The Rudin/ Rudinski family; from Volozhin to Prime real estates in New York

Return to Volozhin Home Page

The Rudin/ Rudinski family; from Volozhin to Prime real estates in New
York

By DAVID SAMUELS

It is not a sight for the faint of heart: a ballroom full of
tuxedo-wearing owners, builders and managers of the city's prime real
estate shouting at the top of their lungs at lenders, lawyers and
assorted factotums as white-jacketed waiters stagger by beneath silver
trays of salmon roulade. If the 101st annual banquet of the Real
Estate Board of New York lacks the laid-back charm of dinner for two
at the Rainbow Room -- there are few spouses, no dancing, and only a
handful of the guests bother to sit down -- the importance of
tonight's event can be seen from even a quick glance at the dais. Gov.
George Pataki and Mayor Rudolph Giuliani are here, along with Assembly
Speaker Sheldon Silver, Senate Majority Leader Joseph Bruno, various
City Council members and a youthful-looking official in a sharp blue
suit whose game but puzzled expression indicates that he is happy to
honor his distinguished constituents in the real-estate business but
has never seen anything quite like this before in his life.

The roar that fills the Grand Ballroom of the New York Hilton tonight,
loud enough to tinkle the glass chandeliers and to overpower all
attempts at conversation in the balcony above, is the sound of
Manhattan's $90 billion real-estate market in the first flush of
exuberance. New construction is up. Midtown vacancies are down near
the single digits. As the ceremonial part of the evening continues on
-- the Governor; the Mayor; Samuel (Sandy) Lindenbaum, the knife-thin
lawyer who helped make so many of these people rich; Joseph B. Rose,
head of the City Planning Commission and a son of the developer Daniel
Rose, mounting the dais one by one -- the small fish swim in frantic
circles, darting anxious glances at the big-deal owners who won't
return their calls during the rest of the year.

And there they sit at the center of the room, the royal families of
Manhattan real estate: the Rudins, Dursts, Roses, Fishers, Tishmans
and Resnicks. Unlike Donald Trump (who, the families like to point
out, is not a member of REBNY) or the late Harry Helmsley (more an
owner-manager than a builder), the names of these men barely ring a
bell. Yet the families are to New York what the oil barons are to
Houston or the steel bosses were to Pittsburgh. With their careful
blend of dynastic savvy, wealth and behind-the-scenes clout, they have
shaped the city through good times and bad. Let the Wall Street bonus
babies squirm and jump with every flutter of the Dow. The rulers of
Manhattan's prime real estate are a throwback to the distant, more
family-oriented age when Wall Street was ruled by Lehmans and Loebs
and Hollywood was run by Warners and Mayers.

The Rudins are represented tonight by William C. Rudin, heir apparent
to an empire of some 39 buildings currently valued at more than $1.5
billion. Jack Rudin, his uncle, is the family builder. William's
father, Lew, who combines a streetwise Rodney Dangerfield voice with
the broad sentimental streak of the successful Jewish machers in Saul
Bellow novels, is the Rudin who speaks to the press. The Dursts, some
of whom are seated nearby, are olive-skinned with big brown eyes,
known in the business for saying very little and for pursuing a
disciplined program of acquisition and construction that has
transformed the area near Grand Central Terminal into a family-held
principality. The latest Durst contribution to the city's skyline, 4
Times Square (the first new Manhattan office tower in nearly a
decade), is being built by John Tishman and his son, Daniel; John is a
wry, inquisitive man whose Tishman Realty and Construction is the
descendant of the company founded by his grandfather Julius in 1898.
Daniel Rose, seated nearby with his nephew Adam and his niece Amy, is
the house intellectual, more likely to be found at a reading on the
Upper West Side than at an industry event like this.

With a few additions and subtractions, these are the same families
that dominated the city's real-estate market 40 years ago. They have
survived the assaults of the big insurance companies of the 60's, the
near-bankruptcy of the city in the 70's, the entry into the market in
the 80's of well-capitalized foreign giants like Sumitomo and Ladbroke
and Olympia & York. They have expanded their fortunes as arriviste
competitors have come and gone. They are as close to a stable ruling
class as New York has enjoyed since the beginning of the century, when
Manhattan was owned by the Astors and the Rhinelanders, and Sam Rudin,
David Rose and other family founders were cutting deals on Court
Street in Brooklyn or 149th Street in the Bronx. And though factions
and alliances still exist (Roses and Rudins; Tishmans and Dursts;
Tishmans and Rudins), the families are more likely to do business with
one another now than at any time in their collective history.

