Mr. Speyer’s father, Jerry Speyer, served as board chair from 1986 to 1988. His grandfather, Robert Tishman, was board chair from 1972 to 1975. That record of service to one of the city’s most creative and dynamic industries speaks volumes about the family’s commitment to the city and its people.

It seems like ages ago, but there was a time when Mr. Speyer had a notion that he would break with the family tradition by becoming, of all things, a newspaper reporter. We’re delighted to note that he tried his hand at The New York Observer, where he showed all the energy and enthusiasm that he has since brought to the city’s real estate industry.

It wasn’t long before Mr. Speyer left us for bigger, although perhaps not better, things. Since joining the family business in 1995, Mr. Speyer has been a top-flight executive as well as an engaged civic patriot. His quiet work on behalf of a variety of public policy initiatives and private philanthropies mark him as one of the city’s most outstanding young people.

We’re happy to count him as one of our alumni, and we’re delighted that he is following his the footsteps of his elders.

Sure, some may lovingly write it off as a veritable men’s club (men are thought to outnumber women five to one), chide it as “The Liar’s Ball” (each year is a broker’s best year, no matter how wretched the marketplace) and speak ill of the food (nearly everyone avoids the chicken and filet mignon).

But the REBNY gala is as essential to a real estate person’s reputation and status as the buildings and bricks he works with. A dozen of the city’s most legendary players spoke to The Commercial Observer about the blurry nights and boom years that helped make the event what it is today.

Bernard Resnick, Sheldon Silver and Steven Spinola, 1996.

The 1950s and 1960s: “The Liar’s Ball” is coined

When the 1950s arrived, the board had expanded enough to stock a banquet hall with men in tuxedos and cigars. Some of today’s most venerable REBNY members attended those balls when they were still wet behind their ears.

Burton Resnick (chairman and chief executive officer, Jack Resnick & Sons, chairman emeritus of REBNY): I remember I was with my father and at that time you [could] cut the air because everybody was smoking cigars and everybody was doing deals. I’d like to have a dollar for every deal that wasn’t done.
Fifty years ago, 75 years ago, it was primarily brokers … but the owners were already there. The brokers were the leadership. I think the owners started being leaders in the last 40 years. They were always there, and I think it was only a matter of who smoked the longest cigar.

Larry Silverstein (president and chief executive officer, Silverstein Properties, former REBNY chairman): I think I started going to these REBNY balls I would say in the late ’50s. I remember missing one. There was one hell of a huge snowstorm—I think it was 1961 or 1962—massive snowstorm, and there was such a terrible night.

Stephen Siegel (chairman global brokerage, CBRE): It was fascinating to be surrounded by people like Leona and Harry Helmsley and Aaron Gural, and some of the legends of our business. Years later I also coined the phrase “The Liar’s Ball,” because no matter how terrible the market was, everybody had their best year ever: “Oh, my god, what a year I had! I would never have imagined in this economy!” So I used to get a kick out of that.

Jerry Speyer (chairman and co-chief executive officer, Tishman Speyer): The people who spoke were then the chairpersons and the people who were engaged in the city, like the mayor and the luminaries who represented the city infrastructure.

The one thing that was consistent was that it was extremely hard for anybody to get the attention of the people attending. It wasn’t until Bernie Mendik became chairman when he got up and made a noise to quiet down, like “Shhhh!”—you know, the kind of sound when you’re trying to calm a child down—and it worked like a charm. He was the first person to really get control of the room.

What was it like in the 1960s? It was probably more formal. People were behaved a little better. They were rowdy in their own ways—Harry Helmsley used to have a party after the Real Estate Board dinner, to which a relatively small group of people were invited. It was a lot of fun. He was a wonderful host.

1970s: Oil Prices Soar and Reciting the Declaration of Independence

The 1970s proved to be a financially challenging decade for REBNY and the real estate industry. Middle East “oil shocks” sent heating oil prices soaring, affecting several buildings. The city and the industry were faced with other financial perils, including a near-bankruptcy for the city and stubborn stagflation.

Peter DiCapua (chief operating officer of ATCO Properties & Management Inc.): If I recall, everything was about inflation and I think we were all concerned about was whether the assets of specifically the commercial real estate industry were going to keep up with inflation. And I think the mood was everybody had their own opinion about that. It’s a diverse group, I tend to be on the optimist’s side. I always say, “We’ll do OK …” Other people like to say the glass is half empty and it’s draining. I don’t think the mood was totally negative. I think it was balanced but concerned.

Mr. Speyer: Real estate’s problems started in 1972, and they got worse as the city’s problems got worse. At that point the real estate markets went down radically, and stagflation was definitely having a big affect on the Real Estate Board dinners.

People felt pretty down. There was not much renting going on, there was a lot of empty space, space downtown was going begging because the World Trade Center had been built and didn’t get rented until the late ’70s, space in Midtown was going begging. There was a lot of stuff going on that wasn’t pretty, to say the least.

Jeffrey Lichtenberg (executive vice president, Cushman & Wakefield): Originally when I started [in 1977] I thought this was a huge big-deal issue and you had to be there. I remember a company called Swig Wyler & Arnell invited me. I remember talking [with Norman Jacobson, then the head of leasing for Swig Wyler] about East 42nd Street and how I thought that … Donald Trump redeveloping the Commodore Hotel into the Hyatt was going to change East 42nd Street for the better. This is not a bullshit story.

