Does it pay to give?
Giving to charity may be personally satisfying, but that’s not the only reason why real estate bigwigs do it. In many cases, philanthropy benefits the donor just as much as the recipient. Indeed, in many cases writing a check with a lot of zeros not only helps the cause at hand, but can also grease the wheels for a future real estate deal.
In addition, sources said one of the main reasons many top real estate executives sit on the boards of high-profile cultural, education and healthcare institutions is that they get to hobnob with other influential players in the business world (see related: The charity web). The galas and charity events held by the elite institutions allow real estate pros to mingle with influential private equity executives, hedge funders, political officials and other deal-makers in an informal setting.
For example, former Citigroup chairman Sanford Weill and Brown Harris Stevens agent Kyle Blackmon were both involved at Carnegie Hall when Blackmon brokered the $88 million sale of Weill’s 15 Central Park West penthouse in 2011. (Weill, who donated the proceeds of the sale to charity, is chairman of Carnegie’s board; Blackmon is a donor to Carnegie Hall who has been involved in the organization’s Real Estate Council.)
“ There’s no question there is a benefit to being involved [in philanthropy] where you get to meet people in the business community in a setting that’s not a sale or business environment,” said Peter Riguardi, Jones Lang LaSalle’s tri-state president. Riguardi said he’s created connections through charities and boards that have resulted in business relationships and real estate deals, but he declined to give specific details.
Working these connections does take some finesse, however, since deal-making at charity events is something of a subtle art, where a seed is planted to be followed up later.
“If you’re involved in these charities for that sole purpose,” Riguardi warned, “it’s not going to work for you.”
Last month, moguls and non-moguls alike rushed to make final tax-exempt donations to their favorite charities. For example, Boston Properties CEO Mort Zuckerman pledged $200 million to Columbia University to fund a neuroscience research institute in what was the biggest donation by a New York real estate player in 2012.
In this issue, The Real Deal examined some of the biggest donors from the New York City real estate world — including developers Larry Silverstein, Howard Milstein, Stephen Ross and the Blackstone Group’s Jonathan Gray — to see what they’re giving and what, if anything, they get in return for their generosity.
There’s an unspoken expectation that sitting on distinguished arts, education and health boards in New York City requires giving generous donations.
“There’s a cliché in the field — you’re supposed to give, or get off the board,” said Stacy Palmer, editor of the Chronicle of Philanthropy, which tracks charitable giving. “Some people on boards aren’t rich, so there’s the expectation that you’re either a generous donor [or bringing in donations].”
Enter wealthy real estate executives.
Daniel Brodsky, president of the Brodsky Organization, made headlines in May 2011 when he was elected chairman of the board of the Metropolitan Museum of Art. One of the most elite organizations in the country, the Met had nearly $3 billion in assets in 2010, the most recent year that data is available for.
Brodsky, who also serves on the boards of the New York City Ballet and New York University, has been a trustee at the Met since 2001.
Brodsky’s position puts him in contact with influential city figures like ex officio trustees Mayor Michael Bloomberg, City Council Speaker Christine Quinn, Comptroller John Liu and real estate execs like William Rudin.
Since Brodsky’s firm is actively marketing several residential projects in Manhattan, and is planning an expansion into Brooklyn, extracurricular ties to the current mayor and a possible future mayor (both Quinn and Liu are expected to run to replace Bloomberg) can’t hurt.
If nothing else, it’s always helpful for developers to come into contact with wealthy potential buyers for their projects. Brodsky declined to comment for this story, but he has a building going up at 135 East 79th Street where units will trade for up to $20 million. One of his fellow Met board members is billionaire oil executive David Koch, who gave $60 million to the Met this past year for the renovation of the Museum’s Fifth Avenue plaza and fountains.
Of course, much of the information about who is donating how much isn’t always shared publicly.
“[There’s] so much giving from our industry that people don’t know about. Clearly a part of our tradition is quiet giving,” said Steven Spinola, president of the Real Estate Board of New York. “A lot of contributions [are] made that are anonymous [or] quietly made but there’s no big fanfare.”
Stephen Ross, the founder of the Related Companies, echoed that point.
