Inside the International Drama Consuming All Year Management
By Chava Gourarie February 1, 2021 1:11 pmreprints
If 2020 came close to undoing us all, it certainly is the year that undid All Year Management.
Led by landlord-turned-developer Yoel Goldman, the $2.4 billion company is at a breaking point, facing a series of foreclosures, defaults, and sanctions in the United States and Israel, and in danger of losing its prime development, the 911-unit Denizen rental complex in Bushwick.
At the start of 2020, All Year was sitting pretty. Most of its developments were complete and on the way to stabilization, and by March, All Year announced two crucial deals that were under contract: a $675 million refinance that would replace the construction and bond debt on Denizen, and a $346 million portfolio sale that would help stabilize the company’s cash cushion.
And then came the pandemic.
Whether the pandemic precipitated the slew of problems facing All Year, a bare-bones operation based in Williamsburg, or merely exposed its underbelly, is a matter its lengthy list of lenders, investors and bondholders are furiously debating.
One of the more unsettling matters is the network of overlapping stakes in the company’s portfolio, which consists of more than 160 rental buildings, commercial holdings, and development land, primarily in Brooklyn, according to property records and financial documents filed on the Tel Aviv Stock Exchange.
The 40-year-old Goldman sits at the center of a complex web of partnerships, agreements, and third-party deals across the portfolio, layered with traditional bank, construction and mezzanine debt; short-term loans; and secured and unsecured corporate bonds issued in Israel. And, since most of All Year’s properties back those bonds, a default on any one property or on the bonds — which has already happened — can affect all of the others.
And, apparently, Goldman is the only one who understands it all. “[Goldman] has all the information in his head,” Joel Biran, the chief restructuring officer appointed by Israeli stakeholders, said in a public online meeting with them. “If it were up to me, I would use the time to do a download of what’s in his head.”
At that same meeting, David Fleischman, an attorney representing a fire-sale proposal from an unnamed group of buyers, echoed that sentiment. The group had secured Goldman’s cooperation with the promise of a $20 million waiver, because they needed his help to understand the tangle of agreements, Fleischman said.
“Without Goldman’s cooperation, we can’t do it,” Fleischman said in the online meeting. “The only person that has the information is Goldman.”
All Year declined to comment for this story.
How it started
Yoel Goldman started out as a landlord buying up Brooklyn rentals in the pre-crash real estate boom, usually in partnership with a circle of Hasidic men, like himself, and emerged as a prolific and ambitious developer in the post-crash development boom.
All Year was incorporated in 2007, though its portfolio dates back slightly further, based on an analysis of 165 residential properties among its holdings by Who Owns What and Commercial Observer. The vast majority are pre-war buildings in Brooklyn, many of which have been renovated since All Year’s purchase, and more than 25 are ground-up rentals built since 2014.
One of the first properties in its portfolio was a pair of walk-ups at 600 Park Place in Crown Heights with 20 units, which an entity now partly owned by All Year purchased for $900,000 in 2003. After that, a handful of properties were purchased in the next couple of years, but things started to ramp up in 2007. Entities now owned by All Year purchased 40 buildings between 2007 and 2009, with Yoel Goldman’s signature starting to show up on deeds and mortgages during this time. The pace dipped after the recession, and then, in 2013 and 2014 alone, All Year picked up more than 50 properties, based on the analysis.
In the interim, rental prices in Williamsburg and the surrounding neighborhoods had skyrocketed, and, like many landlords, All Year profited from the city’s deregulation rules. In 2007, buildings currently in its portfolio included 590 stabilized units protected from rent spikes. By 2019, half were market rate, according to the Who Owns What analysis. During that same period, All Year added 117 newly stabilized units, bringing the net loss to 183 in gross terms, but much more in proportional terms. Its first property, 600 Park Place, had 20 stabilized units in 2007; it now has seven.
