Rick Aidekman’ Crazy World of NYC Landlords-Individual Stories-Other Characters-Part 3

This entry is part 3 of 14 in the series Rick Aidekman and the crazy world of NYC Landlords

Rick Aidekman & The Crazy World of NYC Landlords-Individual Stories-Other Characters-Part 3

In 2001, I happened into a real estate opportunity in the most unusual way.   A good friend of my wife lived in a rent stabilized property on Madison Avenue in the Upper East Side.   The property had over 100 apartments, was located in the most expensive area of NYC and was uniquely subject to the rent regulations under the Rent Stabilization laws of New York State.    This meant that the tenant in each apartment could stay there for life (unless they didn’t pay the rent or do some other action that violated the lease and the law).    This friend was subject to the Rent Stabilization rules, which not only allowed her to live in her apartment for life and to receive nominal rent increases each year enabling her to have a rent well below market.    She had a lovely one-bedroom apartment and was paying about $700 below market, if the apartment were free market, not Stabilized. 

As it happens, the friend received a letter from her landlord threatening to evict her for having a dog, as the rules of the building prohibited dogs, which was a legal prohibition.     She called my wife, knowing that not only was I an attorney, but also in the real estate business and might be able to help her.   She had another dog for years, which was allowed, since she had it before the rules of the building were changed.   The dog had passed, and she got another one, purposely getting a new dog that was similar to the other dog with the intent that the building owners wouldn’t know it was a new dog and she hoped that the superintendent wouldn’t tell.    No such luck.  She asked if I could help.   I told her that I had a friend who was a Landlord Tenant attorney and would likely be able to give her advice and assist her.  

 I got her on the telephone with my attorney friend.    He said he would do his best to help.   He asked her to read the letter.    As she read the third sentence, he said “STOP, I wrote that letter.”   Turned out he did indeed was the author of the letter and was the attorney for the building owners, two brothers in their mid 70s.    He asked her whether she had paid the rent and did her check clear.   She said that she in fact had paid two months since the letter and both checks had cleared.   He told her that the fact that his client cashed the checks would be considered a waiver and that she was safe in keeping the dog.   He later told me that he wasn’t surprised because his clients couldn’t resist depositing the rent, even if it foiled their chance that they might get an eviction and a rent increase with a new tenant.   

I asked him if he thought that his clients would want to sell the building.   He told me that they were twin brothers in their 70s and were tired of running this and their other properties.   He called them and a meeting was arranged.   We went to their offices and through discussions with the twins, we learned so much about them and their history.

Their father had built a portfolio of some top-quality properties, all in good Manhattan neighborhoods.   Their story was quite unique, if not shocking.     In their 20s, the twins wanted to try and make it on their own, so to speak.    They borrowed $1 million from their father and took off for Southern Florida to build their real estate empire.    Unfortunately, they made poor investments in land development deals and lost the million in  a couple of years.   After his disappointment, the father didn’t want them to join him in the business but at the same time, he didn’t want to disown them either.   What he did was send them monthly checks from the cash flow from a three-building portfolio so they could live decently.    The checks were written from the entity that owned the properties and was shown as distributions from the properties on the company’s books.    The twins hatched a plan to get into the father’s business, even without his invitation.   They sued their father for control of the three properties claiming that by virtue of the distributions, he had intentionally, or unintentionally, gifted them control of the properties.    They won the case and the father was out of the three buildings.

There was no way that they were going to sell the three properties, which together had over 300 apartments, but they were open to us managing and getting a piece of them for our efforts.  Additionally, we would receive a right of first refusal, meaning that if they wanted to sell the properties, we could match any offer and become the buyers.

As we negotiated the terms of the overall transaction, a few odd items came to our attention in reviewing documents during our due diligence.   What we found clearly indicated the nature of these two “stingy” millionaires.    In the lease for a retail bakery in one of the properties, it actually stated that anytime either one of them entered the store, they were entitled to a free pastry of their choosing.   In the parking garage, they got free parking when they were in the neighborhood.   When in the coffee shop, the lease called for free coffee and breakfast twice per month for each of them.    And so on.

Well, as the negotiations were in full speed, it became clear to us that a deal was not going to happen as they basically believed that we should do 100% of the work and that they should keep 100% of the money.    It was fun, in spite of our having to inhale the smoke from their cigarettes that were always burning, however, as they were always charming, and our breakfast meetings were always free (of course) as we would meet in the diner at one of their properties.

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