As the names of big-time real estate heavyweights?Mort Zuckerman, Fred Wilpon, Glenwood Management, etc.?continue to trickle out in connection with accused Ponzi schemer Bernard Madoff, we've been awaiting the definitive, air-clearing account of just how bad the scandal has screwed the real estate world (especially since the threats started rolling in). Today, the Times comes pretty darn close to unleashing that exposé. There are tales of hundreds of millions in losses, developers on the verge of collapse, an array of potentially doomed projects and scores of panicked investors looking to unload their apartments right now?only there are few details given as to the identity of these poor panicked souls. One known example is the Blumenfeld Development Group, whose owner "invested heavily" with Madoff. Blumenfeld is a partner with Forest City Ratner on the flag-waving, Target-sporting hope of East Harlem, East River Plaza. A spokesman for Blumenfeld says the megamall (above) will be completed, but the company's other development plans are uncertain. Meanwhile, the Madoff affair's impact on residential real estate could be epic:
Brad Friedman, a lawyer representing about 100 investors primarily in New York and Florida, said several clients have already said they plan to put their apartments on the market. They depended on their Madoff investments to pay their mortgages and co-op fees. “With that source of money frozen, they’ve got no cash,” Mr. Friedman said. “They can’t pay the electric bill. They can’t pay the mortgage.”
Other buyers have already backed out of deals because they had invested with Mr. Madoff and can no longer finance their purchases. Michele Kleier, a prominent Upper East Side broker, had buyers pull out of purchases on two $2 million apartments because they had lost money to Mr. Madoff. The first buyer put in an offer at 3 p.m. last Thursday, the day of Mr. Madoff’s arrest, only to withdraw it by 5:30 p.m.
The second set of buyers had visited an apartment three times, requested the financial information about the co-op and had the broker notify Ms. Kleier that they would be making an offer on Monday morning. On Monday, she learned that the buyers had backed out because their money was tied up with Madoff funds.