While the understated permanence that the families bring to the city
is impressive, this group portrait of wealth and power handed down
from generation to generation is hardly carved in stone. Indeed, some
analysts believe that Manhattan's prime real estate, and the social
and political power that goes with it, will soon be owned not by the
families but by real-estate investment trusts, or REIT's -- publicly
owned and operated companies that invest in and manage real estate.
REIT's have already made inroads into property markets in Chicago,
Atlanta, San Francisco, Houston and Dallas. Now that New York State's
10 percent tax on property transfers has been abolished, there are
hints that prominent Manhattan developers are preparing to take their
holdings public, too.

Those who believe that the families' glory days may be numbered do not
have very far to look. The revolution -- if that's what it is -- began
on March 12 of this year when Bernard H. Mendik, chairman of the Real
Estate Board of New York, announced that he would merge his
family-held company and seven Manhattan office towers with the
publicly traded Vornado Realty Trust, headed by Steven Roth. Vornado
already controlled a prime midtown development site at 58th Street and
Lexington Avenue, once occupied by Alexander's, and is one of five
bidders for the Coliseum site at the southwest corner of Central Park.
With the addition of Mendik's holdings, Vornado now controls more than
five million feet of prime Manhattan office space. ''The financial
strength of our combined companies,'' Roth promised in a written
public statement on the day the deal was announced, ''will enable us
to capitalize on opportunities, including those in the Manhattan
office market.'' Roth has proved as good as his word. On April 25, he
bought 90 Park Avenue for $185 million. In a $160 million joint
venture in June, he bought a half interest in the Hotel Pennsylvania
and paid $75 million for a parcel of property around Madison Square
Garden. According to an article in The New York Times, the developer
has told friends that ''he intends to become the largest owner of
commercial real estate'' in all of New York.

Of course, the families have heard this talk before. nurtured over
three and sometimes four generations, their sense of connection to the
city they built carries with it a touch of the seigniorial feeling
with which noblemen of a different century must have regarded their
estates. ''This is the farm,'' says Richard L. Fisher, the elegantly
dressed heir to the Fisher Brothers fortune, who also holds a master's
in English literature from the University of Pennsylvania. ''It's not
just an asset. It is family and business joined as one.''

Meanwhile, the frequency with which real-estate-family names appear on
major boards is a very public sign that the current generation of
Jewish owner-builders has achieved the place in the city that their
parents were denied. The Roses, Rudins, Tishmans and other families
support such institutions as Mt. Sinai and Beth Israel Hospitals;
Columbia and New York Universities and the New School for Social
Research; Lincoln Center; Carnegie Hall, and in recent years, the
Metropolitan Museum, the Asia Society, the Museum of Natural History
and the Whitney. They do their best to keep out of the papers. ''Real
estate was not very high profile until the late 70's, early 80's,''
says Adam R. Rose. ''The big-name developers, whose names I'm not
going to use, dragged the rest of us out of the closet, if you will,
because they were very high-profile people with very flashy, expensive
projects, who pronounced on every subject and were in the headlines
with their divorces and this and that.''

The families' political influence -- whether helping to get city loan
guarantees through the Senate in the 70's or pushing for more cops on
the street during the Dinkins era -- is also considerable. ''Whoever
the mayor is, they want that person to succeed,'' says former Mayor
Edward I. Koch, a friend of the Rudins. ''I knew I could call on all
these people, and I always did.'' Through a broad and influential
network of contacts, the families and their fellow developers exercise
their influence through elected officials, through REBNY, through
industry-led coalitions like the Alliance for Downtown New York and
through the city's Business Improvement Districts, which provide
once-basic public services like security, street lighting and trash
removal for an increasingly large portion of Manhattan.

''The real-estate tax is the largest thing that comes into the city's
budget,'' says Hadley W. Gold, whose service as first assistant
corporation counsel during the Koch administration gave him a
wide-open window on the families' dealings with the city. ''These are
very smart people. Do you follow what I mean? They know what makes the
city function, they know how to make people comfortable and they don't
overreach.'' More pointed development questions, meanwhile, are
handled by lawyers like Sandy Lindenbaum, whose father, the late Abe
(Bunny) Lindenbaum, served as a political broker between the Brooklyn
Democratic machine and developers. ''They don't need me to call the
Mayor,'' says Sandy Lindenbaum, who, like Howard J. Rubenstein, the
public-relations expert, has been a venerable aide-de-camp to the
families. ''They get on the phone and call the Mayor themselves. But
if what they need is a change in zoning, you don't call the Mayor --
so they call me.''

