Daily Archives: December 22, 2008

More sad news – Christmas on Mustique may be cancelled

The invitations were out, the private jet arranged, and now friends of Corina Noel and her hubby can’t reach them to confirm that the party’s still on. They’re worried, naturally, that something may have happened.

FRIENDS of Andrés Piedrahita and Corina Noel were exchanging e-mails last week, trying to ascertain whether their Christmas trip to Mustique was going ahead as planned.

It was supposed to be the usual affair; meet on Boxing Day in Barbados, then fly to the exclusive island by private jet. There they would eat their turkey in the sunshine at Yemanja, the Noel family holiday home, and enjoy views that are reputed to be the best on the island. Or so says fashion magnate Tommy Hilfiger, who lives next door.

Although the guest list had yet to be finalised, the circle usually included a handful of Europe’s financial elite, such as Alberto Cortina, the billionaire Spanish banker, and Lawrence Stroll, the former owner of Asprey.

Other acquaintances include Arki Busson, the London-based hedge-fund impresario and fiancé of actress Uma Thurman, as well as the younger generation of the BotÍn family, the banking dynasty that runs Santander – owner of Abbey and Alliance & Leicester.

In the past few days, however, Andrés and Corina have dropped off the social radar, refusing to answer calls to their Belgravia townhouse or their home in Madrid. Not all the calls were friendly.

As the European head of the investment firm Fairfield Greenwich, Piedrahita was one of the most prolific salesmen for Bernard Madoff. Fairfield, run by Corina’s father Walter Noel, has emerged as Madoff’s biggest single victim and may lose more than $7.5 billion (£5 billion). Many of its clients were lured in through a network of the family’s connections.

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The best use for $25 oil I can think of

2007-11-04chavezBankrupting Chavez and his Venezuelan collectivist society. Although news that he’s expropriating a shopping mall and converting it into some kind of people’s hospital will no doubt further endear him to the Joseph Kennedys of this country. It’s estimated that the strong man needs oil at $85 a barrel to keep his mobs quiet. Drop baby, drop.

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Uh oh This doesn’t look good for Peter Madoff

Can you spell “fraudulent conveyance”?  

Transferred house to wife two years ago and she promptly filed for Florida’s “homestead exemption” which protects her from creditors. Could it be that Peter knew what was going on before last week?

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The Madoffs go shopping

Standing tall in the face of adversity

Standing tall in the face of adversity

He’s making a list
And checking it twice;
Gonna find out Who’s naughty and nice
Santa Claus is coming to town
He sees you when you’re sleeping
He knows when you’re awake
He knows if you’ve been bad or good
So be good for goodness sake!

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For sale: 57 Tomac Lane?

Turns out that Andrew Madoff, Bernie’s son, was served with divorce papers the day Dad was arrested. This sad news is mitigated, perhaps, by the suspicion that the couple may yet get back together – after the dust settles:

One somewhat more amusing revelation over the weekend is that Bernie’s son, Andrew, was served with divorce papers by his wife Deborah on the very same day Bernie was arrested, especially since the Post has photos of the divorcing coupleon a “holiday shopping spree” in Soho yesterday. A lawyer for Andrew Madoff says the split is “very amicable,” but we’re guessing the situation won’t be described as such when angry investors suing the Madoffs hear how Andrew turned over all his assets to his soon-to-be ex-wife as as part of a divorce settlement.

Will the pair’s weekend house in Old greenwich be put up for sale as the result of this unfortunate domestic situation? Stay tuned – it’s probably worth a mere $2.5 million or so, but Mrs. madoff may need every penny she can get, poor dear.

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Zounds! Another price cut!

187 Stanwich Road was listed for $2,750,000 October 21, 2008. I thought this might be a bit aggressive for a house that had been purchased for $2,615,000 just 14 months before (with no improvements made during that brief ownership) but what the heck, in a strong market like this one, why not shoot the moon? Turns out, there is a reason why not to try this: no one will buy the place. On December 17th the seller reduced his price a full ten thousand dollars and today he reduced it again, gasp!, another ten. I admire the thinking that says there’s no point dawdling between price cuts – cut and cut again, quickly, until you find a buyer – but this house is still priced $115,000 more than it sold for in August ’07, while I think the process is working exactly the other way.