Mr. Silverstein: Seymour Durst was chairman of the board and when he got up, he started speaking, and he started reciting the Declaration of Independence. Nobody, absolutely nobody, cared about what he said, because who’s paying attention? He just rambled on and on, everybody was going about their business like he didn’t exist. The funny thing is he told me the next day he met some people and they said, “Hey did you make the ball last night? We didn’t see you.”

Mr. Speyer: The markets really began to turn in 1977. Then in ’78 and ’79, they really got better. Buildings went up, buildings were being renovated, there were a lot of good things going on.

1980s: The Rise of Manhattan
With the growing pangs of the 1970s long behind them, REBNY members welcomed an explosion of bigger buildings and bigger deals, perking up the moods of the REBNY gala … that is, until 1986 arrived.

Peter Hauspurg (chairman and chief executive officer, Eastern Consolidated): From 1981 to 1986 was really one of the great rises of Manhattan real estate in terms of activity and prices and people who are making a lot of money. So the mood during those times was buoyant, and then they changed the tax law at the end of 1986 [Tax Reform Act of 1986] to discourage syndication and the tax aspects of investing in real estate and activity plunged, for a while at least.

Mr. DiCapua: Through 1986, before everybody realized we had too much money and we were building foolishly, anybody who rubbed two sticks together got the financing and started a 40-story building. It was just too much and we oversaturated the market. We paid for it.

Mr. Speyer: In 1986 there was a big tax rehaul, and the real estate industry took a big hit in 1986, and that affected the industry in a significant way. And that combined with the changes in the economy in the next couple of years, the real estate business was really in tough shape by the end of the ’80s, and during the next five, six years, the industry was in a very difficult position to say the least.

While the economy rebounded—only to stumble once again—one thing was certain: REBNY attendees still would not stop talking for anyone, no matter who the speakers were. And one formerly fail-proof trick did not stand the test of time.

Fred Wilpon (co-founder and chairman, Sterling Equities): No one sits at the table all the time. Everybody is standing and schmoozing and talking, and one year I was to start the [gala]. I tried to get their attention and I couldn’t get their attention. It was impossible. The roar of the crowd—of them all talking to each other. And finally I [started] going, “Four score and seven years ago, our fathers …” A couple people in the front heard it and they were hysterical. The rest of them, they didn’t hear it, until they decided to say “OK, now we’ll go down to a minor roar rather than a large roar.”

Around that same time, several of real estate’s brightest female stars—including a future REBNY chairwoman—started attending the galas.

Mary Ann Tighe (chief executive officer, CBRE, current REBNY chairman): I remember it being a terrifying event for someone who was new to the industry. I remember thousands of men in black tie, and a tiny sprinkling of women in the mix. I remember the shock of [seeing people speak] through the invocation back in the day.

Leslie Himmel (managing partner, Himmel + Meringoff Properties): I will be embarrassed to say, and I’m not sure you should print this, is that I came to meet some friends who had tickets, and they just like walked me in. I sat all the way up in the mezzanine, so I didn’t even have a ticket for downstairs. I was way up in the mezzanine looking at everybody down below.

I can remember looking at the people who were then, I guess, on the executive committee and the powers that be, and you had people like Larry Silverstein and Bernie Mendick, and I think even Harry Helmsley.
It was my dream to one day be an owner, never mind a significant owner. So now it’s 30 years later and not only am I an owner of a few million square feet, but I am on that stage. I even was lucky enough to get the Bernie Mendrick Award, so it marvels me. When I got that award last year I can remember sitting up in the mezzanine and just saying “one day, I just want to own a few buildings.

Faith Hope Consolo (chairman retail leasing, Prudential Douglas Elliman Real Estate): I was at my old firm, which was Garrick-Aug [Associates] at the time [1985]. I felt like a little bit of a lost little girl. I mean, there weren’t a dozen women in the whole room out of 1,000 people.

Ms. Himmel: It was a great place to meet new people, but it was way smaller so it was easier. You could walk around and you could meet for the first time people who were very significant.

Ms. Tighe: One of the things I often joke about is after you’ve had the experience of going, how particular you become about the dress. Because you’re so densely packed, you can’t have a dress that drags on the floor, because people will step on you all night long.

Perhaps most impressive to newcomers was the universal respect held for Harry and Leona Helmsley throughout the entire REBNY gala.

Ms. Consolo: Oh, gosh, they held court. They had a table right in the front, front and center. And of course, she was, you know, very over the top. I got along with her very well. But Harry was very well respected because many of the men in that room he made very rich. I mean, he was like a dean and people liked him personally and professionally. And they would all come over and pay homage.

Mr. Silverstein: Truth of the matter is I’m a legend, but only in my own mind am I a legend, so I don’t consider myself kind of a luminary. I think of Harry, he was just a remarkable guy in his day. It’s amazing the swiftness with which legendary characters become a matter of past interest and very little relevance to today. Quite something. But it’s testimony that we are all here for a very fleeting time, and the world does not revolve around us and we’re not the masters of the universe we like to think we are or are not the legends we like to think we are. In a sense, when you think about it, it’s humbling.

The 1990s to Now: Boom and Bust

Mr. Hauspurg: Then, of course, the market turned and got worse in the early ’90s, and attendance at the banquets dropped markedly. Lot’s of people left the business—it was an awful time. I remember in the darkest days of it, which were ’91 or ’92, someone came up with the slogan “stay alive ’til ’95,” and, sure enough, it was actually ’95 when the market started to get healthy and turn again and attendance again returned to the banquet.

