Rick Aidekman and the Crazy World of NYC Landlords-Part 7

This entry is part 9 of 14 in the series Rick Aidekman and the crazy world of NYC Landlords

Rick Aidekman and The Crazy World of NYC Landlords

I am going to digress from the story of Dracula to turn attention to a few lesser know Landlords with stories that are as bad as Dracula, but not as widely known and with whom we had less contacts and experiences.

One of the oddest cases was with an owner of some absolutely beautiful buildings in the Bronx  located near the Bronx Zoo, in an area where the properties were built in the 1930s and 1940s as luxury properties for the affluent families living in the Bronx.   To my taste, the properties built in those times for the high-income tenant were the most beautiful ever in New York.   In a later article, I will discuss these buildings versus those built both before and after that era that still remain occupied in the Bronx, as well as in the rest of the City.   But simply said, for the most part, these buildings, again built for the upper middle- class tenants had large rooms, many with sunken living rooms, marble bathrooms, beautiful wood flooring, large vaulted ceiling lobbies and walnut or bronze elevator interiors.   Of course, they all had elevators.    But, back to this owner.   When we met, in 1988, he owned about a dozen of these art deco buildings, each with between 75 and 100 units, all large and beautifully maintained and well located.   This individual was at the time, very ill, in a wheelchair with an oxygen mask.    He was operating the business with a son, who I believe was in his 20s.   

At the time we met, he had been trying to refinance his properties through paying off the existing debt, which had now become due, and replacing it with a  new loan that would not only pay off the existing debt, but would give him some extra cash to put back into the properties and protect him with cash to defend against any future downturn in the economy.   At the time, all of his tenants were rent regulated, either rent controlled or rent stabilized (I will explain the difference later).   The problem he confronted was that over the years, he collected a substantial amount of his rent in cash from the tenants and did not report it to the government (tax evasion) and did not show it on his financial statements.   Thus, where typical competitor owners would show collections of 95% or more, his books showed collections of around 55% (the cash not showing).  

As a result of the information he provided to the existing lender and prospective lenders, he could not receive a loan that would even pay off the existing debt.   He was in a real bind.   With his failing health, and this financial predicament, he decided to sell the portfolio.   One other issue, which will be further understood in a moment was a problem he had with the future of the company.   

We met him in his office.   It was a bit odd, that, when we entered the office, located in one of his beautiful buildings, at the entrance was two desks.   A receptionist and his son.   We thought it odd, that his son was in the entrance and not in a normal office, but we just ignored it.  As stated, the owner was suffering from his illness and could not hold a totally normal conversation.   However, since we loved the properties and had the capital and were in an expansion mode, we felt we could meet his price, make a deal and take our competitors out of the race for his properties.    Once the price was agreed, which, as I recall, was around $40 million, he said to us quietly, that he wanted $2 million in “shmatas.”   “Shmatas” is a Yiddish word for rag and had acquired a new meaning in NYC real estate.   Initially, people in the textile industry would criticize other merchants as being in the “shmata” business, meaning their clothing was low class, or rags.   However, in NYC real estate in took on the meaning of cash, under the table.    The primary focus for this was to not show the money to the government for tax purposes (fraud).   In this case, there was a difference.    Being surprised that he would say this to strangers, which my partner and were, caught me off guard.   My immediate response was “You want us to pay you $2 million in cash so you can hide it from the government?”   “No,” he said, “I don’t want my son to know.”

I think to this day I am still frozen by that response.   Needless to say, the conversation went downhill from there.   Here was a man, experience a life threatening illness, and he wanted to screw his son.  

We of course said no, and the meeting ended.

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