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If I read this right

Money market funds are going to start producing a negative yield, after fees. My investment advice for today: buy stock in mattress companies.

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A shoe drops in Greenwich

The first class action suit has been filed against Walter Noel’s Fairfield Greenwich Group.  A reader suggests that when a lis pendens is filed  against the Round Hill cottage, we’ll know Noel’s creditors are serious. Has one been filed? I don’t know but I’ll check  at Town Hall tomorrow and see. In the meantime, friends of the Noels may want to begin collecting old cardboard refrigerator boxes, just in case they need emergency shelter.

Update: here’s some shocking speculation: Noel must have stumbled onto Madoff’s scamming ways years ago.

Says our tipster: Fairfield Greenwich “Stonewalled like you couldn’t believe.” Judging from everything that’s been made public, now, however, we can believe it. He’s also confident that there are memos inside Fairfield Greenwich that will prove a fatal dagger to them, once uncovered by the FBI.

So why were private equity groups interested in this particular firm? In addition to their fantastic results, Fairfield Greenwich had outstanding client loyalty. Its own investors weren’t likely to shift their money away from them (a theme we’ve seen with other Madoff clients) so that level of stickiness was extremely attractive. At the time, Fairfield Greenwich had 94% of its $6+ billion AUM with Bernie Madoff. Although that was troublesome to the buyers, it wasn’t necessarily a dealbreaker, as long as cash could be shifted away from Madoff without alienating the clients. In all likelihood, that would’ve been impossible.

Another question for Fairfield Greenwich: Seeing as they had access to this amazing money tree (Madoff), why did they try on multiple occasions to sell out?

Bottom line: Given the questions raised during multiple due diligence examinations, at least dating back to 2004, there’s no way Fairfield Greenwhich, when presented with direct concerns about their investments, didn’t know of something highly suspect going on with their star work horse Bernie Madoff.

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How does this make sense?

601-lakeWe’ve discussed this spec house at 601 Lake Avenue before – land purchased for $2.350 million in June, 2007, huge brick Georgian erected and put on for sale this spring at $7 million plus, builder’s own house on Parsonage hit with a $2 million lien, etc. Today it was reported as rented for $20,000 per month. By my very rough math, estimating a 30 year mortgage at 7.5% (I suspect that a construction loan is much shorter than that and the interest rate much higher), the rent would cover around a $3 million loan. This house was not built for $650,000, so someone is eating a very painful lesson in changing marketplace conditions. I suppose there’s a personal guarantee involved here so walking away is not an option and $20,000 must be better than nothing, but I don’t see this as a viable option for most of the unsold spec houses in town.

What might be a smart idea for a vulture buyer is to start approaching some of these builders’ lenders and seeing how much of the original loan they’re willing to eat. If you can release a builder from his guarantee, I’ll bet there are a number of houses you could buy for a$1. Plus a large payment to the bank, naturally.

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Maybe some people can’t afford to own a house

Mortgage defaults continue to rise even after loan modification.

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Well gosh darn it!

Love me, love my cottage

Love me, love my cottage

Accordning to Variety, Ira Rennert, junk bond king and builder of the 100,000 sf  cottage in Southhampton, depicted above, lost an “undisclosed amount” of his $500 milion fortune with Bernie Madoff. I hope it wasn’t too large a portion so that he can hang on to his house and provide shelter to Monica and her brood. They’re used to cottages, you see, and moving from their own to someplace grander would shock their egalitarian souls. This would be much better.

