Sol Asylum & The Rebbe's Reprimand

Fractured multibillion-dollar RE dynasty, holy pricing ceilings & TASE wipeouts

Author

Hiten Samtani
September 04, 2024

Sol Asylum

A marital reconciliation agreement scribbled on a legal pad has upended Sol Goldman’s RE dynasty

In December 2000, to show that he was serious about a 13-year-old kid of tiny stature but considerable talent, an executive grabbed a napkin and scribbled what has become one of the most consequential documents in the annals of sport.

“Carles Rexach, FC Barcelona's sporting director, hereby agrees, under his responsibility and regardless of any dissenting opinions, to sign the player Lionel Messi provided that we keep to the amounts agreed upon." ⚽️ 

Scribbles can change the course of history. They can also, as we’ll see, fracture one of the most storied dynasties in the history of real estate. It all started because Sol Goldman wanted his wife back. 

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Goldman (Cont.)

In 1983, Goldman, who had assembled one of the most formidable empires in New York – at its pomp, 600 buildings including HoFers like the Chrysler Building – was in distress: not financial, but marital. Lillian Goldman, his wife of 4 decades, was leaving him: she vacated their suite at the Waldorf and filed for divorce. To win her back, Sol had more than sweet nothings: he promised her a third of his fortune when he died, and put it in writing on a yellow legal notepad. ✒️ 

That hastily scribbled reconciliation is now at the center of a multibillion-dollar feud between Sol’s descendants, which TRD’s Rich Bockmann just dropped a cracker of a read on. It contradicted Sol’s will, which had stipulated Lillian could draw income from properties held in a trust but couldn’t own them outright, but a judge ruled that it constituted a binding agreement. And it has pitted Sol’s youngest child and day-to-day operator of Solil Management, Jane Goldman, against her sister and her nephew. The tale involves disputes over conversations the siblings had while sitting shiva for Sol, poetic depositions (Jane: “When my father was alive, the world was black and white; and after he died, it became gray”), a billionaire vegetable gardener 🥕, and a mysterious holding company that owns 50% of Solil Management. Here’s TRD:

The holding company acts as a pass-through between Solil and the family. It does two things: distributes payments and files taxes. The thing about SG Windsor, though, is that no one can really say how it came to be. It was created shortly before Lillian died in 2002, but there’s no operating agreement saying who should manage it. (There was supposedly a draft operating agreement drawn up at the time, but it was never executed.)    

Internecine feuds are something that all families of means lose sleep over, and many RE dynasties, from the Feils to the Macklowes to the Seenos, have been embroiled in them. Others such as the Elghanayans have taken cinematic steps to avoid them. "In this business, you make money slowly," Sol once said – alas, he didn’t apply the same patience to his domestic affairs.

Rebbe’s Reprimand

A speech by the Satmar Rebbe excoriating high prices of new homes could complicate matters for Kiryas Joel builders

An intriguing case of imposing price controls on new housing is playing out in New York, but it’s not the government laying the smackdown: Rabbi Aron Teitelbaum, the incredibly influential Satmar Rebbe, chastised builders in the Hasidim stronghold of Kiryas Joel 🌴 for what he said were out-of-control home prices. In a speech last week, the Rebbe said the founder of the Satmar sect, Rabbi Joel Teitelbaum, would never have countenanced the pricing situation in the rapidly growing enclave. Developers, the Rebbe said, could still make money at a price ceiling of $300/foot for new construction, and per Orthodox and Hasidic-focused publication Vin News, several of them have already assented to the new mandate.

Keep in mind that the going rate for many new builds today in Kiryas Joel is in the mid $500s/foot, so this has already put question marks on in-progress deals, sources told The Promote. Typically, a developer will buy land, source financing and plan construction according to the expected market rate – that rate has now been slashed. Of course, builders here won’t need to offer fancy finishes for $300/foot – but they will have to deliver workmanlike product at that price, and can offer upgrades at a premium.

Now, this isn’t law as such. But it’s impossible to overstate how much sway the Rebbe has over the town, so it’s expected to become the state of play. Absolutely fascinating stuff, and more to come.

Bonus: For more on how Kiryas Joel became what it is today, I’ve been recommended “American Shtetl” 

Existential Dread

To raise money on TASE, a developer rolls select properties into an entity that raises bonds (Credit: InFin)

A division of a major U.S. office landlord that raised Israeli bonds disclosed that it has “significant doubts regarding the continued existence of the company” – the division, not the parent, to be clear – after getting rocked by weaker leasing, higher operating costs and higher costs of capital.

Hertz Properties, an arm of Zev Hertz’s LA-based Hertz Investment Group, disclosed in a regulatory filing this weekend on the Tel Aviv Stock Exchange (it had raised some $200M in TASE bonds to finance 11 buildings - primer here) that it had doubts about whether it could remain a “going concern” (that phrase always makes me think of the Connery/Caine masterpiece “The Man Who Would be King”). It also disclosed financial reporting irregularities 🤷‍♀️ , per CoStar, and has hired a restructuring officer to help sort out the mess – the division still controls about 4M sf of office, of which a third is vacant. The parent co is a top 25 owner of CBD office space nationwide, per CoStar.

You gotta feel for Israeli institutional investors who decided to get in on the US property market via TASE bonds. It’s been one misadventure after another with sponsors from Yoel Goldman to Boaz Gilad to Gary Barnett to Starwood.

Circle of Life

Life-sciences properties 🧪 , pandemic-era darlings that were hailed as a messiah for the office market, are dealing with such serious oversupply that some developers are now offering them up as 🥁🥁🥁 office space.

“They’re no longer aspiring to get $100 rents,” Rockpoint’s Fred Borges told WSJ of the asking rents for lab space. “They will gladly do a deal for $70 on the office side.” In Boston, at least 10 life-sci property owners are now marketing them as office space, while others have halted construction on new projects. Of the nearly 50M sf of life-sci in the Boston area, 28% is vacant.

IQHQ, which broke ground 4Y ago on a 10-acre, $2B life-sci megaproject in San Diego, has yet to announce a single tenant – you might recall that its lender, Bank OZK, was hit with a downgrade in the spring over its $915M loan on that project.

A classic case of overbuilding in response to a hot trend is how observers described it: Since Q1 ‘20, >59M sf has been added, with 19M sf more in the pipeline, per JLL. Compare that to the average of 3.7M sf added annually in the 5Y pre-pandemic.

Quickies

Unquotable Quotes

“I do so many transactions, ma’am, that I don’t remember.” 😇 
- Miami developer Masoud Shojaee, when asked if he transferred $132K in project funds to another account he controls

 

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