“[You] wouldn’t know what I’ve given to Lincoln Center or the hospital or anything like that” is how he put it.
In fact, the main publicly reported donation Ross gave this past year was $1 million to the Miami Art Museum’s annual campaign, according to the Chronicle of Philanthropy. Along with the Miami Dolphins, which he owns, and Related, Ross also donated $500,000 in November to the Mayor’s Fund to Advance New York for Hurricane Sandy relief efforts.
However, it’s possible (and likely) that he made additional contributions to the boards he sits on. A source told TRD that Ross gives approximately $10 million annually to the variety of boards he serves on.
And, he has been known to go well beyond that. For example, in 2004, he famously donated $100 million to his alma mater, the University of Michigan’s business school. (The school was aptly renamed the Stephen M. Ross School of Business at the University of Michigan.)
Through the various boards he’s on — Lincoln Center, New York-Presbyterian Hospital, the Guggenheim Foundation, the New York Chapter of the Juvenile Diabetes Research Foundation International, the World Resources Institute and the Jackie Robinson Foundation — Ross serves with a host of other heavy hitters. They range from Carlyle Group co-founder David Rubenstein (at Lincoln Center) to Weill, Koch and former AIG CEO Hank Greenberg (at New York-Presbyterian Hospital) to media mogul Steven Forbes and Property Group Partners’ Jeffrey Sussman (at the Jackie Robinson Foundation).
Meanwhile, Arthur Mirante II, principal and tri-state president at Avison Young, sits on some seven boards in the city, including that of the Alvin Ailey Dance Foundation and the National Jewish Center for Immunology and Respiratory Medicine.
He said he’s “absolutely” reaped the benefits of sitting on boards. But, like Riguardi, he said, “if you do it for that reason, I really don’t believe it’s good business.”
Mirante described the business connections he’s made as “accidental” and said being involved in these charities is “a deeply personal thing.”
“I don’t like to play games. You get more rewards than you give [through charity work.] If [connections are] your motivation, then you’ll be disappointed,” Mirante told TRD.
“I’ve been very lucky,” he added. “I’ve made lifelong friends that I’ve met on different boards in working with different nonprofits that have been very successful in their careers that have given me business, and others haven’t, and that’s okay. [It’s] icing on the cake.”
Of course, donating money (up to a certain amount, anyway) can be written off as a tax deduction. However, in recent weeks that’s become controversial given the national debate over the so-called fiscal cliff — the automatic tax increases and spending cuts that were set to kick in at the end of 2012 if Congress didn’t act. (At press time, elected officials and lobbyists were still feverishly trying to hammer out a deal.)
Indeed, charities began lobbying in Washington last month out of fear that tax deductions on charitable contributions would be cut as Congress looked for ways to increase revenue to deal with the fiscal cliff.
Depending on one’s tax bracket, up to 35 percent of a charitable donation can be written off.
But while making big donations does come with tax benefits, many of the biggest donations from real estate pros last year seemed to be driven by personal connections to specific causes.
For example, Gray, Blackstone’s global head of real estate, and his wife, Mindy, donated $25 million to the University of Pennsylvania, their alma mater, in May to establish the Basser Research Center. The center (which was named after Mindy’s late sister, Faith Basser, who died of ovarian cancer) focuses on research and prevention of certain genetic cancers.
“This is very personal to us,” Gray told TRD. “We want to make a difference to families who have this.”
Gray said he and his wife did their due diligence to find a facility they thought would be right for the center.
“It came down to a handful of places,” he told TRD. “We thought Penn was the best choice given the work they were already doing in this area.”
In the city, Gray is chairman of the board of Harlem Village Academics. He said he and Mindy are involved in other organizations, but have never given a donation this large before.
Meanwhile, Gary Sumers — Gray’s colleague at Blackstone and senior managing director of the real estate group — donated $12 million in October to his alma mater, Washington University in St. Louis, to expand the school’s athletic complex and create a recreational center.
“I think when you take on the responsibility of being a member of a board of trustees, along with that goes an understanding of the needs for capital, if one’s lucky enough to help,” said Sumers, who sits on the school’s board.