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Yet it still sold

I stumbled across an old promotional brochure for one of my firm’s listings this morning and was impressed by the effort the copywriter put into trying to describe a plain vanilla builders “colonial” as a mansion fit for a Wall Street king. For instance, “a lovely fire-lit living room with a coffered ceiling embellished by hand-painted moldings  and a beautifully proportioned dining room set a tone of elegance for formal entertaining.” You don’t often see many hand – painted moldings these days; most are slathered with sprayed-on lead paint in Chinese factories and shipped directly to our children’s nurseries, so this is quite a selling point.

Even more appealing, however, is the promise that “the owners can languish in their private space, consisting of a stately bedroom with high ceiling ….” The thought of those poor owners languishing in their bedroom while (the copywriter would have used “whilst”) waiting for their house to sell must have struck a sympathetic chord in someone because, as noted, the place eventually sold. I assume that when it did, the owners stopped with their languishing already and moved out with the furniture.

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A world where mansions are cottages and Greenwich Academy is a public school

Thanks to reader CEA, we have this wonderful link to a story on the family that keeps on giving, the Noels:

FAIRFIELD Greenwich Group founder Walter Noel lost $7.5 billion with alleged Ponzi scheme scammer Bernard Madoff [actually, his investors lost that money – Walt was far too smart to put his own money in this scam – ed], but his wife oddly disputes that they were ever rich. “You write [that] our five daughters were brought up in the lap of luxury in their Greenwich estate. We don’t live in an estate. We live in a normal house that was a cottage on two acres,” Monica Noel, 66, defiantly told The Post’s Chuck Bennett from her swanky Park Avenue pad. Apparently, Monica forgot about the 2002 spread in Vanity Fair on that Greenwich “cottage” and the 2005 Town and Country feature on the family’s opulent tropical retreat on Mustique. “Our daughters went to public school,” Monica declared. One of those daughters, Alix Noel Toub, 41, also seems to have no memory of the family’s shameless self-promotion. “We are not press-hungry people,” she said when asked to comment on their financial losses.

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King Merritt blues

The listing for 20 South Stonehedge Driveexpired today, apparently the victim of market indifference. This is a 50’s cape on a full acre that was last purchased for $980,000 in December 2003. The buyers put it back on the market in May, 2007 for $1.375 million and dropped that down, eventually, to $1,185,000. If it comes back on the market in the new year (and it’s been vacant for a long time so I’d think it would), my guess is that, unless we see a marked improvement in our market, it will go for less than the $980 paid four years ago.

There was some hope that, when Brunswick opened its new school on King Street a few years ago, we’d see a strengthening of the western Greenwich market as families moved there to save time. Whether because no one cares whether their nanny saves time or there is  just a general reluctance to pull up stakes and move to the hinterlands, that phenomenon hasn’t occurred and I doubt it will soon.

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Step away from the car and put your hands in the air

California’s Supreme Court has ruled that a would-be rescuer is liable for any injuries caused by that attempt. What happens in California, alas, does not stay in California so my advice to you, should you witness an accident, is to emulate Dione Warwick and “Walk on by”. Merry Christmas.

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Must this family lose their house?

The town values Walter Noel’s manse at 175 Round Hill Road at $6 million which, judging from the tax card and this picture of the spread seems a bit conservative, even in today’s market. Eighteen rooms within 8,590 sf, 8 bedrooms, 9 1/2 baths, a pool and, naturally, stone walls around the perimeter of its 2.2 acres. When Fairfield Greenwich Group collapses sometime in the next few weeks, will the money that bought this place go with it? Probably not.

Assuming that Noel had good legal advice, his personal liability for the debts of his corporation should be nil. It’s very difficult to “pierce the corporate veil” and as long as all the corporate niceties were attended to, Nole’s villa in Mustique, his New York apartment, his Hampton’s weekend retreat and this cottage on Round Hill should all be safely out of reach from greedy, grasping creditors.

