The Hasidim have become masters of the deal syndication model pioneered by late titan Harry Helmsley: To make an acquisition, they bring in anywhere from dozens to thousands of small-time equity investors, both local and international. Though their operations have grown more sophisticated, company heads tend to steer clear of dense Excel spreadsheets to run the numbers on a prospective deal.
“These guys are still very old school,” a lender source said. “They’ve memorized half the Talmud – they prefer to do complex calculations in their head.”
Their approach to financing projects also stands out. While firms such as Two Trees Management and Tishman Speyer shoot for the big institutional loan up-front, many Hasidim wait until just before breaking ground to line up funds. They prefer to finance in smaller loan increments over multiple stages, which allows them to tweak their design plans or bring in new partners, and then subsequently restructure the financing, sources said. Josh Zegen, co-founder of Madison Realty Capital, said this approach is “more of a middle-market entrepreneur thing” in general.
“As values increased, some sponsors have refinanced their properties during the course of development, using leverage to return equity to their investors,” Boyar said. Once the property is fully leased and operating, they can secure long-term debt. By contrast, he added, “institutional developers have been able to take advantage of the capital markets and finance their developments early on at lower interest rates.”
“If you don’t have a 72-foot Azimut yacht, two Ferraris and three houses, what the hell do you do with your money?”
Most Hasidic investors rely on hard money lenders, a cadre that includes G4 Capital Partners, Emerald Creek Capital, Downtown Capital Partners and Trevian Capital. They also tap development and investment firms like Madison Realty Capital and Ari Shalam’s RWN Real Estate Partners, the family office of Apollo Global Management co-founder Marc Rowan.
But some of the bigger players have been able to lock in major banks and other institutional lenders.
In the past year, Rabsky secured $95 million from TD Bank to refinance its debt at Leonard Pointe and an $80 million acquisition loan from Bank Leumi for a development site it bought from Forest City Ratner. For the Rheingold Brewery redevelopment, Madison Realty Capital and Bank Leumi provided acquisition financing — $70 million to All Year and $50 million to Rabsky, respectively.
Other banks that work with the bigger Hasidic firms include Dime Savings Bank, Santander Bank, Centennial Bank, Bank United and Modern Bank, sources said.
Some Hasidim have taken their quest for funds to the the Tel Aviv Stock Exchange. Goldman, for example, raised $166 million to date, from a total of two bond issuances. Pooling properties together makes them easier to refinance, a source said. But others in the community, reluctant for the spotlight that comes from being in the public markets, avoid this path.
Amid the deal frenzy, the Hasidim are also dabbling in trading debt.
“These guys are very liquid,” said a prominent financing broker. “You’ll see them very strategically buying notes on properties, but only within their own strike zone. They are very, very good in the markets that they know.”
The outside world
The Hasidim are encouraged to remain insular — except when it comes to business.
Some developers from the community have become especially skilled at making a high-end product for young and upwardly mobile professionals, Jewish or otherwise.
“They’ve memorized half the Talmud – they prefer to do complex calculations in their head.”
“They’re informed about new trends to the extent that it might be shocking,” said Eran Chen, founder of ODA New York, which is designing the Rheingold Brewery sites for Goldman and Rabsky. “If you sell something and do it well, it’s still not something that you would necessarily buy [for yourself].”
The Rabsky principals, for example, proposed a series of treehouses in landscaped Zen gardens located throughout the under-construction building at 10 Montieth Street. That property will boast a 25,000-square-foot zigzagging landscaped roof for biking, running and gardening.
A rendering of 10 Montieth Street (credit: ODA New York)
“We have conversations about amenity spaces I’ve never had before – typologies that don’t exist,” Chen said. “People have a preconceived view: that they don’t experience the city as we do. But they walk around the projects we do, they read, and they have the ability to quickly gain knowledge.”
The Hasidim are more than willing to do deals with outsiders, brokers said, but it’s not always easy to get their ear.
