Trump Ties to Infrastructure Advisers Roth, LeFrak Run Deep

  • Vornado chairman rescued Trump from failed Manhattan project
  • LeFrak judged Miss Universe contest, appeared on ‘Apprentice’

Donald Trump didn’t look very far when searching for infrastructure advisers. He turned to two Manhattan real estate developers he has known for decades, Richard LeFrak and Steven Roth.

LeFrak, a billionaire whose New York roots mirror Trump’s own, and Roth, chairman of Vornado Realty Trust, one of the city’s largest landlords, will spearhead a committee dedicated to one of the new administration’s signature campaign pledges. Trump’s relationships with the two men, who will lead a council of builders and engineers to monitor spending, crisscross New York in a web of personal and professional ties.

Richard LeFrak

Photographer: Chris Goodney/Bloomberg

The extent of their power and the risk of conflict aren’t clear. Vornado is the biggest property owner in the area surrounding Manhattan’s Pennsylvania Station and could benefit from increased infrastructure spending.

Click here for story on private sector role in infrastructure financing

While Trump told the Wall Street Journal that the council would reject some projects and expand others, that’s usually the province of local officials. He hasn’t articulated a plan beyond broad statements promising as much as $1 trillion in spending, including private investment, to improve roads, bridges and other public works. In an interview last month with CNBC, LeFrak said he anticipated a tug of war with Republicans in Congress concerned about deficits and that $550 billion was a more reasonable estimate. 

“Part of our assignment is to advise him as best we can on the merits of these different things,” LeFrak said. “There’s no simple answer.”

LeFrak isn’t discussing the council further because it hasn’t been formed yet, said his spokesman, Steve Solomon. A spokeswoman for Roth declined to comment. A White House spokesman said he couldn’t provide any details about the council or its role.

Representative Bill Shuster, chairman of the House Transportation and Infrastructure Committee, said on Tuesday that an infrastructure package won’t be released until after the the House wraps up its proposals to repeal and replace the Affordable Care Act and on taxes.

“I am honored that he has asked me,” Roth said of Trump on a conference call Tuesday with analysts. “Infrastructure matters are not political. Every citizen of America wants our infrastructure to be robust, to be in a good state of repair, so that we can be competitive, and we can have the right quality of life.”

Beauty Judge

LeFrak, 71, and Trump, 70, are both scions of families that made fortunes owning apartment buildings on the outskirts of Manhattan. The LeFrak real estate dynasty traces its origins to 1905, when Richard LeFrak’s grandfather Harry emigrated to the U.S. from Palestine. The family business grew to become one of the largest residential landlords in New York and New Jersey, best known for building an eponymous apartment complex in Queens.

Through the years, LeFrak has had cameos in Trump’s life, serving as a Miss Universe judge in 2009 and appearing in a 2010 episode of “The Apprentice.” In Trump’s 1997 book “The Art of the Comeback,” he praises Richard LeFrak while disparaging his father, Sam LeFrak, who had tussled with Trump. The younger LeFrak has been a frequent guest at Mar-a-Lago, Trump’s resort in Palm Beach, Florida, according to a 2007 profile in the New York Times.

Steven Roth

Photographer: Peter Foley/Bloomberg

Roth’s relationship with Trump goes back at least to the early 1980s, when the two men acquired stakes in Alexander’s Inc. during a takeover battle for the department-store chain. Roth prevailed, seizing on the value of the company’s real estate -- including what is now the Manhattan headquarters of Bloomberg LP -- and turning it into a $35 billion real estate empire. Trump lost his stake to Citibank in bankruptcy court in the 1990s.

In 2007, Roth was Trump’s partner in a deal that tied up the loose ends of the future president’s failed attempt to turn a 77-acre (31-hectare) tract of land on the West Side of Manhattan into what would have been New York’s biggest development since Rockefeller Center. After publicly feuding with Mayor Ed Koch and spurning an offer from developer William Zeckendorf Jr. to buy the undeveloped plot, Trump was forced by bankers to cede control of the site to a group of Hong Kong investors. Proceeds from the sale were eventually used to acquire 1290 Avenue of the Americas in New York and 555 California St. in San Francisco, leaving Trump with minority stakes in the two office buildings.

Vornado Deal

Vornado bought out the controlling partners after Trump sued them, and it assumed potential liabilities from the lawsuit. Roth, 75, referenced his long-standing friendship with Trump when explaining the deal in an annual letter to shareholders. The lawsuit was eventually dismissed. Trump’s stake in the two towers is now worth about $640 million, according to the Bloomberg Billionaires Index, making it his most valuable asset.

More recently, Vornado swooped in when Jared Kushner, Trump’s son-in-law and now senior White House adviser, was fighting to hold on to 666 Fifth Ave., a Manhattan tower he acquired at the height of the property bubble in 2007. Kushner was on the verge of defaulting on $1.1 billion of loans in 2011 when Vornado injected $80 million into the 39-story building as part of a deal to stave off Kushner’s creditors. Kushner, who married Ivanka Trump in 2009, recently sold his stake in 666 Fifth to a family trust of which he isn’t a beneficiary to comply with conflict-of-interest rules.

Roth and LeFrak have their own history together. The developers jointly own a parcel of land on West 57th Street, near Central Park, where they leveled three pre-war buildings in the past two years and plan to build what they describe as a seven-star hotel.

The relationship between Roth and LeFrak will help smooth decision-making when it comes to infrastructure spending, according to Steven Witkoff, a Manhattan developer who has known Trump, Roth and LeFrak for 30 years. They know how to speak to one another, and they’re both regarded as savvy stewards of their real estate empires, he said.

“Risk management is going to be the order of the day,” Witkoff said. “Trump is not just appointing this slot to two billionaires. They have shown a unique ability to manage risk.”

Infrastructure Skills

With exceptions such as projects on federal land, state and local entities typically control infrastructure and decide what work proceeds, said Jim Tymon, chief operating officer of the American Association of State Highway and Transportation Officials. Trump’s council could help review high-profile projects and possibly decide which get additional funding or financing, he said.

It’s not unheard of for developers to have a seat at the table for infrastructure planning. Many of the skills required to put together large real estate projects are transferable, such as navigating the regulatory process, gaining public support and arranging financing, according to Scott Rechler, chief executive officer of RXR Realty, whose company owns $15 billion of real estate throughout New York, New Jersey and Connecticut.

“Real estate are seeds that are planted around infrastructure,” Rechler, who spent five years on the board of the Port Authority of New York and New Jersey, said in an interview.

Vornado has been involved in attempts to redevelop Penn Station and nearby structures for more than a decade. A parallel project called the Gateway Program, which would expand the railroad network under the Hudson River, is high on a list of proposals that local officials say need additional funding.

‘Understand Incentives’

Roth’s holdings around Penn Station, one of the busiest transportation hubs in North America, are more of an asset than a liability, according to Alexander Goldfarb, a real estate analyst at Sandler O’Neil & Partners LP. Roth’s familiarity with the area, in addition to his experience working alongside government entities, gives him insight into logistical issues such as the best way to alleviate traffic jams, Goldfarb said.

LeFrak is partnering with Florida developer Turnberry Associates LLC on SoLe Mia, a $4 billion project to transform a former Miami superfund site into a community with residential, office and retail properties.

Roth and LeFrak are skilled at raising capital from diverse sources, which will be crucial for getting the program off the ground, according to Witkoff. Being able to show private investors predictable returns can be a challenge for infrastructure projects.

“These guys are experts at financial structuring,” Witkoff said. “They understand incentives and how debt and equity come together and what it’s going to take to get people interested in infrastructure.”

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