The up-and-coming brokers and landlords who attend the monthly luncheons of the Young Men’s-Women’s Real Estate Association are usually too busy networking to listen closely to the guest speakers. But the audience sat at rapt attention last winter when Steven Witkoff, a 41-year-old former Harlem landlord who built one of the country’s largest real estate empires during the 1990′s boom, took the stage at the University Club and started complaining about how he had been vilified by the press.
Mr. Witkoff, a spare, knifelike man who keeps a copy of the book Tough Jews on his desk and used to carry a gun while collecting rents uptown, railed about a four-month-old Wall Street Journal article depicting his $2.5 billion portfolio of properties in Manhattan, Philadelphia, Dallas and Chicago as an overleveraged disaster-in-the-making. “I’ve been victimized,” he fumed, before launching into a tenuous defense of his borrowing habits.
Many brokers in the audience shook their heads in disbelief. Several of his recent major deals, including the purchase of three Newark, N.J., office towers, had unraveled because he couldn’t find the money to close on them, and there were rumors that his lenders might soon foreclose on the rest of his holdings. He had been forced to abandon a plan for an initial public offering and to pull out of a deal to become a part owner of the New Jersey Nets. Indeed, the decade’s fastest-rising real estate star seemed on the verge of a colossal crash and burn. And there were many people who would have enjoyed seeing him fall.
As it turns out, however, reports of Mr. Witkoff’s implosion were premature. After his outburst at the University Club, the once-voluble real estate investor became very quiet. (He declined to speak to The Observer for this article.) That fueled more rumors about his demise. But in truth, Mr. Witkoff has had a very productive year, one that he capped in September by purchasing a major office building in London. In the last 12 months, he has rolled up his sleeves, fixed most of his problems and calmed his lenders. “Through it all, I think people didn’t give him credit for how smart he is,” said Stephen Siegel, chairman of Insignia-ESG Inc.
But Mr. Witkoff hasn’t just survived, he’s changed. After his peek into the abyss, he has grown a bit humbler, more self-aware. His friends agree it is for the better. “Now he’s again the guy who I first met several years ago,” said a close acquaintance. “I think the guy you met in 1997 was a full-fledged nut.”
It was Steve Witkoff, full-fledged nut, who personified the 90′s version of the flashy real estate player. He got rich buying and selling existing buildings, most notably the landmark Woolworth Building in lower Manhattan, with other people’s money (as opposed to building them with other people’s money). And he timed it well: He caught the market when the city’s stuffy real estate families were still hesitant to get back in the game, after the recession at the beginning of the decade.
He wasn’t a member of their skyscraper club, either. He ran with a different gang–a crew of carousers led by former New York City policeman Bo Dietl, the author of One Tough Cop and gossip column regular. He did deals with investment bankers from Crédit Suisse First Boston and Lehman Brothers at Rao’s, the East Harlem hangout where celebrities go for succulent veal and a little mobster ambience. “You talk about burning a candle at both ends,” said William Adamski, a C.S. First Boston managing director. “If there was a way to burn it in the middle, Steve Witkoff would figure it out. He doesn’t stop. He’s like the last guy to call it a night.”
Zoom Her Twice
Born in the Bronx, Mr. Witkoff grew up in Baldwin Harbor, L.I., and got his law degree from Hofstra University. After graduating, he landed a job at the real estate firm Dreyer & Traub, where one of his clients was Donald Trump.
The young lawyer, however, was more interested in emulating the famed developer than doing his legal paperwork. So in 1985, he and his fellow attorney, Larry Gluck, started touring Washington Heights in a beat-up 1978 Buick, searching for cheap buys. He wound up digging trenches and doing his own plumbing work when his rental income slumped. But he learned a thing or two about how to turn distressed properties into money makers. It served him well when he began nosing around for cheap office buildings in lower Manhattan in 1995.
In the wake of the 1987 stock market crash, most of the city’s old real estate families were fleeing the financial district. But Mr. Witkoff quietly crept into the neighborhood and bought several small buildings at low prices. Then, in 1996, he struck a deal to buy the mortgage on 33 Maiden Lane, an imposing 27-story tower designed by Philip Johnson for I.B.M. Corporation. He asked C.S. First Boston for financing.
C.S. First Boston’s bankers were leery at first. The word out in the Hamptons, where Andy Stone, the firm’s chief real estate financier, spent his weekends, was that the pistol-packing apartment owner had all the makings of a bad actor. But they agreed to loan him the money, anyway.
With the help of C.S. First Boston, which sometimes underwrote as much as 97 percent of his purchases, Mr. Witkoff quickly bought a number of other properties, including the landmark News Building on East 42nd Street. It wasn’t long before he became the talk of the city’s clubby real estate community, not just for his deals but the way he carried on.
By then, he had fallen in with Mr. Dietl’s rat pack of self-proclaimed tough guys, including the jeweler known as Mike the Russian, clothiers Sheldon Brody and Joseph Abboud, singer Paul Anka and Joey (Pots and Pans) DeKama. Mr. Witkoff began to stay out late. “He was not a guy who used to go out every night,” Mr. Dietl told The Observer . “He used to do his work till 8, 9 o’clock at night, go home, and that was his life. Now I don’t think he goes home anymore. He’s out with me every night!”
