“The building is—what’s the word I’m looking for? Infectious. I refer to it sometimes as Gilligan’s Island. Remember that show? Gilligan’s Island?” Jon Herbitter asked this Monday from the offices of Mann Realty, where he’s president. “You don’t get out.”
In 2007, his boss, Maurice Mann, then a midsize New York landlord, partnered with the billionaire Lev Leviev’s company to buy the Apthorp, that monolithic 101-year-old limestone rental building at Broadway and 79th Street. Last month, Mr. Leviev’s group filed suit, accusing Mr. Mann of wildly, absurdly incompetent mismanagement, if not willful wrongdoing.
“Bullshit. It’s bullshit, it’s bullshit,” Mr. Herbitter said.
Mr. Leviev is an Uzbek-born diamond billionaire, one of the world’s great benefactors of the orthodox Chabad-Lubavitch movement, and a dear friend of Putin. Among other things, his suit accused Mr. Mann of allowing both an illegal immigrant to live in a penthouse and an affiliate to live in two ninth-floor units (while calling them vacant on rent rolls). “I’m not even going to justify that bullshit. It’s bullshit. It is total bullshit, all right? Excuse me,” Mr. Herbitter said. “It’s bullshit.”
Mr. Herbitter takes the management of the building very personally. His voice gets misty when he is asked about the best part of his job. “Sitting in that courtyard; taking a deep breath. The building is such a phenomenal …” He had to pause. “I’m describing something that becomes very emotional.”
The Mann era at the Apthorp started as a story about go-go New York real estate, but the old nerve-frayed clash between the building’s new landlord and its tenants (about half rent-regulated) seems quaint in retrospect. Now it’s a story about Manhattan’s downfall, where googly-eyed ambition—the total asking price for all proposed Apthorp units was announced at $1.06 billion, beating 15 Central Park West’s initial cost per square foot—has devolved into panic and hatred.
What was once a rental farce became a joke about a rabbi, red ants, a gun-carrying real estate manager, a diamond billionaire, and a jeans magnate who walked into a monumental Upper West Side rental building, tried to make it into a gold-plated condo, and may be walking out in foreclosure on Jan. 15, the date one lender has reportedly given as a deadline for avoiding default.
MR. MANN was first reported to be buying the Apthorp in November 2006, when he agreed to pay about $425 million—or $2.6 million per unit, well above the previous high for a U.S. apartment building. “It was a little surprising,” a source said. “I didn’t expect him to be at the winner’s circle.” Mr. Mann planned to keep the Apthorp “a very high-end rental and to keep it exactly the way it is,” he told The Times then.
One day after the deal closed in March, a Wall Street Journal article, which quoted Rotem Rosen, the chief executive of American operations for Mr. Leviev’s Africa Israel and the husband of billionaire Tamir Sapir’s daughter, said the building would go condo.
“That was misinformation,” Mr. Herbitter told another newspaper six days later. “We’re long-term investors and we plan to improve the property while maintaining it as a rental, despite press to the contrary.” Before the end of the month, a news release from Africa Israel reiterated that the apartments would be converted and sold off.
If one of Mr. Mann’s investors hadn’t backed out at the last minute, Mr. Herbitter said, he would never have met Mr. Leviev. “Four days before the closing, when you have $25 million fall out of your package, you have a lot of scrambling to replace it. So someone introduced us to them, and they saw the building on a Thursday. On Friday, they wired in $55 million without a term sheet, just saying, ‘We want in.’”
Meanwhile, Mr. Mann’s other investors included the shoe importer–cum–landlord Ralph Braha, and Joe Nakash, who co-founded Jordache. (“Synonymous with sexiness,” the denim brand’s Web site says.) “Those pals are in many of our deals,” Mr. Herbitter explained. “We find a deal and they say, ‘All right, put me in for a certain piece.’”
Africa Israel took a 50 percent stake in the Apthorp, but agreed that Mr. Mann would manage the building.
The investors took out a $385 million first mortgage from Anglo Irish Bank, which only three years earlier had done such little American work that its annual report apparently gave one sentence about the U.S. from its chairman. This December, the bank’s CEO, David Drumm, and its chairman, Sean FitzPatrick, both resigned after regulators discovered that Mr. FitzPatrick had secretly transferred $120 million in personal loans. Anglo Irish, once the world’s best-performing bank stock, is now effectively nationalized.
But the real lending difficulties for Messrs. Mann and Leviev came from their $135 million second mortgage with William Mack’s Apollo Real Estate Advisors. On Jan. 12, Mr. Mann said he would meet with this reporter and a photographer at the Apthorp the next day to discuss it all. Later, an email from his address said: “I hate to burst your bubble and disappoint you, but, unfortunately Mr. Mann has some blood tests in the morning that I cannot change.”
