The biggest real estate blunders of 2012
From that dangling crane to Grubb & Ellis’ implosion, a year of fumbles
Some of New York City’s real estate professionals probably can’t wait to see 2012 in the rear view mirror. Between the Grubb & Ellis bankruptcy, Extell Development’s crane collapse and Katan Group’s bungled sale in Brooklyn, some of the highest-profile firms and developers stubbed their collective toes at some point this year.
The biggest real estate-related fumble was the implosion of California-based Grubb & Ellis, considered by many to be a man-made disaster. In 2011, as the firm was struggling financially, Grubb spoke with potential suitors to either invest in or buy the company. But those talks collapsed and ultimately, the firm’s Manhattan brokers scattered to more than half a dozen companies in the city after it filed for bankruptcy in February. BGC Partners’ Newmark Grubb Knight Frank bought it for about $49.5 million out of bankruptcy in April.
The other headline-grabbing bankruptcy was that of the law firm Dewey & LeBoeuf’s in May. The company’s large Manhattan-based real estate department, including prominent attorney Stuart Saft, was sent scrambling. Saft landed at Holland & Knight while another group left for Schulte Roth & Zabel, and a third ended up at Venable.
Earlier this month, the 28-year-old rental brokerage Manhattan Apartments, following years of trouble that began with the economic downturn, closed its doors. Brokers and agents were given the option to join rival residential firm AC Lawrence, now a division of the Bellmarc Group.
Some fumbles actually cost lives. In March, one construction worker died in Upper Manhattan when a structure owned by Columbia University that was under demolition collapsed. And in September, a worker was killed in Fort Greene when a roof in an under-construction building collapsed, crushing him.
But the most visually dramatic fumble was the crane atop Extell Development’s under-construction condominium tower One57. Hurricane Sandy’s winds flipped the boom over backwards on Oct. 29, causing the crane to hover 1,000 feet over Midtown. No one was injured, but city officials halted traffic, and nearby buildings including Vornado Realty Trust’s 888 Seventh Avenue were closed. The crane was secured and traffic reopened on Nov. 5.
In a legal tussle, Extell and its partner, Carlyle Realty Partners, just this month lost a battle in a New York State appeals court over buyers breaking out of contracts. The court ruled that the state attorney general correctly ordered the return of $16 million in condominium escrow deposits.
Another state appeals court decision left the Katan Group, an investor with the Domino Sugar Factory development site, with a redface after months of legal jostling. Katan, a co-owner of the site with Community Preservation Corp., had fought to sell to the Chetrit Group, which it claimed had a higher bid for the 11-acre site. But in October the court threw out his lawsuit, and the new owner, Two Trees Management, closed on the land for $185 million.
Not all legal issues were handled in Civil Court. In a high-profile case, Rabbi Yoshiyahu Yosef Pinto, an advisor to many real estate professionals in New York City, was arrested in Israel in October on money laundering charges. Then in late November, Israeli media reported the government was close to indicting him for allegedly attempting to pay a $200,000 bribe to an Israeli police officer. A spokesperson denied the allegations in the news reports.