Mr. Siegel: The best of all was when Eddie Gordon, my partner, passed away in [2000] and I knew nobody would be quiet and I was asked to give a eulogy, and I kind of went “phewww, phewwww” into the microphone and I said, “I am going to ask you all to be quiet for 60 friggin’ seconds in honor of an icon of this business. One of the biggest real estate men we’ve ever had in this city of New York and in his memory I’d like 60 seconds of silence at a dinner which never had 1 second of silence.” And all of a sudden, I kept shushing and shushing, and the word spread and it was dead silence in Eddie’s honor … for about 12 seconds. [Laughs.] I didn’t even get a half a minute, but you know what, I got 12 seconds and I can tell you right now, I don’t think anyone’s ever gotten anything close, including Giuliani [and] Bloomberg.

Today, with people from every corner of the commercial real estate industry attending the gala, many REBNY vets believe it will continue to be a draw for years to come.

Mr. Resnick: I think over the last 20 years we’ve been averaging over 2,000 people, even in the bad times. They’re a lot younger, which I guess is a natural transition, that the young start kicking out the older ones. And hopefully the real estate board will be important to all of them.

Mr. DiCapua: We have 2000-plus [attendees] every year at the banquet. Back in the ’70s, it was half of that. It wasn’t anything close to those numbers. People feel the need to see and be seen, and if they’re not there they are missing out on some very substantial networking.

Ms. Tighe: The mayor and the governor still come usually just to the cocktail hour. And the other public officials come and sit on the dais, but we don’t subject them to the experience of speaking. I have to tell you that [the constant banter] is part of the tradition of the event. I’ve now come to the belief that people would be alarmed if suddenly folks were quiet.

Ed Koch (former mayor of New York): I remember who they are but I have nothing anecdotal to tell you.

drosen@observer.com

It didn't help that Mr. Rattner was ensnared in the billion-dollar New York State pension fund scandal. Those problems haven't gone away, in fact they only seem to have gotten worse, but Mr. Rattner's book is finished. And, according to an advance manuscript that was sent to the Observer this morning, it looks awfully interesting.

So far, this reporter has read just the opening and the finale, which, normally, is a terrible and book-ruining thing to do. It was excusable in this case, especially because of a three-page acknowledgement passage that is one of the all-time greats.

For starters, the book—whose cover features very serious expressions from Larry Summers, Tim Geithner and President Obama, but not our author—has an alluring table of contents. "Dead Man's Curve" is Chapter One, "Mr. Rattner Goes to Washington" is third, followed by "F**k the UAS," and later "Harry Wilson's War" and "The Chief Executive Shuffle" for the finale. There is a six-page character list, followed by a prologue that opens up with the image of Obama body man Reggie Love watching Tiger Woods in March 2009, who was "then still respectable and heroic." Was Mr. Rattner referring to himself metaphorically? Probably not.

The book, which was written with the help of a Fortune editor, a Team Auto colleague, a financial journalist and four others, begins with lovely turns of phrase. The Oval Office on weekends was filled with "T-shirts and jeans worn by unshaven, sockless men." The president "had the air of a man in the business of calmly executing." General Motors and Chrysler were being "fed intravenously" with cash. And Governor Jennifer Granholm's' voice "barely rose above a whisper," but "a chorus of anxious voices crackled through the speaker" during a conference call with senators.

The book, which comes out next month, and was sent without an embargo, is up to date. Mr. Rattner writes that he was disappointed with Ed Whitacre, who just announced he was stepping down, despite a promise "to see GM through its initial public offering." He is also annoyed that Dan Akerson will be both chairman and CEO, which means the roles won't be separated as he had hoped.

Still, working with "such a talented and collegial group of extraordinary individuals has been the high point of my career," he says. Geithner and Summers were "available, supportive, and decisive," and "servants of the highest order and integrity." And other government people? "Contrary to what some Americans may think," he writes, "the Treasury is blessed with a large array of talented and dedicated staff members."

He saves his best for a close friend. "I pay particular tribute to Mayor Michael R. Bloomberg, who truly knows the meaning of loyalty and standing up for people you believe in." Despite Mr. Rattner's pension fund problems, Mr. Bloomberg has stuck by his side: "It’s certainly true he’s not moving away from Steve," a source told The Observer for the March story.

After that thank-you comes a glorious list of names "to whom I am equally grateful." In order of appearance, just a few of those names are The Times' Michiko Kakutani (he calls her Michi), Ambassador Richard Holbrooke, billionaire Barry Diller, Clinton adviser Vernon Jordon, JP Morgan's Jes Staley, billionaire Leon Black, Senator Chuck Schumer, billionaire David Rubenstein, Harvey Weinstein (thanked twice, actually), Bear Stearns' Warren Spector, billionaire Jerry Speyer, billionaire Mort Zuckerman, Barbara Walters, Lehman's Dick Fuld, The Times' Arthur Sulzberger, the Mets' Fred Wilpon, and Harvard's Skip Gates. He doesn't bother with the Henry Louis part.

The breakneck rise and fall of New York developer Shaya Boymelgreen unfolds like a Gilded Age novel of social ascendance: young man immigrates to ethnic neighborhood in big city; accidentally takes part in Crown Heights riot of historic importance; strikes up fortuitous friendship with Uzbek diamond billionaire who agrees to bankroll his projects; gambles on some of boom era's most talked about and coveted developments; and then, as quickly as he rises, disappears, lawsuits and angry creditors chasing his wake.

New York City real estate has a blessedly short memory. It's a truism in the industry that once a man makes his mark, earns his stripes and cements his relationships, even the most famously disastrous business decisions cannot permanently tarnish his name. Think Jerry Speyer. Harry Macklowe. Donald Trump. All men who have seen tremendous triumphs, tremendous declines, then triumphs all over again. That list of comeback kids may soon include Shaya Boymelgreen.