“If you call an owner in Brooklyn and speak Yiddish, you’re going to get a lot further,” said Gabriel Saffioti, who along with colleague Nicole Rabinowitsch left Eastern Consolidated earlier this year to launch Williamsburg-based brokerage Constellation Real Estate Advisors. Rabinowitsch said she hands out business cards at kosher Williamsburg eatery Gottlieb’s to draw potential clients.
Despite their best efforts, Hasidic investors have recently drawn increased attention — and controversy.
Late last year, New York Gov. Andrew Cuomo, Attorney General Eric Schneiderman and New York City Mayor Bill de Blasio released a list of landlords with properties that benefit from 421a tax abatements but allegedly don’t offer rent-regulated leases to tenants. Rabsky, which was also accused of abusing preferential rent rules at a Williamsburg rental building in a ProPublica investigation, was one of the landlords. The firm denies the claims.
In March, Allure Group, a for-profit nursing-home operator led by Solomon Rubin of the Borough Park-based Bobov Hasidic sect, made headlines for its role in the controversial $116 million sale of Rivington House to developers Slate Property Group, Adam America and China Vanke. The deal is in the center of multiple investigations, including one by U.S. Attorney Preet Bharara. In June, Schneiderman prevented Allure from closing on two other nursing home purchases, citing the Rivington House deal.
“We have conversations about amenity spaces I’ve never had before – typologies that don’t exist.” — ODA New York’s Eran Chen
Perhaps the most notorious within industry circles is Chaim Miller, who got his start working for developer Abraham Leser. A recent investigation by TRD found that Miller, whose assets include the Beekman Tower in Midtown East, has been sued at least 18 times since 2014 by at least 29 individuals and entities.
In recent months, the real estate market slowdown has made Hasidic firms, like others, far more selective about deals. But looking at their overall impact over the decade, it’s clear they’ve been the dominant force in shaping Brooklyn real estate.
“For the sake of their business and their community, they need to create an experience they never had,” Chen said. “Through this, there is the opportunity for innovation.”
Yoryi DeLaRosa and Hiten Samtani contributed reporting.
Learning and earning: Hasidic Brooklyn’s real estate machers
“These guys are still very old school,” a lender source said. “They’ve memorized half the Talmud – they prefer to do complex calculations in their head.”
Their approach to financing projects also stands out. While firms such as Two Trees Management and Tishman Speyer shoot for the big institutional loan up-front, many Hasidim wait until just before breaking ground to line up funds. They prefer to finance in smaller loan increments over multiple stages, which allows them to tweak their design plans or bring in new partners, and then subsequently restructure the financing, sources said. Josh Zegen, co-founder of Madison Realty Capital, said this approach is “more of a middle-market entrepreneur thing” in general.
“As values increased, some sponsors have refinanced their properties during the course of development, using leverage to return equity to their investors,” Boyar said. Once the property is fully leased and operating, they can secure long-term debt. By contrast, he added, “institutional developers have been able to take advantage of the capital markets and finance their developments early on at lower interest rates.”
“If you don’t have a 72-foot Azimut yacht, two Ferraris and three houses, what the hell do you do with your money?”
Most Hasidic investors rely on hard money lenders, a cadre that includes G4 Capital Partners, Emerald Creek Capital, Downtown Capital Partners and Trevian Capital. They also tap development and investment firms like Madison Realty Capital and Ari Shalam’s RWN Real Estate Partners, the family office of Apollo Global Management co-founder Marc Rowan.
But some of the bigger players have been able to lock in major banks and other institutional lenders.
In the past year, Rabsky secured $95 million from TD Bank to refinance its debt at Leonard Pointe and an $80 million acquisition loan from Bank Leumi for a development site it bought from Forest City Ratner. For the Rheingold Brewery redevelopment, Madison Realty Capital and Bank Leumi provided acquisition financing — $70 million to All Year and $50 million to Rabsky, respectively.