Yet after decades of building, borrowing and exercising clout, the
families' place in the city may finally be up for grabs. With their
huge reserves of public capital, and their investor-friendly corporate
governance, real-estate investment trusts offer the virtues of
liquidity and transparency in a market that has often resembled a
high-stakes Monopoly game, where properties are bought and sold among
the same small group of players. Martin Cohen of Cohen & Steers, which
manages more than $5 billion in REIT's, says of the families: ''They
weren't so smart. They just had dumb financial partners. So now that
they've bankrupted their partners, they're proud to say, Well, we're
left standing. But they still need financing. One, because their loans
have matured and they have obligations'' -- a reference to the
borrowed money on which so many real-estate empires were built. ''And
two, because the proceeds of selling their properties wouldn't be
great enough to pay their taxes.''

A former partner at a well-known Wall Street firm, who declined to be
named, takes a similar view. ''The empires you're talking about were
all based on the fact that for many years, private ownership of real
estate was rewarded with these ungodly tax breaks sponsored by the
Government,'' he says. ''As an individual owner, you could make money
in any one of dozens of ways. You could deduct your losses at the
highest rate and keep whatever you earned in rents. You could sell
your losses to other wealthy individuals. When the value of the
building went up, you could borrow against that and deduct those
payments, too. To invest in real estate as a public entity meant you
were crazy.'' With the 1986 Federal tax reforms, however, the
real-estate playing field was abruptly leveled. ''The smart ones will
always survive, of course,'' the banker says. ''For the rest of them,
the ride is over.''

Even developers who have no plans to go public anytime soon are
impressed by the speed with which the REIT's have moved. ''Large
institutions will play an increasing role,'' predicts Daniel Rose. ''I
would not be surprised if some of the family companies you see today
do not survive in their present form.'' Marty Cohen takes Rose's
prediction one step further. ''Within the next 20 years or so,'' he
says, ''I would not be surprised if half of the visible buildings in
Manhattan are owned by public companies.''

Richard Fisher is not quite so sure. ''I remember the recession in the
70's,'' he recalls, with a faraway look in his eyes. ''I remember
credit drying up. I also remember one lender walking into this office
and suddenly demanding that a loan be paid off. I sent a messenger
over there, and I enjoyed that experience immensely. I might also note
that bank is out of business now. And that becomes part of your
memory, too.''

On any weekday morning at around 8 o'clock at the Regency Hotel, you
might find Henry Kissinger conversing with Bob Tisch while men at the
surrounding tables get the inside scoop on the latest hot I.P.O. over
egg whites and coffee. The atmosphere is understated and cozy, a
combination of private club and neighborhood coffee shop for New
Yorkers whose net worth numbers in the hundreds of millions. For
anyone hoping to understand the role the family real-estate dynasties
play in New York, Lew Rudin's table at the Regency is a good place to
start.

The ambassador-at-large of Manhattan real estate, Rudin, 70, is a
gruff, streetwise man known in the business as a compulsive talker and
a soft touch. The first Rudin to own property in Manhattan was his
grandfather Louis Rudinsky, an immigrant from Volozhin, Poland, who
became a grocer on the Lower East Side. ''What his father instigated
in him,'' Rudin says, ''was the love of freedom of religion and the
freedom to own property, which he couldn't own in Europe.'' In 1902,
Rudinsky invested his savings, site unseen, in an apartment house on
54th Street, on the wrong side of the tracks from the Rockefeller
mansion. ''We still own and operate that property,'' Rudin adds,
''although now it's a 32-story office building.''

As the founder and chairman of the Association for a Better New York,
Rudin has also been a significant power behind the scenes -- eminence
grise would be too geriatric-sounding a term for a man who can hit a
half-dozen board meetings, cocktail parties and dinners in a single
evening -- in the administrations of every Mayor since Abe Beame.
''The secret of my relationship with the political world is, I never
ask them for anything,'' he says. ''So I owe them nothing. Most of the
time, they owe me something.''

