After a $920,000 investment, documents show Epstein appears to have come out ahead of seasoned real estate executives like Howard Lorber, the longtime head of Douglas Elliman whose development firm New Valley invested in the project.\u00a0 One New York City developer who reviewed the financial projections was amazed at the returns Epstein received.\u00a0<\/p>\n
\u201cWe would trip over ourselves to do that [deal],\u201d they said.\u00a0<\/p>\n
Epstein\u2019s source of wealth is still something of a mystery. It is not clear how he amassed the funds needed to buy two private islands, an Upper East Side townhouse, a Palm Beach mansion, a New Mexico ranch and a private jet. But documents on individual development deals like 21 East 26th Street provide a window into Epstein\u2019s investment strategy.\u00a0<\/p>\n
\u201cNo guarantees but should be good\u201d<\/p>\n
Mitchell first pitched the 21 East 26th Street condo project, known as the Whitman, to Epstein in August 2011. By this time, the two were well acquainted.\u00a0<\/p>\n
Epstein had previously used Mitchell for high-profile meetings. Epstein had instructed Mitchell to go to Dubai to meet Sultan Ahmed Bin Sulayem. Epstein hosted a meeting at his Manhattan townhouse with Peter Mandelson, a member of the U.K.\u2019s House of Lords, so Mitchell could pitch his bid on the Silverstone racing track. (Mandelson was recently arrested on suspicion of misconduct in public office.)<\/p>\n
This time, it was Mitchell offering Epstein something. Mitchell\u2019s firm bought out his co-developers and acquired a century-old building used as a fabric importer showroom from the Plumber\u2019s Union for $13 million. He took on $25.7 million in financing, hired architect Jeffrey Cole and planned to convert the historic structure to luxury condos.\u00a0<\/p>\n
Manhattan\u2019s condo market was on an upswing and Mitchell secured key approval from the city\u2019s Landmarks Preservation Commission to build an additional floor. The developer tapped the brokerage then known as Prudential Douglas Elliman to handle sales.\u00a0<\/p>\n
\u201cI think this is attractive because most of the risk of approvals and asbestos removal is behind,\u201d Mitchell emailed Epstein in his initial investment pitch in 2011. \u201cNo guarantees but should be good.\u201d\u00a0<\/p>\n
The project\u2019s capital stack looks like that of a typical condo development: the development entity, AdvanceStar, at the top, set to reap the highest returns for taking on the greatest risk, followed by the equity partners and the debt.\u00a0<\/p>\n
In this case, the project was expected to cost a little over $32.6 million and return almost $55 million after sales. The project was 80 percent financed with a $25.7 million loan. (\u201cThe returns were pretty juiced because they borrowed a lot of money,\u201d the developer told TRD.)<\/p>\n
Mitchell offered Epstein the most lucrative part of the deal. Epstein was able to get a 30 percent stake in AdvanceStar for just $700,000. He could also invest $220,000 as a limited partner.<\/p>\n
Epstein, however, asked Mitchell if he could take the penthouse, instead of any profit.\u00a0<\/p>\n
\u201cTough to do as the deal closed in February,\u201d Mitchell said in an email in 2012. \u201cLorber is an investor and Prudential [Douglas Elliman] is the broker.\u201d\u00a0<\/p>\n
Epstein told Mitchell to send details anyway, noting \u201cI could always ask howard [Lorber], i like him.\u201d<\/p>\n
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A strong market<\/p>\n
When the project launched sales in 2013, New York City\u2019s real estate market had recovered from the doldrums of the 2008 Great Financial Crisis and was hitting a new peak. The average sale price for new development condos reached $3.43 million in the third quarter that year, a record at the time and up over 50 percent from the previous high set in 2008, according to a Corcoran Sunshine report.\u00a0<\/p>\n
The building\u2019s three non-penthouse units sold out shortly after sales launched in 2013, and early projections for the project looked promising. After returning the debt and nearly $5 million in cost overruns, there would be about $24 million to divvy up among the investors. Limited partner investors, including Lorber\u2019s New Valley, put in the remaining $7.4 million and were set to double their money, according to projections from February 2014. (New Valley controlled a 12.86 percent stake in the project, according to an organization chart.)\u00a0<\/p>\n
\u201cThe margin on cost is insanely high. The developer must have really timed the market well,\u201d said David Eyzenberg, president of Eyzenberg and Company, a ground lease & capital advisory firm, of the projected returns.<\/p>\n
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Epstein\u2019s sweetheart deal<\/p>\n
Epstein\u2019s total investment in 21 East 26th Street totaled about $920,000. By Mitchell\u2019s projections, Epstein should double his $220,000 investment as a limited partner investor. Epstein\u2019s stake in the AdvanceStar could bring in as much as $3.7 million, according to Mitchell.\u00a0<\/p>\n
Epstein\u2019s returns were contingent on the penthouse, a 6,000-square-foot duplex with two staircases and 3,000 square feet of outdoor terrace space.\u00a0<\/p>\n
<\/p>\n
Listed for $25 million, it sat on the market for a year until a mystery buyer emerged. In October 2014, Mitchell told Epstein in an email that someone offered $19.8 million for the penthouse. The buyer also agreed to pay $225,000 in transfer taxes.\u00a0<\/p>\n
The buyer, not named in the email, was later revealed to be pop icon Jennifer Lopez.<\/p>\n
\u201cI think we take it Bottom line on your investment\u00a0 You put up 920,000 Out of this you will receive about 1,668,000,\u201d Mitchell wrote to Epstein. \u201cOf which 220,500 was returned in 2013.\u201d<\/p>\n
\u201cNot amazing returns but ok,\u201d Mitchell added.\u00a0<\/p>\n
Epstein\u2019s final return based on those numbers would be close to 80 percent of his initial investment.<\/p>\n
Thanks and Good Luck<\/p>\n
The deal provided an exceptional return and a piece of Manhattan\u2019s then-roaring condo market, but his overall track record as a real estate investor is mixed at best. His success came from a personal connection to the developer via Mitchell, but the two men\u2019s later deals didn\u2019t fare as well.\u00a0<\/p>\n
A $3.4 million investment in a boutique condo on the Upper East Side was a complete wash for Epstein<\/a>. Mitchell and his wife, a Douglas Elliman agent who launched sales at the property, repaid Epstein in increments as small as $2,200 to Epstein over the course, totaling over $600,000, up until April 2019.<\/p>\n Epstein\u2019s vast connections across business and finance gave way to a multitude of investments, including startups, private funds and even a marina. But despite the volume of deals, Epstein doesn\u2019t appear to have been particularly discerning about which ones were winners and losers. In the case of 21 East 26th Street, he didn\u2019t even seem to really care. Less than a week after Mitchell brought it to Epstein\u2019s attention, Epstein appeared to agree to the deal.<\/p>\n \u201cI m closing today on your deal,, with no due diligence. I am merely relying on your representations . thanks and good luck,\u201d Epstein told Mitchell.6675555<\/p>\n \tRead more \t\t\t\t\t\t\t\t\t\t\t\t\t Meet David Mitchell: The down-on-his-luck real estate guy Jeffrey Epstein kept close<\/p>\n \t\t\t<\/a> \t\t\t\t\t\t\t\t\t\t\t\t\t A peek in the NYC condo J. Lo and Chelsea Clinton call home<\/p>\n
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