IN EARLY OCTOBER, before his fight with Apollo came to a head, Maurice Mann’s people met with Lev Leviev’s. It had been four months since the attorney general had approved their billion-dollar conversion plan, but not a single apartment had been contracted to sell.
According to the Leviev lawsuit, there were several proposals at that October meeting, including one that Mr. Mann resign and be replaced by an acceptable manager. “They wanted to co-manage the building,” Mr. Herbitter explained this week. “We said no. Our partners said no. They weren’t happy with that decision. That’s all.”
On Nov. 17, there was a meeting at the offices of Mr. Nakash, the tight-jeans mogul. “Everyone got into the same room, where various options were discussed; the principals went out and had a private meeting,” a source who was present said. “I didn’t perceive sensitivity. Nobody was breaking down and crying. It was a serious meeting.”
It was decided that a brokerage would be hired to sell off the entire building for $552 million. The parties further agreed, according to Leviev’s suit, that they would cooperate on marketing, and that Mann would consider stepping down as manager.
“It’s not true. They said it and ran out of their office as they said it,” Mr. Herbitter said. “It was never, ever agreed to. … Rotem, on his way out, with his coat on, said, ‘O.K., we’re going to co-manage! Co-manage, that’s what we’ll do! See you later!’”
So what does Mann’s president think Africa Israel has been up to? “They wanted control, which their arrangement doesn’t allow them.” He pointed out the reports that Africa Israel has pulled away from American real estate; the company’s stock was $3.10 a share in November, down from $43.58 last January. “So I would guess that they would want to get out what they could—if they could.”
MR. HERBITTER is the man whom a New York City Civil Court judge passionately and, at least around the Apthorp, very famously upbraided in September when Mann Realty tried to evict Nancy Robbins from her 720-square-foot penthouse, a case that ended last Wednesday. Red ants were supposedly spreading from Ms. Robbins’ plants.
“Mr. Harbitter—I’m sorry, Herbitter is the right name, not Harbitter, I’ll correct myself,” the judge said then. “Anytime I say Harbitter, I mean Herbitter. Mr. Herbitter … was caught in several whopping inconsistencies.”
The Apthorp ant decision, which includes, for example, the judge’s declaration that Mr. Herbitter has lied about his memorization skills, is probably this young century’s greatest piece of New York real estate legal history. (A runner-up is the lawsuit at the Plaza, where billionaire Andrei Vavilov’s wife apparently burst into tears when she first saw their poorly completed $53.5 million penthouse unit; that suit was filed by Y. David Scharff, who is also Mr. Leviev’s attorney at the Apthorp.)
According to Darryl Vernon, the ant lady’s attorney, Mr. Herbitter showed up to one deposition with a gun on his belt. Tony Smith, the co-chairman of the Apthorp Tenants Association, once asked Mr. Herbitter about his much-gossiped-over firearm. “I said, ‘I’m told you carried a gun.’ He said, ‘Yes, I’m licensed to carry a gun.’ I asked why and he said, ‘I’m an EMT.’ I think a lot of people feel threatened by him. He’s very brusque and cold. I don’t think he has threatened anyone, to the best of my knowledge; I think he likes to convey a little bit of menace, I think he enjoys that.”
The N.Y.P.D. confirmed that Mann’s president has a pistol license—for a .380 Sig Sauer and a .380 Walther—but said it’s only a residence permit. “Not germane to the issue,” Mr. Herbitter said this week when asked about guns.
THE REAL TROUBLE for the Apthorp came in the first week of December. Apollo, one of the lenders, made a $22.7 million capital call and demanded that Mr. Mann submit a new business plan for the project. “I send new ones every week,” Mr. Herbitter complained Monday. “They’re very arbitrary.” Had the world economy not tanked, he offered, “Apollo wouldn’t be losing the money they’re losing and have to focus on minutiae. ‘What toilets are we putting in?’ they asked one day. It’s ridiculous! Toilets!”
Mr. Mann responded to Apollo by threatening a lawsuit. If “you do file,” Apollo’s counsel wrote, “all bets are off and this project will quickly spiral down the toilet.”
He filed his suit anyway, asking for “an amount no less than Five Hundred Million” and accusing the lender of demanding a ransom payment and trying to get the Apthorp at a “fraction of its worth.” The suit, which misspelled screenwriter Nora Ephron’s name in its list of past Apthorp residents (“Norah Ephron, Al Pacino, Conan O’Brien”), even though she wrote a famous piece for The New Yorker on her life there, was quickly dropped.
Mr. Leviev’s people were livid. They sued to get Mr. Mann to agree to enter arbitration over management, which was, they said, an attempt to avoid foreclosure and save the Apthorp. Besides anger over Mr. Mann’s business plans, and besides those charges about the penthouse and ninth-floor units, they complained about an amateurish and embarrassing marketing campaign, especially a film about the building. (A segment of the movie is still on the building’s Web site, and features strings out of late-’70s pornography and a woman purring, “The Apthorp: A moment of passion that lasted a hundred years.”)