"I'm back in town," Mr. Boymelgreen told The Observer on July 12, in what he said was his first interview with a reporter in three years. He was phoning from a 646 number that did not accept incoming calls.

Not only is Mr. Boymelgreen back in town—he is back in business. The Lubavitcher developer has leased an office in a midrange skyscraper on Broad Street. And he is scouting New York for new development opportunities.

"We have a few, I would say, institutions and private institutions behind us, from the U.S. and Israel," Mr. Boymelgreen said, in heavily accented English. "Unless I get an offer I can't refuse, I would like to concentrate now in Manhattan. I believe this is now the opportunity and the time. If I cannot make it in Manhattan, I don't know where else I can make it."

SHAYA BOYMELGREEN HAS has made it in Manhattan before. After immigrating to Brooklyn from Israel in 1969, he settled into a stately red-brick row house on President Street in Crown Heights. He got into the Judaica business, the diamond business and asbestos removal. Then, on Aug. 19, 1991, while driving near the intersection of President and Brooklyn Avenue, he happened upon a pivotal moment in New York City history: From his car, he saw an injured young man struggling to walk down the street. The man was 29-year-old Yankel Rosenbaum, who just minutes before had been stabbed and beaten in the Crown Heights riots. Mr. Boymelgreen cradled him until an ambulance whisked Rosenbaum to the hospital, where he died. "He held my hand and said, 'I'm scared, I'm scared,'" Mr. Boymelgreen told The New York Times in 2005.

In 1994, Mr. Boymelgreen founded Boymelgreen Developers. He built his first apartment house on Avenue A and Third Street. In 2002, he completed a conversion of an old Daily News printing plant into a condo called Newswalk, one of the first in the Prospect Heights area. That same year, Mr. Boymelgreen formed a partnership with Uzbek diamond billionaire Lev Leviev, whom he met on a kosher cruise. With Mr. Leviev's cash, Mr. Boymelgreen positioned himself at the forefront of the redevelopment of Lower Manhattan's obsolete office stock into residences, part of a hoped-for transformation of the business district into a 24-7 community. 

"I found him to be a visionary," recalls James Kuhn, the president of brokerage Newmark Knight Frank. Together with his colleague Alice DiMarzio, Mr. Kuhn sold Mr. Boymelgreen three downtown office towers.

"He came to us and he said JPMorgan Chase was selling 15 Broad Street," Mr. Kuhn recalled. "He wanted to buy it and he wanted our help, because he wasn't known and he didn't have any credibility. So we met him there, with Lev Leviev. We called up JPMorgan Chase. They already had two contracts out, both in the $85 million range. We talked to Shaya, and we suggested if he thought it was the right deal, he should bid $100 million. And that was the start of Shaya Boymelgreen's adventures in Manhattan."

They redeveloped the century-old office building at 15 Broad into high-end condos, with designer Philippe Starck. In a tacit acknowledgment that the neighborhood still lacked Manhattan conveniences, it came with a small town's worth of amenities: bowling alley, yoga studio, children's playroom, basketball court, business center. They followed a similar concept at 20 Pine, this time with marketing wunderkind Michael Shvo creating New York's first 24-hour residential sales office and Giorgio Armani's firm designing the interiors. In Tribeca, at the corner of Laight and Washington streets, Messrs. Leviev and Boymelgreen converted an old warehouse into the River Lofts condo, attracting the likes of Meryl Streep and Gwyneth Paltrow.

What more in life does a man need? Eight children, a lovely home, a real estate business that soon stretched to Miami and Houston and Israel, a staff numbering more than 200? His own bank, perhaps? In 2005, Mr. Boymelgreen founded LibertyPointe, a commercial bank catering to the Orthodox Jewish community. The launch party, in the Lower Manhattan branch, ended with a sit-down feast at a long table laden with fine food and drink, and presided over by the founder.

MR. BOYMELGREEN, 59, has a charm so ingratiating and a beard so cloud-white that he could land a second gig working the Santa Claus line at Macy's. Yet beneath the charm lies a shrewd businessman who, his critics allege in court papers and in the press, is less than forthcoming with his lenders, business partners and clients, and who, either because he wants to save money or doesn't have the requisite expertise, has built projects with serious construction flaws.

"He's a really friendly, warm guy," chuckled Michael Rogers, who bought a three-bedroom condo in Newswalk in 2002, and whose condo board is now suing Mr. Boymelgreen for at least $10 million in damages for shoddy construction, including leaks that have damaged 70 of the 173 units. The board has since launched a $7 million capital campaign to correct the construction errors and built a Web site, shameonshaya.org—in English, Russian and Hebrew—featuring videos depicting their living conditions. Jazz electric bassist Richard Bona is featured in one such video, sitting in his top-floor apartment so inundated with leaks that he called it a "Jacuzzi."

"My wife is sleeping at her uncle's place," said Mr. Bona, some of whose instruments have been damaged by the flooding. "The whole balance of my life is kind of messed up, because you can't have a life here."

In response to the Newswalk controversy, Mr. Boymelgreen said, "Everyone has a problem with something. You know how long ago we finished and fixed and corrected Newswalk?

"It's become a trend that every condominium, either they sue or they're going to sue because the lawyers that don't have much to do these days are running after the condo board and saying, 'Let's make some money,'" Mr. Boymelgreen added. "For me and for everyone else, it is a problem."

