97-77 Queens Boulevard
Recognized as one of the world's leading building firms, the Lefrak Organization has been acclaimed internationally for its commitment to large-scale affordable housing and responsible community development.
Lefrak Organization Inc. was, by the late 1990s, one of the largest private real estate development companies in the world. It was the nation's eighth largest owner of multifamily apartment buildings in the United States, with 61,000 units--all or most in New York and New Jersey--including Lefrak City and the residential portions of Battery Park City and Newport. The organization, a family holding company consisting of hundreds of subsidiaries, also controlled millions of square feet of office and retail space in projects that it developed. In addition, the Lefrak Organization was the holding company for Lefrak Oil & Gas Organization (LOGO), engaged in exploration, and Lefrak Entertainment, which operated the record label LMR, owned stage and movie theaters, and produced movies and Broadway and television shows.
From Glazier to Mass Market Builder: 1905-60
Russian-born Harry Lefrak came to the United States from Palestine as a youth about 1900, arriving in New York City with $4 in his pocket. He had learned glazing and carpentry from his grandfather and father and with the latter founded what was to become known as the Lefrak Organization in 1905, concentrating its efforts on manufacturing customized lamps for Louis Comfort Tiffany. After some personal reverses, Harry Lefrak sold the glass factory in 1919 and began erecting row houses in Brooklyn, eventually constructing entire blocks of homes in the Bedford-Stuyvesant area. As Brooklyn filled up, the Lefrak Organization switched to building apartment houses for middle-income families, constructing more than 400 such buildings in the metropolitan area.
The Lefrak Organization became a partnership in 1940 when Samuel Lefrak, Harry's only son, joined the firm, buying a piece of the business. He became president in 1948, on the threshold of the great homebuilding boom that followed World War II. But he was still only a small-time Brooklyn builder in January 1951, when he scraped together the $50,000 binder needed to support his $5 million winning bid at public auction for 29 pieces of real estate and 20 mortgages being liquidated. To raise the $500,000 down payment required by law, he pledged the ten most valuable properties as collateral. To finance the rest of the sum he had to sell the other properties for less than their assessed valuation, but the ten properties he retained yielded enough cash to win further loans for the large-scale building projects he envisioned.
By the late 1950s Lefrak's gamble had proved to be a resounding success. In 1957 the Lefrak Organization erected buildings with a total of 2,000 apartments, mostly in Queens and Brooklyn; in 1958 the number grew to 2,500, and in 1959 it reached 4,600. By 1960, 250 corporations established under the partnership owned and collected rents from more than 200 buildings, most of them constructed by Lefrak. The organization bought land and materials at bulk prices, did its own architecture, engineering, painting, plastering, and carpentry, and bought forests and clay and gypsum quarries to operate its own lumber mills, brick factories, and cement plants. Mechanical services were the only major part of a project contracted out. Although Sam Lefrak generally eschewed government-assisted programs, his organization built the first project under New York's Mitchell-Lama law in 1957, a 520-unit Brooklyn development that used low-interest, state-guaranteed loans and tax abatements.
Some of the Lefrak Organization's apartment buildings were owned outright or jointly in Baltimore, Washington, Philadelphia, Boston, Dallas, Minneapolis, and Los Angeles, but most were in the New York metropolitan area, where labor, materials, taxes, debt, and land costs were more expensive than anywhere else in the nation and where most builders felt the middle-income apartment monthly market-rent range--$30 to $40 a room--was not worth building for. By vertical integration and obsessive attention to cost control, the Lefrak Organization was able to turn a profit building mostly six-story brick walk-ups in Brooklyn and Queens for this market. By 1963 it was the landlord for about 250,000 people and was receiving more than $5 million a month in rentals.
Sam Lefrak's management style was to employ so many executives that he said he could not remember how many vice-presidents there were. They made few major decisions but carried out Lefrak's own decisions to build, buy, or borrow. Speaking of his executive vice-president, he said, "I make the deal and he cleans it up." Another executive was leasing and renting administrator of the organization's buildings and also headed a self-insuring subsidiary. The legal department kept Lefrak informed on building codes and also sought code revisions from state legislators. Other departments were devoted to architecture, construction, and field engineering.
To hold down costs the Lefrak Organization bought land years in advance of a project, warehoused steel and bricks at distress prices, thoroughly tested sites to save on building expenses, and fostered steady cash flow to hold down interest rates on its loans. The organization's size and wealth enabled it to take a hard line with subcontractors, suppliers, and manufacturers. Sam Lefrak even looked into the feasibility of building a nuclear power plant to reduce electricity costs. A former associate called him a "ferocious negotiator"; a rival developer preferred the term "vicious negotiator."
Big New York Projects, 1960-96
In 1960 the company announced its largest endeavor yet: Lefrak City, a high-rise residential development on a swampy but strategically located 40-acre Queens site purchased for $7 million. Built with no government aid of any sort, not even Federal Housing Authority mortgage insurance, it was the largest privately financed apartment development in the world. Completed in 1967 at a cost of $150 million, Lefrak City included 20 18-story towers with 5,000 apartments. There also were two office buildings. Although drab and uninviting in appearance, Lefrak City offered two-bedroom apartments for about $220 a month and efficiencies for as little as $102 a month. Amenities available (for additional fees) included terraces, parking, a swimming pool, and air conditioning.