Pre-2014, Goldman began taking on development projects as well, such as the residential conversion at 641 Driggs Avenue in Williamsburg, a former Marbleworks factory, which Goldman turned into 25 luxury rental and ground-floor retail. The property, purchased for $7 million in 2011 and completed in 2013, now rents units starting at more than $4,000.
In just five years, beginning in 2014, All Year built more than 1,600 new rental units, according to the data, many of them with partners. That includes a variety of smaller projects with between eight to 25 units, as well as several larger projects, including the 121-unit Dean in Crown Heights; the 199-unit Delmar in Queens; and the 150-unit luxury Albee Square, a rental building and shopping center in the heart of Downtown Brooklyn, now home to a Target and a Trader Joe’s.
During that time, Goldman also developed The William Vale Hotel — again, with partners — which once hosted the rose ceremony during a season of The Bachelor.
And Denizen, of course.
All Year played a smaller development role in Albee Square and The William Vale, where it is a 50-50 partner, but Denizen was All Year’s baby entirely. The two-building complex, built on a portion of what was once the Rheingold Brewery, was an ambitious project from the start, and much larger in scale than All Year’s previous work.
Denizen, designed by ODA New York, is a developer’s idea of a millennial paradise, with a zen garden between the two buildings, themed design concepts on each floor, local artwork adorning its walls, and a raft of amenities. The 1.2 million-square-foot development received the ULI New York Award for Excellence in the development of market-rate housing, and a 2019 design award from the New York chapter of the Society of American Registered Architects.
To finance the mammoth project, Goldman turned to the Tel Aviv Stock Exchange, an alternative capital source that he had tapped frequently to fuel his frenzied development timeline.
The TASE route was a deft piece of financial magic that many New York owners and developers had taken advantage of, as it allows them to issue unsecured corporate bonds in Israel at tantalizingly low interest rates to fund their projects in New York. Goldman outdid them all, raising more than $600 million in under two years, at interest rates ranging from 3.6 percent to 7.8 percent, and was one of the first to issue bonds secured by assets in New York. By 2018, he had issued five bond series, one secured by The William Vale Hotel, and one by the first phase of Denizen, a 443-unit building at 54 Noll Street.
By then, New York’s luxury market had topped out, but rents in Brooklyn kept climbing. That helped insulate Goldman for a time from the effects of a June 2019 move by the New York Legislature, which passed a set of laws that, in part, further hindered landlords’ ability to raise rents in regulated housing.
All Year’s bonds, however, ran into trouble at the end of 2018, when Goldman disclosed a financial irregularity that unleashed scrutiny from the media, investors and regulators, leading to more reveals and questions.
Goldman disclosed that he had transferred $3.7 million from the coffers of the bondholder portfolio to a separate entity he owned, in what he claimed was an error, several months after it happened.
In addition, All Year often master-leased portions of its new developments to unknown third parties, which began paying rent before the developments were completed. That allowed All Year to report income on properties still under development. Though master leases are an established mechanism, they can obscure the real health of an asset, because there is an artificial source of cash flow, and they rely heavily on the creditworthiness of the lessee. At Denizen, Goldman had three such master leases: two residential master leases totaling 342 out of the 443 units at 54 Noll, and a commercial master lease.
The issues led to a sharp decline in the company’s bond prices, and left some bondholders with a bitter taste. Some of the bondholders sued Goldman over the $3.7 million transfer, and the Israeli Securities Agency, the equivalent of the U.S. Securities & Exchange Commission, began an investigation that came to a close in December 2020.
After a promising first couple of months of 2020, All Year, like the rest of New York, started to hunker down. And that’s when things really started to unravel.
The first hiccup came in early May, when the contracted buyer for a 74-building portfolio in Brooklyn, an entity associated with David Werner Real Estate Investments, backed out of the deal. Werner had paid a $15 million deposit in March for the portfolio with 611 rental units, with a plan to close in May. But conditions had changed since the March agreement, and All Year was refusing to provide the buyer with updated rent rolls while offering new tenants concessions, the Werner-associated entity later claimed in a lawsuit.