Newswalk is hardly the only pebble in Mr. Boymelgreen's shoe. He publicly fell out with Mr. Leviev in the summer of 2007, prompting the dissolution of their partnership. In 2009, residents of both River Lofts and 15 Broad filed preliminary summonses against him and co-defendants in Manhattan Supreme Court, citing construction flaws. Aristone, the group that helped him finance the purchase of a prime plot of land along the High Line, at 500 West 23rd Street (also known as 10 Chelsea), sued Mr. Boymelgreen in December, accusing him of selling the land behind its back and trying to spirit away the proceeds without repaying his creditors.

Mr. Boymelgreen initially told Aristone that because he owed so many people so much money, he could only repay a portion of the original $3.8 million loan, according to court papers. "Mr. Boymelgreen stated that Boymelgreen Family purportedly only had around $100,000.00 in its account," reads the suit. "Mr. Boymelgreen also stated that 'everybody is honorable if they have the money.'"

Mr. Boymelgreen said he didn't recall making either of those remarks.

"We ultimately got paid back, but not without some litigation," said Michael Beys, a principal at Aristone. "We were very happy with the final result."

In September of last year, SL Green, the city's largest commercial landlord, also sued Boymelgreen Global Holdings, alleging that it had fallen behind on its rent for its posh offices at 420 Lexington Avenue and "abandoned the premises." A judge ruled that Boymelgreen owed the landlord back rent, and that its lease would be terminated early. Mr. Boymelgreen has also been sued by, among others, TD Bank for a lapsed nearly $3 million loan; and Hersha Hospitality, the firm with which he built the boutique Nu Hotel and condominium at Smith Street and Atlantic Avenue in Brooklyn. Hersha alleges that Mr. Boymelgreen and his co-defendants owe about $250,000 for repairs required by the shoddy installation of heating and cooling systems.

And the bank? Earlier this year, the F.D.I.C. seized LibertyPointe's assets and sold them to Valley National Bank. LibertyPointe, which had $210 million in assets, was hobbled by bad real estate loans. Mr. Boymelgreen has had to fire most of his employees.

These are just his New York City problems. Mr. Boymelgreen faces plenty of obstacles in Israel, where he is also an influential developer. In June, an Israeli bank requested that a court declare him bankrupt, citing unpaid debts.

IN RECENT YEARS, Shaya Boymelgreen has largely receded from view. Critics claim that he's run away from his problems, but he disputes that, as well as much else that's been written about him in the press.

The developer says that he didn't disappear from New York so much as foresee the coming real estate collapse and refocus his energies on other markets, starting in 2006. Little did he know that the collapse would spread globally. He says it's a decision he regrets. "I'm sorry I left Manhattan," Mr. Boymelgreen said. "I should have stayed only in Manhattan, as far as going to Brooklyn, to Florida, to Vegas, to East Europe."

What's so great about Manhattan?

"Remember the advertisement, 'Where's the beef?'" he asked. "Nothing is like Manhattan. I have to do five other projects to make what I make in one project in Manhattan."

In general, Mr. Boymelgreen says, he's avoided the press because the stories it prints are so "below the belt."

"I read here and there some bad publicity about me, and about 80 percent of it was not accurate or true," he said. He claims that, contrary to reports, he was not evicted from his Pacific Street offices in Brooklyn, and that, also contrary to reports, there's no truth to the rumor that he can't return to Israel for legal reasons.

In fact, by Mr. Boymelgreen's lights, his situation isn't half-bad. By way of example, he recounted a conversation he said he recently had with the head of Citibank in Israel.

"They wanted us to do something together, and I told them, 'Listen, I am not so strong as I used to be,'" Mr. Boymelgreen recalled. "So they say, 'Shaya, I wouldn't call it exactly how you said it. Before, you just knew how to make money. Now you know how to make, you know how to lose, we like people like this.' He said, 'We like you better now.'"

drubinstein@observer.com

To flip through the pages of the 2006 offering book for potential buyers of the 11,200-apartment Stuyvesant Town and Peter Cooper Village-a deal that has devolved into the largest individual property default in modern history-is to immerse oneself in an historical delusion, one that, from today's privileged vantage point, appears as likely as Iraqi WMDs.

The book wove the strands of possible Stuy Town revenue into a real estate dreamscape, one in which the largely rent-regulated complex could become a wealthier community, complete with an elite private school, gourmet grocery shops, private spas, gated communities, Santa Cecilia granite countertops in every apartment.

"With the surge in market rental increases showing no signs of abating, there is immense upside potential, especially for stabilized units rolling to market rates," reads the 73-page offering book, prepared by Darcy Stacom, one of the city's top investment sales brokers.

If the failed $6.3 billion Stuyvesant Town deal-sealed in late 2006 by seller MetLife and buyers led by Tishman Speyer-is emblematic of nearly everything that went wrong with the real estate world during this most recent boom, the marketing of the historically middle-income property is emblematic of the unexamined contribution of top brokers to the era's fantastical mind-set.

As conversations with numerous executives involved with the bidding process illustrate, the role of Ms Stacom and other advisers was essentially to pour lubricant into an ever-accelerating dealmaking machine, one that would eventually implode.

Ms. Stacom, 50, is a real estate titan in her own right, as admired for her business acumen and salesmanship as she is feared for her mercurial temper.

New York born and Greenwich raised, Ms. Stacom, who declined comment for this story, was nurtured in real estate. Both of her parents, Matthew and Claire Stacom, were Cushman & Wakefield brokers. Her father most famously consulted in the development and leasing of the Sears Tower (now the Willis Tower). When she was 14, she worked in the Cushman & Wakefield mailroom.