Evidence of Lew Rudin's political muscle is not hard to find. Under
his leadership, the families prepaid hundreds of millions of dollars
in property taxes, as did other major real-estate taxpayers, during
the 70's to keep New York afloat. When Morgan Stanley threatened to
jump ship in the 80's, Rudin and Bob Tisch (whose own Manhattan
holdings are considerable) convened a meeting to convince the bankers
that leaving the city would be a mistake. ''Moynihan, Rangel, the
Cardinal, David Rockefeller -- it was intimidating,'' Rudin says.
''Moynihan got up and said, 'I'm going to be the chairman of the
Finance Committee.' Rangel got up and said, 'I'm the No. 2 guy on Ways
and Means in the House.' In any event, we did them a favor. And they
recognize it now.''

Was the Mayor at the Morgan Stanley meeting? ''I don't know who the
Mayor was then,'' Rudin says, swatting the question away with the flat
of his hand as he leans over the table. ''Dinkins? Koch? I don't know
if the Mayor was there.'' The look on his face is easy to read: Who
cares?

The Rudins' latest development project, 55 Broad Street, is a textbook
example of the families' ability to combine enlightened self-interest
and political acumen to shape the city's future and to insure their
prosperity for decades to come. The aging, asbestos-ridden,
Rudin-owned building went dark for five years after the real-estate
bust of 1990. Last year, 55 Broad Street was reborn as the Information
Technology Center, a hive of flexible office space where content
providers from companies like N2K, Sun Microsystems and I.B.M. sit in
front of glowing blue computer screens -- thanks to a plan developed
by the New York City Partnership, investments like the $40 million by
the Rudins and generous incentives from the city and the state for
tenants.

Padding around his office, showing off his pictures of Presidents and
mayors, children and grandchildren, Rudin notes that this very office
building was constructed on the site of the grade school attended by
his father, Sam, at the turn of the century. It was completed in 1969
with a 120-year ground lease held by the U.S. Steel pension fund.
Twenty years later, in the late 80's, the Rudins purchased the lease
for $25 million. What does the future hold for the Rudins? ''Owning
the land here is going to be very good for my children and
grandchildren,'' Rudin says. ''I would say we got a very good deal.''

The Prudential Insurance Company's March 17 announcement that the
three remaining sites it controls in Times Square are up for grabs set
off an immediate scramble for financing and tenants among the families
and their corporate rivals, REIT's included. As the latest battle in
the Manhattan real-estate wars began, however, one winner was already
apparent: the Dursts. ''All of us here grew up involved not just with
real estate but with New York City and its operation,'' says Douglas
Durst as various cousins and nephews and in-laws, gathered around a
polished conference table in one of the Durst Organization's
buildings, nod their assent. ''And because this is a family business,
we're not thinking about tomorrow or next week. We're thinking about
our children and grandchildren, and so we do develop buildings and
begin planning them 20 and 30 years before they are actually built.''

The Dursts are pleasant but shy, communicating in sentences of three
or four words punctuated by the occasional glance or stare. If they
are not the most colorful real-estate family in New York, they are,
next to the Fishers, the richest, with a fortune estimated by Forbes
at $650 million.

''I look at it as a puzzle -- putting all the pieces together,''
Douglas Durst says. ''That's what interests me. Putting together the 4
Times Square site, for example, was an incredibly complicated
puzzle.'' Eighty-six percent leased before the ground was broken last
August, the 1.6 million-square-foot building will be the largest
Durst-owned building yet. The tower itself, a model of which sits on
the table at the far end of the room, reflects the family's emphasis
on state-of-the-art materials and boiler plants over glitzy
architecture and show. Durst says that the tax benefits attached to
the site add up to $70 million. (Published reports put that figure at
more than four times as high.)

''With that site,'' Durst says, ''part of the puzzle was that the
footprint was too small, although there were tax advantages that
convinced me that it would be the next place somebody could develop.
So we had to enlarge the site. We had to buy the main property from
people we had spent the last couple of years suing and who weren't
very fond of us, we had to buy more property we didn't own, we had to
find financing and we had to do it all concurrently.'' Another part of
the puzzle was the developer's apparent use of the press to send
confusing signals to his rivals, first telling reporters that the days
of large-scale building in the city were over and then, once the
acquisition was announced, flatly denying that Conde Nast would be a
tenant. (The publisher will be sharing the building with the law firm
of Skadden, Arps.)

