Almost no segment of New York City’s real estate industry was spared in the Madoff scandal, which may be history’s largest Ponzi scheme: commercial brokers large and small, little-known developers and prominent families like the Wilpons and Rechlers all lost money to Bernard L. Madoff, industry executives say.The outsize impact on the industry may have resulted largely because Mr. Madoff (pronounced MAY-doff) managed his funds much the way that real estate leaders have operated successfully for decades: He provided little information and demanded a lot of trust.
By Christine Haughney, December 18, 2008, New York Times
“You have a lot of wealthy people who made a lot of money on handshakes,” said Mark S. Weiss, a commercial real estate broker at Newmark Knight Frank, where several brokers had invested heavily with Mr. Madoff. There was “something about this person, pedigree and reputation that inspired trust,” he said.
Across the city, industry executives said deals had been scuttled or jeopardized because of the scandal. Residential brokers are taking calls from Madoff investors who have had to put their apartments on the market. Many developers had pledged their investments with Mr. Madoff as collateral for projects, and are now worried that their banks will call in their loans.
“The level of devastation, both financial and on a human level, is astounding,” said Robert J. Ivanhoe, a lawyer who is representing 10 developers and investors who lost $5 million to $50 million each with Mr. Madoff.
Indeed, at an industry fund-raiser at the Grand Hyatt hotel in Manhattan last weekend, much of the chatter over sushi and crudités was about money feared lost with Mr. Madoff, according to people who attended. And a Manhattan psychotherapist who counsels real estate leaders and bankers said most of the patients he has seen this week have close friends and relatives who lost money with Mr. Madoff.
The victims include executives at the global commercial brokerage CB Richard Ellis, most prominently Stephen Siegel, a major Bronx landlord who is chairman of worldwide operations at the brokerage and whose wife, Wendy, helped organize Saturday’s fund-raising dinner.
Brian S. Waterman, a principal at Newmark, also invested with Mr. Madoff. So did the Rechler family, which has been a major owner of office buildings in the region. Scott Rechler, the head of RexCorp, one of the family’s largest firms, called the family’s exposure “limited.”
Jerry Reisman, a lawyer based in Garden City, N.Y., said he was representing six commercial real estate investors and developers in the area who lost a total of $150 million to Mr. Madoff. They met Mr. Madoff through contacts at country clubs in the tristate area, he said.
“They knew him from golfing in the Hamptons. They knew him from the locker rooms,” Mr. Reisman said. “He was considered a wizard.”
Mr. Reisman said his clients were especially concerned because they counted on Madoff investments to complete some of their real estate projects, pledging their investments as collateral for projects. Those developers fear that when their banks realize that their investments with Mr. Madoff have disappeared, they will demand new collateral from other sources, Mr. Reisman said.