That’s if he can avoid being labeled a willing participant in Madoff’s fraud. If he plays the “I’m just an old dotard who relied on the word of my bestest friend” card right, he’ll escape Scot-free. There are a few clouds on his horizon, of course, not the least of which are the reports circulating that when he tried to unload a major portion of his Sentry fund to other investors he couldn’t and wouldn’t let them examine Madoff’s books and records. A wilful blindness to an ongoing fraud, especially when one is being enriched by that fraud, may be enough to bring liability crashing down on Walt’s head.

But would he want to stay on Round Hill? Wouldn’t it be uncomfortable to wander across the street to the Round Hill Club for a bit of golf where his impoverished former friends and investors now work as grounds keepers? For some people, sure; but for a man who just last Saturday, two days after he’d wiped out his pal’s fortunes, showed up at the Club’s annual Christmas party and brazened it out, probably not – “What? What’s the matter? Something wrong with your canape?” Don’t forget, Harvard obviously didn’t teach the man much but it did inculcate that fine sense of arrogance that permits him to look down on the “little people” (and without their money, his friends have shrunk to mere Lilliputians) and shrug off their envy and anger. I bet he stays.

But it will be fun to watch developments.

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Inventory clearance

In addition to 54 Highview Avenue, discussed below, another long time denizen of our multiple listing service, 18 Sandy Lane has gone to contract. I liked this house, off of Round Hill Road on four acres but with some exposure to Merritt Parkway noise, but I never thought it was worth its original asking price of $2.995 million. It eventually dropped, over the course of 18 months, to $1.825, which seemed closer to its real value. What did it actually sell for? I’ll let you know as soon as that is reported.

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Old Greenwich woes?

I thought that 54 Highview Avenue was fairly priced back in August, 2007  when it was first listed at $1.695. The owners had paid $975 for it in 2001 and completely renovated it so that, while it remained an unprepossessing builder’s special on the outside inside it was a comfortable, well laid out house, all up to date.

But the market was beginning its decline then and it didn’t sell, even as its price dropped and dropped again until it finally reached $1.295 this November. Today it was reported as under contract but “sold direct” meaning that the owners found a friend or neighbor to buy it, presumably for less than its last asking price. So it’s selling for at best 76% of its first asking price and probably less. Considering the improvements put into it in the past years, I wouldn’t be surprised if they lost money on this deal.

I make fun of a lot of houses that sell for far less than their first asking price and point out how ridiculous that price was. That isn’t the case in this instance, so we’re seeing a real market decline, rather than just a overly-optimistic seller finally accepting reality.

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More trouble for Greenwich’s Walter Noel

Nothing we haven’t pointed out here before, but burned investors in Noel’s Fairfield Greenwich Group’s Sentry Fund are beginning to ask some hard questions about what, exactly, Noel did to earn his fees. Nothing at all, it turns out.

In a “due diligence questionnaire” made available to potential investors in Sentry, Fairfield promised that it calculated the value of Sentry’s assets weekly and monthly. It also said Citco Fund Services, an independent hedge fund administrator based in the Netherlands, separately calculated the value of Sentry’s assets each month.

Further, Fairfield promised that both it and Citco double-checked the monthly statements from Mr. Madoff’s firm it received against records of the assets held in the fund. To prevent unauthorized stock trades or the unauthorized removal of cash from Sentry’s accounts, “the movement of cash among the Fund’s accounts requires two signatures,” Sentry said.

Mr. Mulligan did not respond to questions about whether Mr. Madoff could have moved money or securities out of Fairfield Sentry’s accounts without its approval. 

But what was bad for its investors certainly worked out well for the Noel clan.

According to the document, Fairfield generated $250 million in revenue and $200 million in profit for the year that ended Sep. 30, 2007. Nearly 65 percent of that money came from fees on Sentry, and nearly all the profits were distributed among the firm’s 21 partners. Fairfield’s employees were also lavishly compensated, with at least four receiving more than $5 million in pay.