She began her brokerage career at Cushman & Wakefield, defecting in 2002 for archrival CB Richard Ellis. Her sister, Tara, remains at Cushman. Her husband is a broker at Jones Lang LaSalle. It wasn't easy being a woman broker in a real estate world where men, even now, behave like extras in Mad Men. In 1996, when she was pregnant with one of her daughters, Ms. Stacom pitched a deal to a potential client, only to be asked what would happen were she to have complications during childbirth. She didn't get the gig. In interviews, she prides herself on her eccentricities: She prefers colorful skirts to business suits, funky costume jewelry to the real stuff.

Even so, she did well for herself. Arguably, there is no more fearsome commercial broker than Ms. Stacom. In 2005 alone, she sold 195 Broadway for nearly $300 million. She sold the Verizon Building at 1095 Avenue of the Americas for $500 million. She sold One Madison Avenue for $1 billion. She sold 575 Fifth Avenue for $385 million. She sold 25 Broad Street for more than $200 million. She sold 230 Park for more than $700 million. And that's an abbreviated list. One can only guess at the commissions she earned along the way.

Ms. Stacom also built relationships that would figure in the story to come, performing work for both MetLife and Tishman Speyer. So it likely seemed only natural to bring the two together in what she must have thought of as her career's crowning achievement.

One industry executive spoke of a close relationship between Ms. Stacom and Tishman Speyer. "They had never bought a residential building before. They relied on her."

Central to Ms. Stacom's pitch for the complex was that it could be unshackled from rent stabilization (at the time, three-fourths of the apartments were rent-regulated). The offering book repeatedly refers to the complex's future as a "market rate master community."

Further, as the complex's "population evolves in response to deregulation, new ownership will have a unique opportunity to put its personal stamp on Manhattan's largest apartment complex." Among the suggested "creative strategies"? "Use of air rights"; "Gated Communities"; "Adding doormen to further promote the notion of a high-end residential complex."

The offering book suggested that such innovations would result in a remarkable influx of money. It projected a 2007 net operating income of $167 million; Tishman Speyer, led by co-CEOs Jerry and Rob Speyer (Rob took the lead on Stuy Town), turned out a yawning $59 million short of that, bringing in $108 million at a time when rents were still high. By 2009, the book projected $252 million; the analyst firm Realpoint has estimated revenue at just $129 million.

Implicit but not specifically stated in these projections was that the rate of deregulation could be dramatically accelerated, a necessarily abrasive effort that tenants dislike. "I think it was pretty clear that the information was projected on what it could be if you managed to get everybody out-that's how people bought it," said one executive familiar with the marketing of the deal in 2006. "When you look at those numbers, the only way it makes sense is if you got rid of the current tenants."

And that was the idea of Stuy Town's eventual buyers. In their loan documents, the Tishman Speyer-led team assumed they could deregulate more than 3,000 units in the four years following the sale, a goal that proved wildly unattainable. By June 2009, the owners were about 2,000 units short of their 2011 goal, as the prior manager for MetLife, Rose Associates, had apparently done a far more thorough job of removing obvious illegal tenants than suspected. To add insult to injury, the courts have ruled all of the former and current owner's deregulation efforts illegal, returning all units to rent regulation. And beyond that, the complex had faced problems filling its apartments, as more units went vacant than at any time at the property in years.

Following the real estate market's spectacular crash, Ms. Stacom apologized to some landlords for the timing of the late-boom deals now underwater.

But did she have anything to apologize for? Wasn't she, after all, just doing her job really, really well?

Indeed, it was the world's biggest banks and the city's best-known landlords who clamored over each other to actually bid on the property, after a presumably careful look of their own at the finances. And it was Tishman Speyer and partner BlackRock, supported by hundreds of millions from pension funds and other investors, that actually signed the documents to receive the property.

"I think we and others underestimated the difficulties of bringing that asset from stabilized market rents to unstabilized market rents," said Jeff Barclay, a managing director at ING Clarion Partners, which was part of the second-place, $5.3 billion bid with Apollo Real Estate Advisors. "Darcy did her job-I don't think she oversold, I don't think she misrepresented. Everything that a broker gives you has caveats."

"My sense is the real culprit in all the madness that happened in the commercial real estate market was the combination of cheap, plentiful debt capital and the willingness on the part of buyers and lenders to utilize it and provide it so aggressively," said Michael Knott, a senior analyst at Green Street Advisors. "There was no sense of risk. I also wouldn't dismiss the impact that 'OPM' [other people's money] played, given the incentive for advisers to put capital to work. This is especially relevant if there is no penalty for doing bad deals in terms of future fund-raising. If Tishman raises boatloads of money in the future, which seems likely, did they really lose anything by gambling on Stuy Town?"

Perhaps not. Yet, if the boom was an orgy of real estate profligacy, with institutional investors and reputable real estate dynasties drunk on easy money, Ms. Stacom and other top brokers, in the role of Bacchus, helped the party roar.

"It's one thing to accept that people renting illegally could be pursued," said a real estate executive familiar with Stuy Town. "But she had such high turnover rates."

Then again, if Ms. Stacom hadn't served as Bacchus, someone else would gladly have filled the role.

Even amid its epic default, and the subsequent transfer to mortgage holders, many in the industry are pointing out Stuy Town's potential. Sure, all the apartments may now be re-regulated thanks to a court decision, but that requirement is set to be lifted within the next decade, giving the complex the potential to be a market-rate community once again, if not the tonier enclave imagined in the 2006 offering book.