Durst's foxy, chess player's approach to the development business is,
like the buildings he owns, an inheritance from his father, Seymour,
who helped build the Durst Organization on the properties accumulated
by his father, Joseph, a cobbler's apprentice from Poland who
purchased his first building in Manhattan in 1915. A puckish man known
among his peers for his sly humor and eccentricities, Seymour Durst
turned his Manhattan townhouse into a shrine for his private
collection of New York City historical materials (including a room
lined with billboards from the old Times Square) and indulged what
appears to have been a case of true graphomania by sending countless
letters to city newspapers and serving as a columnist for Street News,
the publication distributed by the homeless. Seymour Durst was also
the premier site assembler of his generation, using byzantine chains
of shell companies to disguise his intentions from sellers and rivals.
Insisting that he would never buy anything he couldn't walk to, he
built an empire that is currently unrivaled in its profitability,
strategic concentration and 98 percent occupancy rate.

Which may explain why, when it comes to the REIT's, the latest in the
family's long line of competitors, Douglas Durst does not seem worried
at all. ''Our goal is to be the last company being fought over by the
REIT's,'' he says. Around the polished wood conference table, the
Dursts look at one another and smile. ''My own feeling is,'' Douglas
continues, as if stating the obvious, ''that the REIT's will get into
trouble, the public will get disenchanted and they will disappear off
the face of the earth.''

Whether the real-estate families of Manhattan will survive the passing
of the current generation with the power and glory of their empires
intact, however, remains an open question -- and not just because of
the arrival of the REIT's. Outside the sleek modernist conference room
of the Rose Associates' office hangs a black-and-white photograph of
Manhattan as seen from the sky immediately after World War II. Shaded
pathways wind through Central Park. The Chrysler Building glints in
the sun. Other features of the landscape, however, are not so
familiar. The saw-toothed piers are filled with dozens of ships
unloading passengers and cargo onto bustling docks. The peaks of
midtown and Wall Street, an Everest-like mountain and its smaller, no
less ambitious cousin, tower over a landscape that seems startling in
its flatness. ''Every street corner had a crane,'' instructs Elihu
Rose, standing in front of the picture and slipping into his familiar
role as family historian. ''And we had our share,'' adds his older
brother, Fred.

The office towers that line the avenues of the city today, rising 40
and 50 stories into the sky, are impressive symbols of the families'
rise from immigrant poverty to wealth and power. Nearly a century
after that rise began, however, perhaps the most telling criticism of
the city that the families have built is that part of it is missing.
The buildings are bigger and the families are richer, but the legions
of artisans who did the millwork, made the door bucks and windows and
lent their skills to Manhattan's once vibrant building trades are
gone. Where 60,000 residential units were built in the city in 1963,
residential construction in 1995 was just over 7,000 units. Among the
surprisingly large number of those in the families who agree with at
least some part of this critique is John Tishman, whose family
construction business built the World Trade Center, the Hancock Tower
in Chicago and Century City in Los Angeles. ''It's no coincidence that
all of a sudden we have no good housing,'' Tishman says. ''The
Government gave these incentives for commercial buildings, whereas
good planned housing, as a social thing, is what the Government should
have been supporting.''

As the current generation of real-estate moguls dies off or retires
and family estates are divided, it seems safe to predict that at least
some of the mammoth glass-and-steel towers so lovingly pictured in the
family brochures will appear someday in shareholders reports sent out
by the REIT's. As REIT holdings grow, families that stay in business
are ever more likely to form REIT's of their own, or to merge their
holdings with those of existing REIT's in exchange for cash and a
share of the power. It is also true that REIT managers, with
shareholders to satisfy, will have even less of an incentive than the
city's current landlords to worry about new street lamps or
after-school programs or multimillion-dollar donations to hospitals
and museums. For REIT investors, however, Manhattan real estate will
continue to look good -- as long as the current boom continues.

But as the families know only too well, no boom lasts forever. When
the dust settles on the next Manhattan real-estate bust -- and
eventually there's always a bust -- chances are that with a few
additions and subtractions, the landscape will look very familiar.

David Samuels is a contributing editor at Harper's Magazine. This is
his first article for The New York Times Magazine.

By DAVID SAMUELS

David Samuels is a contributing editor at Harper's Magazine. This is
his first article for The New York Times Magazine.

By DAVID SAMUELS

David Samuels is a contributing editor at Harper's Magazine. This is
his first article for The New York Times Magazine.