Ashkenazy Battling Lawsuits, Dodging Foreclosures As Grasp Slips On Iconic Properties
In a typical year, Washington, D.C.’s Union Station, the second-busiest train station in the United States, sees 40 million visitors. But for many of those tourists coming to the nation’s capital, their first impression is one of decline.
The 435K SF station is filled with retail spaces, but not with retailers. The retail reckoning followed by the pandemic has reduced the once-bustling Daniel Burnham-designed rail hub to a shell of its former self. That is part of the reason why Amtrak moved to seize control of Union Station using eminent domain, taking aim at the longtime operator of the retail space: Ashkenazy Acquisition Corp.
The legal action is just the latest facing Ashkenazy, which has been fighting debtors, partners, local governments and, yes, a railroad operator controlled by the federal government, for control of its ample retail portfolio.
At Union Station, Ashkenazy has fended off two foreclosure attempts, the most recent of which was avoided in January thanks to a funding injection from South Korea’s Kookmin Bank. It has been less successful at some of its other properties, which include some of the highest-profile shopping centers in Boston, New York City, Baltimore and D.C.
In numerous legal filings, lenders claim Ashkenazy owes them tens of millions in unpaid debt and have moved to foreclose on its properties. Tenants have complained that they have been left to fend for themselves by an inattentive owner, and politicians have publicly called out Ashkenazy for failing to be a good steward of critical economic engines.
Multiple calls and emails requesting comment from Ashkenazy for this story were not returned.
The troubles are partly the result of the vexed retail market that’s only been made worse by the pandemic, sources told Bisnow, although some of the company's properties were in trouble before 2020. But while the fallout will have major implications for communities around these properties, sources said the company and its leader, billionaire Ben Ashkenazy, are likely far healthier financially than many of its holdings.
“He is one of the shrewdest and most strategic real estate moguls of our time,” Compass Vice Chair Adelaide Polsinelli said. “Honestly, because no one knows how to put a deal together or take one apart better than he does.”
Both the portfolio and Ashkenazy, 52, have something of a legendary status. The Israeli-born, Long Island-raised investor bought his first property as a teenager — land underneath a Bronx shopping center funded by a $2M loan, according to The Real Deal. His father, Izzy, was a retailer and property investor.
Forbes pegs his wealth at $2.6B today, down from $4B in 2018. He has garnered a reputation for extravagant tastes: Drake performed at his daughter’s bat mitzvah at the Rainbow Room in 2016, per Bloomberg, which described him as a “shy billionaire.” His summers are typically spent on a yacht in Europe, his longtime lawyer told TRD in 2017.
Ashkenazy has amassed holdings that, five years ago, would have been the envy of the world. The company controls Union Station, owns a host of storefronts on Fifth and Madison avenues, as well as Bayside Marketplace in Miami and One Union Square in San Francisco and ground leases Fanueil Hall, the historic tourist-centric shopping hub at the heart of Boston. For a brief time before the pandemic, it co-owned the Plaza Hotel.
“There’s a bit of a mythical quality about Ashkenazy as it relates to the marketplace, the fact that they do it all themselves makes sense as to why everybody wouldn’t know them as well,” Miller Walker Retail Real Estate principal Bill Miller, a D.C. retail specialist, told Bisnow. “Iconic real estate is expensive. If they can buy world-class assets regularly all over the East Coast, and to do that is not easy, so it’s interesting that they have given some back over the last 24 months, and I think generally people are wondering why they’ve had to pull out of so many projects.”
The sheer number of legal actions against Ashkenazy and its affiliates in recent months has been dizzying.
This month, it was sued by BankUnited, which claims Ashkenazy stopped making loan payments for the retail space at the Philip House Condominium on the Upper East Side in December 2020. The commercial eviction and foreclosure moratorium had protected Ashkenazy until January this year, Patch reported, but now BankUnited wants back the $11.9M it says it is owed, along with interest.
In March, Ashkenazy was hit with a foreclosure suit for its retail space at 1400 Fifth Ave. in Harlem, with lenders claiming the firm hadn’t made repayments there in nearly two years. The loan came from Barclays in 2018, and was then sold to other investors, The Real Deal reported. Ben Ashkenazy and Andrew Cohen, who runs Cohen Commercial Properties, personally guaranteed the loan, according to the trustee who filed the suit, which is seeking $16.7M in damages. That same month, lender Argentic Investment Management took control of 115 Seventh Ave. in Chelsea — the original Barney’s building — having claimed Ashkenazy owed it $46.2M, PincusCo reported.