Other banks that work with the bigger Hasidic firms include Dime Savings Bank, Santander Bank, Centennial Bank, Bank United and Modern Bank, sources said.
Some Hasidim have taken their quest for funds to the the Tel Aviv Stock Exchange. Goldman, for example, raised $166 million to date, from a total of two bond issuances. Pooling properties together makes them easier to refinance, a source said. But others in the community, reluctant for the spotlight that comes from being in the public markets, avoid this path.
Amid the deal frenzy, the Hasidim are also dabbling in trading debt.
“These guys are very liquid,” said a prominent financing broker. “You’ll see them very strategically buying notes on properties, but only within their own strike zone. They are very, very good in the markets that they know.”
The outside world
The Hasidim are encouraged to remain insular — except when it comes to business.
Some developers from the community have become especially skilled at making a high-end product for young and upwardly mobile professionals, Jewish or otherwise.
“They’ve memorized half the Talmud – they prefer to do complex calculations in their head.”
“They’re informed about new trends to the extent that it might be shocking,” said Eran Chen, founder of ODA New York, which is designing the Rheingold Brewery sites for Goldman and Rabsky. “If you sell something and do it well, it’s still not something that you would necessarily buy [for yourself].”
The Rabsky principals, for example, proposed a series of treehouses in landscaped Zen gardens located throughout the under-construction building at 10 Montieth Street. That property will boast a 25,000-square-foot zigzagging landscaped roof for biking, running and gardening.
A rendering of 10 Montieth Street (credit: ODA New York)
“We have conversations about amenity spaces I’ve never had before – typologies that don’t exist,” Chen said. “People have a preconceived view: that they don’t experience the city as we do. But they walk around the projects we do, they read, and they have the ability to quickly gain knowledge.”
The Hasidim are more than willing to do deals with outsiders, brokers said, but it’s not always easy to get their ear.
“If you call an owner in Brooklyn and speak Yiddish, you’re going to get a lot further,” said Gabriel Saffioti, who along with colleague Nicole Rabinowitsch left Eastern Consolidated earlier this year to launch Williamsburg-based brokerage Constellation Real Estate Advisors. Rabinowitsch said she hands out business cards at kosher Williamsburg eatery Gottlieb’s to draw potential clients.
Late last year, New York Gov. Andrew Cuomo, Attorney General Eric Schneiderman and New York City Mayor Bill de Blasio released a list of landlords with properties that benefit from 421a tax abatements but allegedly don’t offer rent-regulated leases to tenants. Rabsky, which was also accused of abusing preferential rent rules at a Williamsburg rental building in a ProPublica investigation, was one of the landlords. The firm denies the claims.
In March, Allure Group, a for-profit nursing-home operator led by Solomon Rubin of the Borough Park-based Bobov Hasidic sect, made headlines for its role in the controversial $116 million sale of Rivington House to developers Slate Property Group, Adam America and China Vanke. The deal is in the center of multiple investigations, including one by U.S. Attorney Preet Bharara. In June, Schneiderman prevented Allure from closing on two other nursing home purchases, citing the Rivington House deal.
“We have conversations about amenity spaces I’ve never had before – typologies that don’t exist.” — ODA New York’s Eran Chen
Perhaps the most notorious within industry circles is Chaim Miller, who got his start working for developer Abraham Leser. A recent investigation by TRD found that Miller, whose assets include the Beekman Tower in Midtown East, has been sued at least 18 times since 2014 by at least 29 individuals and entities.
In recent months, the real estate market slowdown has made Hasidic firms, like others, far more selective about deals. But looking at their overall impact over the decade, it’s clear they’ve been the dominant force in shaping Brooklyn real estate.
“For the sake of their business and their community, they need to create an experience they never had,” Chen said. “Through this, there is the opportunity for innovation.”
Yoryi DeLaRosa and Hiten Samtani contributed reporting.
Learning and earning: Hasidic Brooklyn’s real estate machers