Which helps explain the names circling to be the next Rob Speyer. Would-be buyers who have publicly declared their interests include Richard LeFrak, Wilbur Ross and Donald Trump.

ebrown@observer.com,
drubinstein@observer.com

Here's a few tidbits I found:

Jerry Speyer donated $50,000; half on July 17, the other half on  October 13.

Wendy Neu, a major Democratic donor, also gave $25,000.

Peter Kalikow gave $10,000.

Donald Trump donated a total of $6,000.

Harvey Weinstein gave $5,000.

Barbara Streisand gave $1,000.

UPDATE: Michael Regan, a spokesman for News Corp. confirmed that a July 16, 2009 donation for $4,000 in Andrew Cuomo's filing is from News Corp.

Now, it will, presumably, be the biggest default.

Tishman Speyer and BlackRock announced this afternoon they will miss their January debt payment due today, as their reserves to pay off the debt on their highly leveraged deal have run dry. 

"[T]he joint venture will not make today's scheduled full debt service payment to its senior lenders," a joint statement from the two firms said. "The joint venture has been engaged in discussions with CWCapital, the special servicer acting on behalf of the lenders, and hopes to continue good-faith negotiations toward a potential restructuring of the debt."

Now an official notice of default is expected, and the special servicer, CWCapital, will sort through the numerous holders of the debt on the property--investors who bought bonds in one of a set of Commercial Mortgage Backed Securities.

Among those are Fannie Mae and Freddie Mac, who both claim they do not have a seat at the table because they hold the most secure bonds on the property. In all, there is $3 billion in debt financed through the sale of bonds; based on current rent rolls (which are in flux), the property is valued by various analysts at about $1.9 billion.

The missed payment is the beginning of an end for what's been a rowdy three-year ride for the owners, who bet big at the market's peak that New York City was on the rapid rise--that rents would continue their constant ascent seen at the time. They also gambled they could remove rent-regulated tenants at a faster rate than they already had been doing, converting the apartments to market rates that could pay twice as much rent. The results: rents flattened and then fell; the rate of conversions slowed.

And then came the icing on the cake: a court decision that ruled Tishman Speyer (and the previous owner, MetLife, along with other landlords throughout the city) had been illegally deregulating apartments due to the receipt of a tax break that encourages renovations.

The move was expected for months, and yesterday, per The Times, the Speyers started spreading the word on the impending default.

What happens next is unclear, and will depend what road the special servicer and bondholders decide to go down. The property could be sold, though there is uncertainty over the price given outstanding litigation following the rent regulation court decision.

Tishman Speyer has shown no willingness to give up the property immediately--they take in millions in fees so long as they're the complex's manager--and the firm has made clear that other holdings are insulated from this default. 

The Times reported news of the impending default Friday.

ebrown@observer.com

Back then, a medium-size Rogers canvas such as the one purchased by Mr. Speyer sold for about $12,000. On Jan. 8, Mr. Rogers will have his fourth solo show at the Leo Koenig gallery, titled “Last House,” of large, mostly gestural abstract paintings with interwoven bits of realism, priced between $20,000 and $30,000.

In addition to Mr. Speyer, prominent New York art collectors Susan and Michael Hort (they’ve amassed more than 2,000 works in their downtown triplex) and Elton John have also bought work by Mr. Rogers. Mr. John bought a large vertical painting called Striking at Mr. Rogers’ 2002 show at the Koenig gallery after former Interview editor Ingrid Sischy suggested he check out the artist’s work. A year later, he returned and asked to meet with Mr. Rogers in person to purchase another work; he bought a face portrait of Mr. Rogers’ then-girlfriend, Melissa. (His current girlfriend is the former Page Six gossip reporter Paula Froelich.)

Just recently, Adam Moss, the editor of New York magazine, also came in possession of one of Mr. Rogers’ work. At least temporarily.

During the March Armory show, Jody Quon, the photo director at New York, ran into Mr. Rogers, an old friend, and asked whether he might like to create a portrait of Michelle Obama—other artists such as Hank Willis Thomas and Billi Kid were also contributing works—for the magazine’s March 23rd cover (“The Power of Michelle Obama”). And though he doesn’t usually do portrait work, Mr. Rogers agreed.

“I only had two days to do it, so I really just kind of whipped it together,” Mr. Rogers told the Transom. “For a while I thought it might be of the cover, too, but I think I made her look a little too … Well, I think they wanted something more upbeat for the cover.” In Mr. Rogers’ work, Ms. Obama has a stern expression; a cheery Gluekit illustration was featured on the cover instead.

But Mr. Moss liked the painting enough to ask to borrow it for a wall of his Tribeca office, where it is still on loan. “I may try to get it back in a few weeks to have it around my studio when the show is up,” said Mr. Rogers. “I was actually thinking of donating it to the White House or I’ll just keep it, but I don’t plan on selling it.”

No surprise with the outlook on the bulk of the loans: "Negative."

The new analysis has no bombshells, but offered a broad look at how values have declined. Fitch put the current value of the 11,200-apartment complex at $1.8 billion, a number that it only expects to go down should the court rule that the owners, a partnership led by Tishman Speyer, owe back rent to tenants who were overcharged. (Tenants have argued that they are owed more than $200 million in back rent).

Last week's crippling decision from New York's top court ruled that Tishman Speyer and prior owner MetLife had been illegally deregulating apartments while taking a government tax break (from which they received about $24 million in benefits). Now all deregulation is sure to stop, and some units may see their rates lowered to the proper stabilized rent, depending on what the courts ultimately decide in coming months and, probably, years.

