill. At that site he’s teaming up with Miller, who is a member of the Hasidic community and based out of Borough Park. The pair is developing hotel, office and retail space in industrial buildings.
Sources said that Miller was also gunning to buy the Dupont site. However, it’s unclear whether he has a stake in it.
The investor-developer, sources said, often finds his way into deals through the purchase of a contract, a defaulted note, or bidding on hospitals as they’re shuttering. His most high-profile effort to date was his almost-successful attempt to buy the Long Island College Hospital site in Cobble Hill for $250 million. Miller’s group was originally chosen by the State University of New York, which owns the site, but the deal collapsed. Nevertheless, Miller remains optimistic his group will prevail there, a source close to him said.
Miller, who has also acquired properties in Manhattan and Queens, launched his own firm after working with a long-time developer, Abraham Leser of the Leser Group, which sources said he still has ties to.
Insiders point out that many of these active Brooklyn developers have deep roots in their neighborhood, with several large Hasidic groups headquartered in and around Williamsburg.
And many of these players have owned land in the borough and done deals with one another for decades.
“It’s a world that once you are in, once a couple guys trust you,” you can participate, one broker source noted. “But it definitely takes time to get to know [them]. They like to work amongst themselves.”
Indeed, few have formal corporate offices. Stark and Perlmutter, for instance, for years registered their properties at a P.O. box at 199 Lee Street in Williamsburg.
A young property owner and Stark’s brother-in-law, Abraham Bernat, has a P.O. box at the same address now.
Bernat, now a major property manager himself, acquired about a dozen properties from Stark and Perlmutter between 2010 and 2013, a review by TRD found.
Another investor, Williamsburg-based Isaac Jacobowitz, has amassed a collection of nearly a dozen properties, a search of city records shows.
For example, in 2011 he snapped up 421 Union Avenue, a 29-unit rental building in Williamsburg for $10.2 million.
Morphing into titans
Some of these developers are getting so large that they’re beginning to make waves in the broader real estate community.
One such developer is Simon Dushinsky, who heads up the Rabsky Group. The firm still does not have a website, but has completed buildings and filed plans for a number of big projects in Brooklyn, Queens and Manhattan.
In addition, there are some under-the-radar titans, such as Ruby Schron, David Bistricer and the Chetrit brothers, who have all come from similar worlds and managed to grow into mega-investors and developers while remaining low profile.
Shay Zach, a broker with Soho-based Epic Commercial Realty, likes to work with off-the-radar properties and developers.
“I think it’s honorable to do things without putting your name on everything. To go to work, and work, and not boast about everything you do,” he said.