A November appraisal of Denizen by Bowery Valuation confirmed that All Year was offering new tenants eight-week concessions.
In June, All Year informed bondholders that the Denizen refinance, a deal that would have originated more than $650 million in senior and mezzanine debt from Citi Real Estate Group and Goldman Sachs (GS), hadn’t closed yet, but was still under negotiation. It had been scheduled to close in March.
Over the summer, All Year began disclosing that it had begun missing payments on various mezzanine loans, and was negotiating with lenders on forbearance agreements and workouts. At the end of October, it appeared that All Year would reach a deal on the Denizen refinance, which would be used to pay down the existing $371 million in debt on both properties, as well as $247 million in secured bond payments in Tel Aviv, according to a report from Morningstar. But again, it failed to close.
By the end of November, the dominoes began to fall. All Year announced it would pause payments on its bonds in Israel and delay the publication of its third-quarter financial statement, putting it in default. Bondholders began to mobilize, appointing representation to oversee a restructuring and advocate on their behalf in the upcoming financial and legal proceedings.
In early December, the ISA released the report of its findings from 2019, and sanctioned All Year and Goldman, personally, barring him from running a company overseen by the ISA for nine months.
Days after that, mezzanine lender Mack Real Estate Group drew the line after Goldman failed to make a $7.5 million deadline, after months of negotiations. Mack announced it would be seeking to foreclose on a $65 million mezzanine loan on the second phase of Denizen and the 468-unit building at 123 Melrose Street is now scheduled for a Uniform Commercial Code (UCC) foreclosure auction on Feb. 5. Not to be outdone, the senior lender on the property, JPMorgan Chase (JPM), put All Year in a retroactive default on its $170 million mortgage for reporting irregularities, although All Year did not miss any payments.
On Dec. 28, TASE announced it would delist All Year’s bonds on Jan. 3 because it had failed to produce third-quarter earnings statements, prompting a heated discussion among Israeli investors about the fate of the company, and whether or not to buy or sell before it was too late.
That quickly devolved, when a power scuffle broke out amid the governing board of All Year Holdings Ltd., the subsidiary that issues bonds on Israel’s public markets and is responsible for representing the bondholders’ interests, according to documents filed on TASE. When All Year paused its bond payments, and was then sanctioned by the ISA, the board of directors issued several directives, agreeing to limit Goldman’s power by appointing a CEO whose signature would be required alongside Goldman’s on any matter that required his approval. A standstill agreement was put in place until a CEO was appointed.
On Dec. 30, Joel Biran was appointed to that role, as CEO of the subsidiary and the chief restructuring officer, a move that offered the bondholders some shot at certainty.
But, the next day, four external directors resigned in protest, after Goldman violated the standstill agreement and took several unilateral actions that convinced them he would not cooperate with the process, according to a letter published by the directors on TASE.
They explained that at a New Year’s Eve meeting — the day after Biran’s appointment — Goldman appointed four new directors of his own, giving him the majority to enact whatever he pleased. He then put up for a vote both a dissolution of the standstill agreement requiring a second signature and a proposal to transfer $8.5 million from the company to an unknown private creditor, a transaction about which he had previously refused to answer any questions, according to the letter.
Biran did not resign and continued to meet with bondholders to weigh their options.
But, as bondholders continue to battle it out, the day of the UCC foreclosure on Denizen’s second phase approaches. Goldman has until Feb. 5 to file for bankruptcy or file for a state court injunction, if he wants to save the property. A bankruptcy could expose All Year to a lot more scrutiny, which Goldman might not want, said David Goldwasser, a real estate restructuring strategist, who has reviewed All Year’s affairs.
“There’s definitely a path out,” Goldwasser said. “It’s just going to be painful.”