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Sam Lefrak: Enjoying The Last Laugh


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SAM LEFRAK: ENJOYING THE LAST LAUGH

It's a little distracting. Disconcerting, even. Here's Sam LeFrak, looking for all the world like a reincarnation of W.C. Fields, proclaiming loudly why so many real estate developers bit the dust in the 1980s--the "Decade of Swine," as he calls it. And over his shoulder, grinning her toothy grin, is Barbra Streisand in life-size cutout. You've just been ushered into LeFrak's office through a doorway crowned with an enormous moose head ("Shot it right through the brain," LeFrak says). On the wall to the left you can't help noticing a framed set of gleaming shark's teeth. As the billionaire barks out opinion after opinion, you listen politely. But inside, a thought is gnawing at you: "How," you wonder, "can I take this guy seriously?"

It's hard not to. Samuel Jayson LeFrak, 74, has long been known as an eccentric blowhard who built an empire slapping up apartment buildings for the Joe Sixpack set. (It's estimated that 1 in every 16 New Yorkers lives in aLeFrak-built apartment.) But as one of the worst real estate slumps in history wipes out developers like a hurricane, the Lefrak Organization is holding its own. "Sam LeFrak is one of the few developers the banks will still lend money to," says Peter Cohen, a consultant to Republic National Bank of New York. Echoes Frank Lourenso, executive vice-president at Chemical Bank: "Sam's business is strong and very, very liquid."

Call it LeFrak's last laugh. Bankers estimate he has some $400 million stashed away in government securities. And they say that LeFrak's quirky mix of businesses--ranging from oil drilling to pop-music recording--has a net worth of roughly $2 billion (table). LeFrak may raise eyebrows with projects such as funding a recent expedition that claims to have sighted one of Christopher Columbus' vessels near Jamaica (he vows to raise it and put it beside the Statue of Liberty). But in the summer of 1992, as his 47-year-old son, Richard, gradually takes over the business, LeFrak is one of the few big developers who can convincingly say he has money to spend on new opportunities.

If LeFrak's public image is flamboyant, his business style is quite the opposite. Over the years, he has proved a shrewd and conservative developer--building his family's construction business into New York's largest private landlord. The bulk of LeFrak's real estate portfolio consists of low- to moderate-priced apartments. He owns 92,000 units, ranging from studios for $436 to three-bedroom apartments that top out at $2,400. At an average of about $1,000 a unit, LeFrak rakes in a cool $92 million per month, or $1.1 billion per year. What's more, the mortgages on many of his buildings were paid off years ago.

Such cash flow means resiliency. In the early 1970s, when many developers crashed along with the real estate market, LeFrak emerged with $50 million and shopped for distressed properties. In the 1980s, while many were buying and building on speculation, LeFrak made the most noise with his criticism of others. Donald Trump? "Like I always said, he might be strutting around like a peacock today, but he's gonna be a feather duster tomorrow." The Reichmanns? "I can't believe some of the crazy deals they did."

MEMENTOS. LeFrak certainly has had his frustrations--mostly when he strayed from residential building. In 1986, he and two other developers launched with great fanfare a $10 billion planned community called Newport along the Hudson River in New Jersey. Blueprints called for a combination of residential, retail, and office space, creating what LeFrak hailed as "The City of the Future." Today, Newport is only one-third finished and is moving at a snail's pace. Still, what's built is nearly filled, and LeFrak is probably breaking even. Says Richard LeFrak: "At least we're not stuck with some turkey we have to feed."

LeFrak's biggest commercial success, Manhattan's 34-story 40 W. 57th St., houses his office. Near the shark, the moose, and Streisand (who early in her career sang on LeFrak's record label), sits an electric-yellow portrait of Sam and his wife, Ethel, silk-screened by Andy Warhol. Strewn across a credenza are photos of Sam beaming next to General Norman Schwarzkopf, Audrey Hepburn, and Richard Nixon.

Within LeFrak's puffed-out chest, however, beats the heart of a deeply conservative investor. "Don't overleverage, have a safety net, and prepare for the worst" has been the family's motto since they launched the firm in 1905. Sam's father, Harry Lefrak, an architect and builder who emigrated from France, began by building tenements for immigrants on Manhattan's Lower East Side. Soon he crossed the East River and started developing stores in Brooklyn.

Sam, who added the capital F to his name in the early 1970s to highlight his French heritage, joined the business after graduating from the University of Maryland. He erected his first apartment building in 1938 in the Flatbush section of Brooklyn and over the next two decades built hundreds of low-cost cooperatives and apartments throughout New York. As the company grew, he became known for his shouting matches with public officials and speeches peppered with offbeat idioms. "I build for the masses, not for the classes," he likes to say. Or, "I live by the golden rule: The guy with the gold makes the rules."

`THE BEST.' Richard LeFrak isn't exactly a chip off the old block. While Sam considers himself a visionary who bounces back and forth from real estate to entertainment, Richard is a soft-spoken pragmatist. He runs the company day to day and has stayed the family's conservative course. With prices and interest rates depressed, Richard is negotiating to buy as many as 5,000 distressed apartment units in Arizona, Florida, and New England. And he's building 1,000 more in New Jersey.

The most radical thing Richard proposes is to expand overseas. Over the past two years, Richard and Sam have traveled to both Eastern Europe and Latin America, making contacts and studying the market. They see opportunity but don't expect to build for some time. As for "The City of the Future," Newport will move at its own pace, Richard says. Otherwise, he doesn't plan to do much more in terms of commercial development. "It doesn't take a rocket scientist to see that there's already too much office and retail space," he says.

It's safe to say that the Lefrak Organization is not built on rocket science. "I wouldn't call what LeFrak has done genius," says real estate consultant Larry Russo. "But he's the best at what he does." Plenty of developers who were hailed as prodigies in the 1980s found their way to bankruptcy court in the '90s. Sam LeFrak may be full of bluster, but he still has plenty to bluster about.LEFRAK'S $2 BILLION EMPIRE

REAL ESTATE

Apartments: 92,000 units, largely in New York area

Offices: 5 million sq. ft., mostly small buildings, but including Manhattan's

40 W. 57th St.

Retail space: 5 million sq. ft., including Ashley Plaza in Charleston, S.C.,

and Tri-State Mall in Wilmington, Del.

ENERGY

Lefrak Oil & Gas Organization: 300 oil- and gas-producing properties in

Louisiana, Texas, and Oklahoma

ENTERTAINMENT

Lefrak Entertainment Co.: Produces Broadway plays, including My One and Only

and Crimes of the Heart. Recording artists have included Barbra Streisand,

Dolly Parton, Stevie B.

DATA: THE LEFRAK ORGANIZATION, BW

Ron Stodghill II in New York


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