Mr. Witkoff even cut Mr. Dietl in on the action at the News Building, 33 Maiden Lane and other quickly appreciating properties. Mr. Dietl returned the favor, referring to his friend as “the great real estate mogul Steve Witkoff” during his Friday morning movie reviews with Joey Pots and Pans on the “Imus in the Morning” radio program.
At his 40th-birthday party at the Glen Oaks Country Club on Long Island, a friend, banker Saverio Giarrusso, kidded him about his taste in friends and nightspots. “Steve really wants to be Italian,” Mr. Giarrusso said in a toast.
Meanwhile, he was buying with the house’s money. Over time, he borrowed $500 million from C.S. First Boston. In May 1997, after their first year together, Mr. Witkoff and his C.S. First Boston bankers flew to Georgia in a private plane to the exclusive Augusta National golf course. Later, they toasted their success over ribs at a local barbecue joint. But one of Mr. Witkoff’s bankers struck a note of warning. “Steven, you are, like, the success story right now in Manhattan,” the banker recalled saying. “You are going to be pursued by every investment banker, every newspaper reporter. It’s going to be hard to hang on to yourself.”
“If that happens, we’ll go there together,” Mr. Witkoff said.
But when he wanted to take bigger risks, C.S. First Boston balked. So Mr. Witkoff hooked up with Lehman Brothers, which had an even bigger plan for him: a $2 billion I.P.O.
Mr. Witkoff now tells people he never really planned to go public. But his friends aren’t so sure. They say he borrowed everything he could from Lehman, assuming he could pay it all off with money from shareholders.
So Mr. Witkoff and his bankers went searching for bargains in faraway places like Seoul, South Korea, where they met with top executives from Samsung Electronics Company. Mr. Witkoff even brought Mr. Dietl along for the ride. When Mr. Witkoff struggled through an interpreter to say how he wanted to develop friendships with his partners before entering into business ventures, the ex-cop interrupted: “Steven, hold it a second, let me explain it. It’s like when you are with a girl the first time. When you zoom her once, then you wanna zoom her twice.” That broke the ice, though it didn’t lead to any real estate deals.
Still, Mr. Witkoff bought properties in Chicago, Dallas and Philadelphia. He struck his deal to buy the Woolworth Building in June 1998. He agreed to be part of a group that was going to buy the New Jersey Nets. And he seemed intoxicated by the fast money that was passing through his hands. “I can’t hear you now,” he joked to a reporter during a telephone interview. “So maybe I should close the roof of my Rolls-Royce.”
Then in the summer of 1998, the market for publicly traded real estate firms collapsed. According to Mr. Witkoff’s friends, Lehman canceled his I.P.O. It suddenly seemed as if he was in real trouble. According to several sources, Mr. Witkoff toyed with selling his company to Vornado Realty Trust. Steven Roth, Vornado’s chairman, was beguiled by his younger peer. “I will tell you for a fact that Steve Roth said to me, ‘When I looked to buy Steve Witkoff’s company, I didn’t care about the properties, I wanted to buy the kid,’” a source recalled. But nothing came of it.
The Twin Towers?
Instead, that fall, The Wall Street Journal published a front-page profile of Mr. Witkoff that read like an obituary. In the piece, he was chastised by a number of colleagues, including Andy Stone, who said it was time for him to start selling if he wanted to avert disaster.
Mr. Witkoff was deeply wounded. He felt his problems had been overblown. None of his loans were scheduled to come due for another three years. So, in his view, he had plenty of time to fix things.
He couldn’t fix them all, though. His bid to become one of the owners of the Nets unraveled. So did two huge real estate deals he had announced months before. And it looked like he might lose the Woolworth Building, too. He had paid a $5 million deposit but still needed another $152 million. He couldn’t count on Lehman anymore, after the bank suffered staggering losses in Russia amid rumors of insolvency. Nobody else in town was willing to bail out Mr. Witkoff at the generous rates to which he’d grown accustomed.
But Mr. Witkoff proved his epitaph had been written too early. He raised $25 million in cash from partners and convinced Lehman to underwrite the rest. Then, taking advantage of Venator’s financial problems and the shaky real estate market, Mr. Witkoff demanded a discount. Venator blinked and shaved $20 million off the price.
Before long, he had leased up every square foot of the Woolworth Building. Meanwhile, he was shuttling regularly to Dallas to find tenants for a money-losing office building he had purchased there. He sold several of his Manhattan office properties–including 33 Maiden Lane–at a healthy profit. Then he plunged back into the market with Lehman, buying the famous Shell-Mex House in London.
But as he scrambled to rescue his empire, he dropped out of the public eye. He stopped speaking to reporters. He has admitted to friends that he got carried away in the real estate boom. They said he has grown calmer. Of course, he still hangs out with Mr. Dietl, who owns a piece of the Woolworth Building now. But the ex-cop complains that on weekends he can’t drag his buddy away from his Long Island home and his wife and three sons. “The guy’s a great father,” he lamented.
That’s not to say he doesn’t have some surprises up his sleeve. He and Mr. Dietl recently talked about making a run at the World Trade Center. “I said, ‘Stevie, let’s fucking do whatever we have to do,’” Mr. Dietl recalled. “He gave me a big smile.”