Who the fuck is Keith Rubenstein?
So I've been trying to figure out who owns this particular office building in DC that I'm affectionate for, 1801 K Street, and I finally found out - a company called Somerset Partners that I had never heard of.
I was checking out their principals and one of the co-founders is this guy named Keith Rubenstein. Turns out he's a graduate of Widener University Law School who was practicing real estate law and was struggling to the point where he made a deal in 2002 to act as a front to some personal injury practice owned by a non-lawyer, resulting in him getting disbarred.
5 years later his firm was buying 450 Park Ave for $509MM, on top of two other recently-acquired $250MM+ office properties. Now he's trying to transform the south Bronx and is selling his UES mansion for $85 million.
How did he go from a broke struggling lawyer to mogul in just five years? Who the fuck knows. I think he got some money from Russian partners, but it seems pretty sketchy.
Just thought I'd share this with you guys as a living testament to how crazy the world of real estate is.
Somerset Partners sold that deal more than a year ago to Mirae and honestly they had been trying to get out of that deal since early 2014. The FED was under contract but walked when the government shut down. But yes his background is crazy. I've heard that he is not the most fun guy to work with. Would be interested to hear where he got his money to buy this up. I am assuming its OPM
Russians... And gambling moguls.. where do you think
Sketchy but hey still sounds more legit than World Class Capital lol
What is the deal with World Class Capital?
Hahaha I still can't get over that name
I don't think you really understand the industry, especially not in 2007, if you're asking this question. The purchase price of whatever asset he's buying has absolutely nothing to do with his net worth, not when banks were giving over 100%+ leverage in some instances and there was a ton of crazy loose equity sloshing around. If you can borrow the full price of an acquisition, then nothing stops a homeless guy from taking a shower, borrowing a nice suit, and buying a $500mm piece of property. He sold that asset for $575mm like 6 years later, meaning that even with a huge amount of leverage he didn't exactly kill it.
Look, as other commentators have pointed out, there are a lot of people who front for other people's capital. Developers who syndicate out all their equity tend to not make a ton of money, since they're often also syndicating out part of their promote as well to make that deal. I don't know a ton about Somerset Partners, but they sound like they are mostly an asset-manager type of company for other's equity - you can make a lot of money that way, but huge real estate fortunes are built from long-term equity ownership.
... I was being facetious.
This is by no means a given. Harry Macklowe (who obviously wasn't a nobody) took $5.8b with only $50mm down to buy the EOP portfolio, and he got that non-recourse.
To take a post-crash example, Raphael Toledano borrowed at over 100% leverage a couple years back despite having little to no net worth and no liquidity, and did it non-recourse (not that it would have mattered).
Getting huge non-recourse loans on asset acquisitions isn't very difficult, you just pay for it. And in a frothy market, developers who are basically gamblers can get those loans and make money.
LOL yeah, Taledano borrowed from madison realty capital, which is why he lost his assets. And why MRC lent to him in the first place. They knew he was gonna give back the keys (or were banking on it, correctly). The didn't need recourse, the just wanted his portfolio.
a) i figured he had some sliver of net worth and put a few million cash into the deal and figured it was recourse (but it sounds like the answer to all that is: not necessarily) and
b) he clearly was able to somehow go under contract on this portfolio at a basis that was appealing to Madison. Says a lot. What this means is he probably could've done this with a different source of capital regardless. As easy as it is to make fun of douchebags like him (and I am not defending his douchiness), this is not something a random guy off the street could pull off.
Again, not arguing with anybody here, you guys are speaking the truth, but a guy like Toledano is far more interesting to me than someone who is really good at modeling waterfalls.
I agree it's a very interesting story and he's clearly shrewd to pull off a deal like that with little to nothing backing him in the first place. I certainly don't think I could. It's impressive what he did. but his douchiness led the whole situation to turn into a classic Icarus story.
Yeah but this is the whole point of recourse vs non-recourse loans. Yes, Madison wanted the keys to the property, and yes, they can be classified as loan-to-own lenders, but that doesn't erase the fact that Toledano was able to buy a very expensive set of assets with no track record and no equity in. I'm not arguing the merits of the deal or anything personal about him - I'm making a generic point that you don't need a long history of sponsorship or tons of personal net worth to take crazy loans and basically play roulette, and get massive leverage to do so. I don't know if that is what Keith Rubenstein did, I'm merely saying it is possible.
And his douchiness had nothing to do with why that deal failed - it failed because he didn't understand (like many developers in NYC) that the days of being able to easily evict rent stabilized tenants are over, and that the City and the tenants themselves are paying more attention and are more aware of their rights. It could have been Related or Blackstone trying to execute on that business plan and it would have failed.
Can anyone give a tl:dr of who this Toledano guy is. Never heard of him.
Toledano is related by blood to one of the best brokers in NYC and had completed a few smaller but profitable deals prior to the portfolio purchase. I think it's at best speculation to say he had no equity in as we don't really know how the deal was structured despite the size of the loan. MRC played him like a fiddle. Those guys are good.
There are a lot of guys in NYC that come from very little and work their way into the limelight within a decade. Is JDS Development Group questionable? Stern was buying big deals in his twenties. One difference is that he made them work and in a big way.
He looks like he made his bones loan-sharking for the Jewish mafia
He sort of looks more Italian than Jewish to me.
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