Sumers denied that there was a business benefit to sitting on a board far outside of New York, but noted that the school “gave me a great education [and] a great start in life.”
Stephen Schwarzman, chairman of the Blackstone Group, didn’t give a public donation in 2012, but donated $100 million in 2008 to the New York Public Library, where he’s a board member.
The library has since renamed its main Fifth Avenue building after him.
For his part, Silverstein — who generally declined to discuss his charitable donations — donated $5 million to his wife Klara’s alma mater, Hunter College, last spring as a surprise for her when she retired as chairwoman of Hunter College Foundation’s board of trustees after 11 years.
The developer told TRD that he organized the donation without his wife’s knowledge, then showed up at her last board meeting as chair — she will stay on as a board member — to present it to her.
“We surprised her completely,” Silverstein said.
The donation will go towards establishing a new component of the Hunter Library.
Silverstein also gave $5.2 million to New York University School of Medicine, which will create a scholarship fund. (Silverstein and two of his kids went to NYU as undergraduates.)
He also serves on the board of NYU alongside his daughter, Lisa, senior vice president of Silverstein Properties; Brodsky; Kelly Kennedy Mack, president of Corcoran Sunshine Marketing Group; Rudin; developer Sheldon Solow; Leonard Boxer, chairman of Stroock & Stroock & Lavan’s real estate practice; and hedge fund billionaire John Paulson.
And he does business with some of his fellow board members. For example, Corcoran Sunshine represents Silverstein Properties’ Four Seasons Private Residences New York located at 30 Park Place. Construction on the building was suspended during the downturn, but is expected to start this year, according to a Silverstein spokesman.
“You constantly find yourself involved in various civic charitable functions with other people with whom you do business,” Silverstein said. “New Yorkers are a very involved group of people. … Certainly a large component of those [people] involved are in the real estate industry.”
Mack said that although she’s never met a client through her nonprofit work, interacting socially with clients has improved her business relationships. Besides Silverstein Properties, Corcoran Sunshine also represents Rudin Management.
“I think it’s always a great opportunity to get to know people you work with in the business community outside of a predominantly business-oriented atmosphere,” Mack said. “Many of my clients are on the board of NYU, including Larry [Silverstein]. I had a great professional and personal relationship [with them] prior to joining the board, but I do think it … helps solidify those existing relationships [and] exposes you to different sides of them.”
Mack — who is also on the committee for the Stephen D. Hassenfeld Children’s Center, which treats childhood cancers, and the Penn Institute for Urban Research advisory board — said she gets “a sense of great emotional pleasure and satisfaction” from seeing the nonprofit work impact the community.
Silverstein agreed. “The benefits clearly are self-gratification, joy, happiness and a feeling of well-being for those who desperately need the help,” Silverstein said. “I find [philanthropy] extraordinarily satisfying. I have to believe everybody has the same feeling.”
In addition to the high-profile connections that running in New York’s charitable circles bring, charitable donations usually come with a boost in social status, too.
For example, tickets to sought-after black tie galas, invitations to social events, a general increase in visibility and, of course, helping family and friends through connections all come with the territory.
“Sure, there’s a social aspect,” Silverstein said, noting that philanthropy does “feed the ego” at times. “Being on these boards is [also] an extremely stimulating experience, intellectually and otherwise.”
Riguardi — who is on the board for the Regional Plan Association, American Friends of Rabin Medical Center (based in Israel) and his alma mater, Iona College in New Rochelle, N.Y. — said his position often allows him to help friends and family.
“If someone gets a certain type of medical issue, I’ve been able to connect them,” Riguardi said.
“It’s always a pleasure to use one’s position in the industry to feel like you’re helping other people,” he added.
Still, there’s a certain amount of exposure that accompanies making large donations and sitting on boards.
“I think people know that you’re giving and part of the community and people respect that,” Ross said. “It doesn’t hurt you.”
CORRECTION: In the January story “Does it pay to give?” The Real Deal incorrectly stated that Brown Harris Stevens broker Kyle Blackmon was previously a member of the board of Carnegie Hall. In fact, he is a member of Carnegie Hall but has never been on the board.
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