Rebranding LeFrak

Editors’ Note Richard LeFrak joined the LeFrak Organization in 1968 and was appointed President in 1975, becoming Chairman in 2003. LeFrak serves on the boards of a number of organizations, including the American Museum of Natural History and Amherst College. He also presides over the LeFrak Foundation. LeFrak graduated cum laude from Amherst College in 1967, received a JD from Columbia University, and was awarded an honorary doctorate degree from Amherst College.

Company Brief Founded in 1901 and based in New York, the LeFrak Organization (www.lefrak.com) is a diversified, privately-held firm active in major residential and commercial real estate development, oil and gas exploration, and financial investments. The firm is one of the largest owners of apartment and office properties in the United States and also owns significant hotel and retail assets. Notable projects include Gateway Plaza in New York’s Battery Park City, the Newport mixed-use community on Jersey City’s Hudson River waterfront, and a host of office buildings in Los Angeles.

Given the challenging economic climate, have you been happy with the progress of LeFrak’s developments?

Yes, because we’re somewhat re-branding our business now. We were known as the largest supplier of affordable housing in New York for a long time. That’s a little bit of a misnomer today, as about 50 percent of our business is now in commercial – not residential – activity, and our residential activity is aimed at the upper middle class, as opposed to the working class. We sold some assets this past year, and we have repositioned ourselves. We’ve also made a big investment on the West Coast.

Is the market sufficiently aware of this repositioning effort?

We’re slowly transferring the identification of the brand toward what we are, as opposed to what we were. That takes a while, because we were known for affordable housing. Although we still own tens of thousands of rent-stabilized apartments in New York, and we’re not abandoning those assets at this point, they’re becoming, as a percentage of the total business, far less significant.

Why did you feel it was time to extend your reach to the West Coast?

It’s never a good idea to concentrate all of your wealth in one area. New York real estate, to a certain extent, is a direct proxy for the financial services industry and reflects how well Wall Street does. That’s not to say that we’re not fully committed to New York, but we’re trying to diversify holdings. Internationally, we’ve even made some investments in London.

Has the Newport project in Jersey City developed as you envisioned it?

At its current rate of progress, we should be done in approximately 10 years. It has been a massive undertaking. Financially, it has been a home run, but we spent 15 years fighting our way through the forest to get to the clearing. To date, we’ve completed about five million feet of office space, 5,000 apartment units, about two million feet of retail space, two hotels, and ancillary facilities, including a marina and a skating rink. It has been a lot of fun, because we started with a blank page and built a small city. It’s not like plugging a building into Manhattan’s existing infrastructure. We had to think about everything that goes into the package of the community, and often we had to plan things that don’t make a profit immediately, but that reflect on the whole. Not many developers get an opportunity to do something on that scale.

Will you build more hotels?

Yes. We’re building our second hotel in New Jersey now – a Westin. We have a site in Manhattan that’s conducive to a five- or six-star hotel. We’re not rushing to build it, but it will eventually get developed.

You’re also investing in energy.

Yes. We’re now drilling wells in Louisiana, Oklahoma, North Dakota, Alabama, and Mississippi. So we are actively trying to increase our investments in that area.

I have been in the oil and gas exploration business for more than 30 years and am very aware of the economics of that business, having been in it for such a long time. The leadership of our country has not seen fit to plan for the situation that we’re in now. That’s why we’re paying $4 a gallon for gasoline. If I had to advise our future leaders, I’d tell them they better drop the politics and start doing some hardheaded thinking about it, because if they don’t, the standard of living for people in this country is going to go down.

Has the increased focus on the environment changed the way LeFrak operates?

The best way to get people to think green is to send them a heating bill. In the long term, there’s no question we’re going to be more conscious of our energy use. I don’t know whether global warming is a reality or not, but I know the price of heating oil is a reality. After interest and real estate taxes, our third biggest operating expense is energy, and we’re going to go green because we want to squeeze that number.

How important is the partnership between the public and private sectors to the success of businesses based in New York?

Mayor Bloomberg understands how to operate a business, and he understands that this city is a big business. He’s been apolitical in a way, because he does the right thing for the right reasons. I’m only sorry he’s not running for President.

You know your business inside out. As it grows, is it challenging to delegate work and let some of it go?

I’m the luckiest guy in the world. I have two very talented sons; they’re both ambitious, bright, and hardworking. They make more and more decisions, and I’m there only to help with problems or the things they don’t have experience with. However, I don’t see a day that I’m ever going to retire.

So you are always looking to the next challenge.

When I asked Frank Lloyd Wright what his favorite project was, he said, “The next one.” I don’t plan to stop. Certainly, I’ll recognize my limits, but right now, I feel like I’m still at the top. I have the experience and the energy, so why should I stop?

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Richard S. LeFrak

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The LeFrak headquarters