It was, of course, all about Bernie Madoff, but who was he? Don’t ask, don’t tell:

In early 2008, several private equity and investment firms were approached by Fairfield about purchasing a share of the company. A partner of one that considered buying a stake that he estimated was between one-third and one-half of Fairfield — the firm was valuing itself somewhere between $1 billion and $1.5 billion — said that he was scared off about 20 minutes into his initial meeting with a team of Fairfield managers.

“They were just incredibly squishy and vague even during the warm-up,” said the prospective buyer, who spoke on condition of anonymity because of a non-disclosure agreement with Fairfield. “I asked them to tell me about the manager of the fund Sentry feeds into, and I was told, ‘We don’t really talk about him.’ ”

But while investors eat a thin gruel this Christmas they will no doubt be partially mollified by the thought of the Noels relaxing on Mustique, or elsewhere:

Like Mr. Madoff’s firm, Fairfield was at least in part a family business. Four of Mr. Noel’s sons-in-law worked at Fairfield. But unlike Mr. Madoff, Fairfield’s partners, led by Mr. Noel, were not shy about spending their money and taking a high profile in wealthy New York society circles.

“The last few years, they really made a play to be a part of that New York-Southampton social axis,” David Patrick Columbia, the editor of NewYorkSocialDiary.com, said of Mr. Noel and his family. “It happened so fast that you really noticed them.”

Mr. Noel, whose primary residence and office remain in Greenwich, has at least five luxury homes. Along with his Greenwich house, whose value has been estimated at $4.2 million, he has homes in Southampton and Palm Beach. And since 2000, the Noels have also maintained a pied-à-terre at 812 Park Avenue. The combined value of those homes is more than $20 million.

Update: the New York Social Diary mentioned in the Time’s article has lots of good Noel/Madoff stuff including that whistle blower’s futile attempt to interest the SEC in the Madoff fraud (his letter names all the players who, three years later, will go down in flames, including (especially) Fairfield Greenwich, and some photos of the Noels with their friends, including Greenwich’s own, John J. McCloy and his interior designer wife. Were they burned by their pal or did they just have the misfortune to share a photo frame with the blundering financial moke? Who knows – if you see a certain house n Stanwich Road go up for sale, perhaps that will be a clue.

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Antares and UST Building

“For rent: former hedge fund space”

After driving Manhattan office rents to nearly $200 a square foot, hedge funds are struggling with stingier lenders, investor redemptions and, in many cases, poor returns. As a result, in East Coast hedge fund capitals New York City and Greenwich, Conn., several high-profile hedge funds are scrambling to sublet office space.

“There is certainly a lack of demand from hedge funds,” said Evan Margolin, a New York managing director at Studley Inc., a tenant-representation firm. “It’s all redemption-driven. Even funds doing well are facing redemptions, and funds not doing well are facing larger redemptions.”

In Manhattan, hedge funds Duff Capital Advisors, RiverPark Capital, SAB Capital and Sansar Capital Management are among those with Midtown space to sublet, real-estate brokers say. Twenty-eight miles northeast in Greenwich, Duff Capital and quantitative fund firm AQR Capital Management have spare square footage.

The situation is a far cry from just a year ago when firms were willing to pay millions to outfit office space with backup power systems, in-house gyms and large pantries for catered lunches. A handful of skyscrapers near the southeast corner of Central Park commanded the highest rents, in some cases near $200 a square foot.

It should be an interesting year.

(hat tip, Cos Cobber)

“Over the last few years ostentatiousness was in and having space in the top of towers with phenomenal Central Park views was highly coveted,” said Ben Friedland, a senior vice president at CB Richard Ellis Group Inc. “Now as a money manager in the world we’re in you have to weigh what message that gives off.”

Posh Sublets

The moves to downsize follow unprecedented pain in the hedge-fund industry.

….

Duff Capital, founded by Phil Duff, is trying to sublet about 11,000 square feet on Park Avenue in Manhattan, as well as 15,000 square feet in the former Greenwich headquarters of tobacco company UST Inc. Duff Capital is reducing space and “looking at various options,” a firm spokeswoman said. She wouldn’t give a reason behind the moves.

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