Last year, SL Green took control of 690 Madison Ave., foreclosing on the mezzanine loan it provided Ashkenazy in 2016, per PincusCo. And last summer, a judge ordered the firm to pay $136M on a defaulted loan on the New York Marriott East Side hotel, Commercial Observer reported.
In 2020, it lost control of the Mazza Gallerie Mall in the toney Friendship Heights neighborhood of D.C. In an attempt to stop the sale, Ashkenazy said it had lost in excess of $533M in revenue at the property because of the restrictions D.C. placed in response to the pandemic, and that it was protected by emergency measures. Tishman Speyer bought the mall, for which Ashkenazy paid $78M in 2017, for $52M at auction.
The lawsuits could be the result of Ashkenazy’s calculated approach to underperforming assets that aren’t worth saving, sources suggested.
But for many of the company’s most-valuable properties, it is still facing challenges big and small. Ashkenazy bought the ground lease on the famed Faneuil Hall Marketplace in Boston for $140M in 2011, but the relationship between the tenants and landlords soon became acrimonious.
The property’s merchants’ association sued the company in October over $2.5M the group claim Ashkenazy owes for the marketing budget.
“The bottom line is, Faneuil Hall is a mess,” George McLaughlin, an attorney for the merchants told the Boston Globe in November. “Ashkenazy is just grinding the tenants for every last dollar and not doing anything to promote the place … The worst thing in the world is to have a wonderful asset and not to utilize it for its potential, and to let it sit and gather dust. That’s what is happening here.”
One tenant told the Globe the only reason her quick-service restaurant was surviving was thanks to government help, not concessions from the landlord. The Boston Planning & Development Agency pushed Ashkenazy to offer support to the tenants there; it had fallen behind on tax payments to the city in 2020, but it had caught up by that November.
“When we observe the retail vacancies … that has the impact or has the effect of lowering the activity in streets, on the sidewalks, in placemaking and by extension, what we refer to in literature as the social capital of a neighborhood,” said Sam Chandan, the director of the Stern Center for Real Estate Finance at New York University. “In our industry, we tend to think of this in terms of co-tenancy and minimum occupancy clauses are related to a specific property, but on a larger level … In the extreme it has the potential to really change the character and dynamics of a neighborhood.”
That issue is being felt deeply at another of Ashkenazy’s iconic properties: Harborplace in Baltimore. The company’s purchase of the waterfront complex in 2012 for $98.5M was billed then as a major win for the city.
“This is a company with a track record of investing in and managing premier destinations each with its own local character in cities across America,” then-Mayor Stephanie Rawlings-Blake said, according to the Baltimore Business Journal. She was committed, she said, to working with Ashkenazy to “continue making progress and to secure Harborplace’s legacy."
But within a few years, Ashkenazy was facing accusations of neglect from city officials, business leaders and tenants, according to a BBJ investigation. A judge put the property into receivership in 2019.
This month, Baltimore’s MCB Real Estate, led by P. David Bramble, reached a deal to acquire it out of receivership, the Baltimore Sun reported.
“We want it to be local, we want it to be authentic, we want it to represent the best of Baltimore and we really want it to be a reflection of the whole city,” Bramble told the publication of the property’s future, which is seeking the court’s approval to close on the property.
“We’re starting the work to transform Harborplace into a landmark destination where residents can go to enjoy the best that we have to offer — thriving small businesses, green spaces, and cultural venues,” Baltimore Mayor Brandon Scott said in an emailed statement to Bisnow. “Our vision is to make it a space that highlights the very best Baltimore has to offer and welcomes residents and visitors alike with open arms.”
Harborplace was 48% leased as of the end of February, per the Sun, and Bramble said when the property “got into the hands of people who weren’t connected to Baltimore, it became full of chains that would be found in any shopping mall around the country.”
Today, Ashkenazy’s website says it has acquired more than 15M SF of properties in both the U.S and Canada, with a portfolio that included more than 100 buildings valued at over $12B.
The company is still making acquisitions, although they are properties with less pizzazz: In December, the firm purchased a 200K SF shopping center in Queens for $40.5M. And it continues to fight for control of Union Station, although if Amtrak succeeds in seizing it, it has already set aside $250M to purchase the ground lease from Ashkenazy.
“He's been through enough cycles to know how to position himself to protect his portfolio,” Polsinelli said.
Jon Banister contributed reporting for this article.