Now, default is almost an inevitability, and Fitch predicts it is likely to happen by the end of the year:

The balance of the debt service reserve as of October 2009 was $24.4 million and is likely to be sufficient to only make the November and December debt service payments. Once the reserves have been depleted, Fitch believes a default of the loan and transfer to the special servicer is likely.

ebrown@observer.com

In a 4-2 decision, the Court of Appeals upheld an appellate ruling that said Tishman Speyer was not allowed to take apartments out of the rent stabilization program at the 11,000-unit complex because it was accepting a tax incentive meant to encourage renovations. The ruling is a sharp reversal of the way the law has been interpreted for years, and even the New York State government previously advised landlords who accepted the tax incentive, called J-51, that they were permitted to deregulate apartments.

The costs are sure to be tremendous. The plaintiffs in the suit—a set of market-rate tenants represented by attorney Alexander Schmidt of Wolf Haldenstein—estimated that the cost to the Tishman Speyer/BlackRock-led partnership would be more than $200 million. The landlord bought the complex with BlackRock and other partners for $5.4 billion in late 2006, an amount that now seems ludicrous and to have rested on unreasonable assumptions, even without the court decision. 

The deal has a long list of investors and bond holders on debt that spans from pension funds--Florida and California public employees had hundreds of millions in the deal--to big New York real estate names to the well regarded investment management firm BlackRock. The deal was structured with $3 billion in senior debt that was securitized--meaning it's now held by a series of bondholders, including Freddie Mac-and $1.4 billion in mezzanine debt from holders, including SL Green. The rest of the $1.89 billion was in equity from an array of banks and funds that are almost certain to never see their money again. 

All of which raises the question: What does this mean for the Speyers?

Jerry and Rob Speyer, the father-son duo that leads Tishman Speyer, have been the front men for the deal: They cobbled together the investors, they picked the price, they (occasionally) addressed the media, and they put the highly-regarded Tishman Speyer stamp on the deal.

But in the scheme of what was a $6.29 billion transaction--including reserve funds--they had only a sliver of investment. According to a person familiar with the financing structure, Tishman Speyer and its affiliates put only $112 million of equity into the deal. They also have taken an untold amount in fees for managing the property, likely worth tens of millions.

And Tishman Speyer did not mortgage any of their other holdings for the deal. That means their empire, which includes Rockefeller Center and the Chrysler Building, seems safe.

Still, the Speyer name is certain to be scarred. This court decision aside, the complex is now worth far less than what the family and its investors had expected. A $400 million reserve fund that was intended to last to the beginning of 2011 has been almost completely exhausted (it has $24 million left). Efforts to deregulate apartments have gone much slower than anticipated--much more on that in a story in this week's Observer--and, more significantly, a rapid and unending ascent of rents never came to be.

With the court decision--particularly if it is applied retroactively so all the market rate tenants get their money back--the complex is worth a fraction of what was paid for it. The rents from regulated apartments simply don't make the complex quite valuable. The $5.4 billion that the owners paid was based on the assumption that Tishman Speyer would be able to wring far more income out of the market rate apartments. But in an analysis of 2006 rents, assuming revenues and expenses would stay the same, the firm Realpoint found Stuy Town would have been worth just $1.7 billion. If all the apartments are re-regulated, the value would surely be even less than the 2006 figure.

The decision seemed to leave many open unanswered questions—such as whether deregulated apartments will be re-regulated and tenants all given refunds on their rent paid—and the judges opened up a few of them in their decision:

"Defendants predict dire financial consequences from our ruling, for themselves and the New York City real estate industry generally. These predictions may not come true; they depend, among other things, on issues yet to be decided, including retroactivity, class certification, the statute of limitations, and other defenses that may be applicable to particular tenants. If the statute imposes unacceptable burdens, defendants' remedy is to seek legislative relief."

Should the decision indeed be retroactive, as the tenants have requested, the existing 4,400 tenants currently paying market rates would see their rents dramatically lowered. It would be as if they never had been de-stabilized, and tenants could even receive back-rent for the difference between the market and regulated rents.

The decision applies to other owners who deregulated apartments while in the J-51 program as well.  

Just how many apartments that means is uncertain. Steven Spinola, President of the Real Estate Board of New York, said his group estimates it's between 6,000 to 8,000 additional apartments.

It's clear from a list of those apartments entered in the J-51 program-which only gave the Stuyvesant Town owners a benefit of about $24 million since 1992-that there are few other very large buildings to which this ruling would apply. The next-largest in Manhattan that would potentially be affected, according to the list, is 415 West 23^rd Street, which is listed as enrolled in J-51 for its 921 apartments.

From here, whatever the future looks like for Stuyvesant Town, it's sure to involve restructuring and a whole lot of losses. In the event of default, typically a special servicer comes in and tries to sort through the various parties and investors-a sluggish process that often ends in a sale.

On the legal side of things, it's sure to be a gold rush for tenant lawyers. In addition to issues like retroactivity, there are many others to think of. What role does MetLife have in footing the bill for this, given that it owned the complex until 2006? Are MetLife and Tishman Speyer eligible to get property taxes back from the city and state, given that they paid taxes on a property thought to be far more valuable than it actually was? In terms of transfer taxes alone, the numbers are gigantic: Between the $3 billion mortgage and the transfer taxes, more than $245 million came to state and city coffers, according to property records.

In a statement, Tishman Speyer spokesman Bud Perrone suggested years of legal fights are sure to arise:

"While we respect the Court's decision, we view this as an unfortunate outcome for New York.  The ruling, which reverses 15 years of government practice, raises a number of difficult issues that will need to be resolved by the courts and various government agencies in the coming months and years."

ebrown@observer.com