“The film was done at a time when the market was different; the market was sexier,” Mr. Herbitter explained.
More importantly, they complained that Mr. Mann had allowed excessive vacancies, and then had to lease the empty units at fire-sale rents after realizing that the so-called warehousing violated rules from the attorney general’s office about condo conversions. “Yes, we did create inventory!” Mr. Herbitter explained. “There’s natural attrition. People left. And in some places we didn’t lease them out so I could sell them!”
Then there was the charge that Mr. Mann was “overpaying for certain renovations while neglecting others.” According to a sales brochure, the Apthorp—known for its old-school grandeur but a sort of professorial untidiness—was going to have units outfitted with onyx in the powder rooms, for example, or hand-cast lion-head spouts. Even in the bubbliest market, those might not have been the ideal choices; a building known for its periodically murky tap water—“A few days ago we had brown water for 12 or 15 hours,” said Mr. Smith of the tenants’ committee—might not bother over hand-cast lion-head spouts.
Though the condo units won’t be getting lion-head spouts after all—“We’re not renovating many of them,” Mr. Herbitter said, “we’re selling them now as is”—there are still plans to construct an all-new central air-conditioning system. As it happens, the new cooling will not extend into the rent-stabilized apartments. “Well, as in any occupied conversion, the benefits accrue, for the most part, to the purchasers. The rent-stabilized tenants have their rights, so they get to stay there and get some improvements,” Mann’s president said. “But something like the central air-conditioning? No.”
Finally, among other things, the suit said Mr. Mann had unilaterally decided to replace the building’s third-party construction manager with one connected to his business partners.
“That has not happened,” Mr. Herbitter said. “There is a proposal for that. But it has not happened.”
ACCORDING TO Mr. Leviev’s investment agreement with Mr. Mann, the parties can solve stalemates by finding a mutually agreeable rabbi from a court known as a beth din, or house of judgment, to arbitrate their case.
But there were problems with finding a rabbinical court. First, Mr. Mann’s side didn’t think there was any technical stalemate: “But that doesn’t stop them from trying to push their agenda,” Mr. Herbitter said.
Then Mr. Leviev’s side recommended the orthodox Beth Din of America. According to court transcripts, Mr. Mann’s lawyer cited online research about that court “which gives us pause and concern; namely, an article that appeared online and a quote.”
“We regularly have commercial cases, O.K.?” said Rabbi Ronald Warburg, a coordinator for Beth Din of America, who was willing to answer general questions about the process. “It’s nothing unusual, O.K.?” Has he ever seen an argument over such a huge deal? “It’s not necessarily an issue of the amount of money. It’s an issue of the complexities.” Considering that Mr. Leviev is a renowned supporter of Orthodox causes, what happens if someone involved has made a contribution to the court? “It generally doesn’t happen,” Mr. Warburg said, “but if there’s a problem, there’s a disclosure beforehand.”
Meanwhile, Mr. Mann’s choices were the Joint Beth Din of the Conservative Movement, and something called Beth Din Zedek, which the court dismissed because it was picked “from the telephone book.” Mr. Leviev’s lawyers have complained that the Joint Beth Din doesn’t have enough experience in commercial real estate issues, and have said they will ask a State Supreme Court judge to decide on Jan. 14 what kind of rabbi will arbitrate. Time is tight: Apollo has reportedly made the following day its default deadline, extended from Jan. 9.
Mr. Scharf, the attorney for Mr. Leviev, declined specific comment, other than referring The Observer to court filings. Mr. Mann’s attorney did not return emails or phone calls.
CITING AN ANONYMOUS source, the Web site for The Real Deal magazine reported on Jan. 12 that “Mann has agreed to resign as managing partner of the landmark Apthorp condominium conversion.” Later that day, he denied the story to The Times. “I control the Apthorp,” Mr. Mann said, “100 percent.”
“I think,” a longtime associate of Mr. Mann said this week about his friend, “he’s just gotten himself into an unfortunate situation—a project bigger than he was expecting it was going to be. I don’t know if he really knew what he was getting into. He’s a decent, good guy. He tries to do the right thing, that’s what I’m going to say.”
“I can’t characterize him as a good guy or a bad guy,” Mr. Smith from the tenants’ committee said. “There are tenants who are chortling gleefully. My feeling is, we should not be gleeful.” After all, the Apthorp could be foreclosing this week. “That may be worse,” he said, “than frying-pan-into-fire. I am not gleeful.”
Does Mann have any regrets? “You need to put this into perspective of what happened to the economy,” Mr. Herbitter, its president, said. “Every yuppie would be taking his bonus and asking, ‘Is there someone who can get me into the Apthorp?’”