During the 1960s Lefrak Organization projects included two high-rise urban development housing projects on Manhattan's West Side and Westchester Plaza, a large-scale development in suburban Mount Vernon. In 1972 the Lefrak Organization put up its first major midtown Manhattan office building, and by 1976 it was the company's single most valuable property. With the run-up in fuel prices that followed the 1973 oil embargo, Sam Lefrak decided to secure his own supplies of fuel by founding Oklahoma-based Lefrak Oil & Gas Organization (LOGO), which in 1981 was drilling nearly 100 wells in the United States.
The Lefrak Organization in 1976 had an asset value estimated at between $500 million and $700 million and net worth of perhaps $100 million. Debt service was running about $30 million and annual net cash flow at about $10 million to $12 million. The holding company consisted of some 350 separate companies and was owned by Sam Lefrak, his wife, and their four children, including Richard, president of the parent firm. Arsam Investment Co. was engaged in several venture capital deals. Lefrak Communications operated LMR, the record label that launched Barbra Streisand, and also invested in music publishing and television and movie production. By this time Sam Lefrak had changed the spelling of his name to LeFrak (pronounced lefrak) instead of Lefrak (pronounced lef rak). He later said the change had been necessary because other Lefraks at his club had been cited for nonpayment of dues.
The last Lefrak Organization development in New York City was Battery Park City. In 1969 the company, over heavy competition, won the right to co-develop this ambitious state project on a mile-long, 92-acre site along the Hudson River in lower Manhattan, formed by landfill from the construction of the World Trade Center. Plans called for a collection of office buildings, stores, and apartment towers, financed by issuing state agency "moral obligation" bonds backed by rents from office leases. With the advent of the 1973-74 recession and the subsequent default of the bonds, the project stalled.
Lefrak and his partners were able to obtain FHA insurance, sell bonds to the public, and complete the 1,712-apartment Gateway Plaza complex, consisting of three 34-story towers and three low-rise buildings, in 1981. After that red tape and lawsuits took a further toll, and Battery Park City, in reduced form and without further Lefrak Organization participation, was not completed until the 1980s. "The bureaucrats tortured him," a real estate executive and former city official later told a reporter. The bureaucrats had another story: they disliked the drab towers he had built, and when they told him he would have to bid against other developers for further work, he replied that "he didn't want to stand in a delicatessen line."
Heavily Jewish Lefrak City underwent white flight in the mid-1970s, after the Lefrak Organization was sued for alleged discrimination against blacks. By 1980 two-thirds of its residents were blacks. By 1990 only nine percent of the residents were white (compared with 82 percent in 1970). The complex suffered from rising crime and vandalism, and its biggest commercial tenant, the Social Security Administration, departed in 1989. Yet by 1996 increasing immigration from the former Soviet Union had resulted in a resurgence of the Jewish community. The black population included not only longtime residents but a large number of West African Muslims who had settled in Lefrak City over the past decade and were considered a stabilizing factor. New York City's Department of Environmental Protection had, in 1991, moved into the office space formerly occupied by the Social Security Administration.
In the 1980s the Lefrak Organization's attention turned from the city to the blighted Hudson River waterfront in New Jersey, opposite from lower Manhattan. In partnership with the Glimcher Co. and Melvin Simon and Associates, Lefrak in 1986 began converting 600 acres of abandoned railroad tracks along the Jersey City shoreline into a $10 billion mixed-use complex named Newport. The privately financed project received tax abatements and a $40 million federal urban development grant, the largest ever.
By 1990 the Lefrak Organization had erected four high-rise buildings with 1,624 apartments and condominium units, a huge shopping mall with a multiplex cinema, and a 1,000-boat marina. A 475,000-square-foot office building also was completed. An economic downturn put an end to further building, however, with only one-third of the project completed, and LeFrak refused to pay property taxes due to Jersey City, arguing he had not received promised services. The dispute was later resolved.
Lefrak resumed work in 1995 with the start of construction for Towers of America, a group of four residential buildings on a peninsula jutting into the Hudson. By autumn 1998 two had been completed and work had begun on a third. Ground was broken in May 1998 for a 575,000-square-foot Lefrak-financed office building, even though no leases had been signed--making it the first speculative building to rise in the metropolitan area in 20 years. The company also began construction in 1998 of a 200-room Marriott hotel in Newport. A riverside esplanade, marina, and heliport already were in place. When completed, Newport was to include 9,000 apartments, 4.5 million square feet of office space, two million square feet of retail space, and 1,200 hotel rooms.
A 1992 Business Week article listed the Lefrak Organization's real estate empire as consisting of 92,000 apartment units, primarily in the New York metropolitan area; five million square feet of office space, mostly small buildings, but including a high-rise at 40 West 57th Street in Manhattan; and five million square feet of retail space, including Ashley Plaza in Charleston, South Carolina, and Tri-State Mall in Wilmington, Delaware. Lefrak Oil & Gas held 300 oil- and gas-producing properties in Louisiana, Texas, and Oklahoma; two years later, it bought 200 more oilfields. Lefrak Entertainment Co.'s Broadway productions had included Nine and Crimes of the Heart (both of which won awards and were co-produced by Sam Lefrak's daughter Francine). Its recording artists had included Dolly Parton and Stevie B. as well as Barbra Streisand.
According to an annual survey by National Real Estate Investor, however, the Lefrak Organization had an apartment ownership interest in only 61,127 units in 1992. The number given by this publication for 1998 was 61,000. Sam LeFrak's son, Richard, had been president of the Lefrak Organization since at least 1987 and was in charge of day-to-day administration. Forbes estimated the worth of the LeFrak family holdings in 1998 at $1.7 billion.