Why everybody who’s anybody in Manhattan real estate relies on Jon Mechanic
Jonathan Mechanic was gazing at the sweeping view from the 22nd floor of One New York Plaza, a skyscraper at the southern tip of Manhattan. In the twilight down below, a frenetic New York scene played out, as boats trundled every which way across the harbour and helicopters zipped to and from landing pads on the East River. Mechanic was focused on the buildings. To New York’s uber real estate lawyer, each was its own saga, with reversals of fortunes, convoluted deals and colourful characters. Lots of heroes, not many villains. “I can tell you the history of the buildings: who sold it to who, who financed it, when it traded, who the major tenant was, when they left, why they left, who the new guy coming in was,” he said.
Then he began to do so. “Seventeen State Street?” Mechanic said, glancing at the cylindrical tower just outside his window. “It’s owned by RFR Realty, but originally it was built by Mel and Bob Kaufman, which is Sage Realty, which used to be partners with Howard Ronson, and they got into a big fight. Howard partnered with the Kaufmans on 30 Broad after coming to New York City, thinking he’d learn the local business. It got a little feisty, and we represented Howard when they got into a fight. And they ended up separating, and Howard ended up with 30 Broad Street . . . ”
That brought Mechanic three decades forward, to a building on Madison Avenue where he recently represented Bob Kaufman’s grandson, a developer “who got recommended to me by somebody. And now we’ve become friends. I like him a lot. He’s a really good guy . . . ” Mechanic seems to like everyone. “He knew his uncle was crazy, and his grandfather was OK, and his grandmother was great.”
And that brought him to WeWork, which was on the other side of the Madison Avenue deal. “I ended up intervening because the chairman of WeWork at that point in time was Sandeep Mathrani who I know,” Mechanic explained. “So I would deal with him. He would call me. I mean, he had outside lawyers but he would call me.”
On and on it went, buildings and relationships laced throughout the city. All of them with Mechanic in the mix. It was the accumulation of a 40-year career as what Mechanic humbly calls a “dirt lawyer”. The bulk of that dirt lawyering has been done in the employ of Fried, Frank, Harris, Shriver & Jacobson, the New York law firm where Mechanic chairs a real estate practice that has grown from a handful of lawyers when he joined in the 1970s to more than a hundred today. “They just have a murderers’ row of lawyers over there,” one real estate executive observed, invoking the Yankees of Babe Ruth and Lou Gehrig to try to convey the firm’s talent in legal specialities such as land use and zoning.
“I watched him build his empire and, by the way, it is an empire,” said Mary Ann Tighe, chief executive of another real estate firm CBRE’s New York office. She worked with Mechanic on the deal to bring publisher Condé Nast to 4 Times Square in the late 1990s in what was regarded as a turning point for a once-seedy neighbourhood. They reunited in 2014, when Condé Nast embarked on another landmark move, this time to a rebuilt One World Trade Center. One reason her clients hire Fried Frank, said Tighe, using the firm’s shorthand, is so they do not have to face it across the negotiating table. Then there are Mechanic’s connections and the backdoors he can open. “He knows who holds the debt and who the silent partner is,” she explained. “He’ll say: ‘Let me call them and see what the issue is.’ Jon can do that everywhere.”
Developers will always be the celebrities of New York City real estate, the gods who literally shape the city skyline or go broke trying. Lawyers, not so much. The most renowned among them was probably the late Samuel “Sandy” Lindenbaum, the wizard who was able to convince city officials that less public space was somehow more public space when seeking approval for the iconic Apple store on Fifth Avenue.
Mechanic, though, now ranks among the most influential figures of the property world you’ve probably never heard of, a fixer who has made himself into an institution. His career has paralleled a transformation of the real estate industry — from a buccaneering trade once dominated by a group of New York families to one that has grown larger and more sophisticated, with increasing flows of foreign and institutional money, complex financial engineering and more government regulation. Leases that once ran to a few pages can now run to more than a hundred.
“You couldn’t do real estate in New York without running into Jon Mechanic,” said Jonathan Gray, president of the Blackstone Group, the alternative asset manager that is one of the property industry’s biggest players. “He has just built up this reservoir of goodwill that is very special and unique.” One top architect called Mechanic “the most New York of New York characters. He’s Zelig-like.” This person described his speciality this way: “If two giant egos have to be brought together in a room to get a deal done, Jon Mechanic is the guy you call.” Asked whether Mechanic was indispensable or merely ubiquitous, the architect at last concluded: “His ubiquity makes him indispensable.”
Mechanic also has a talent for people, often pairing developers with future partners and investors. Marian Klein, president of the family-owned Park Tower Group, a developer with properties in Manhattan and Brooklyn, calls him “a shadchan”, Yiddish for matchmaker. “Jon’s secret is that everyone loves Jon and Jon loves everyone,” Klein said.
Nearly everyone. Naysayers grumble that Mechanic likes to ramp up problems in a negotiation so that he can play the hero when he resolves them. Other real estate lawyers do exceptional work without the fanfare or, as one put it, “the shtick”.
“Is he the biggest guy? Yes,” one property executive said of Mechanic. “Is he the only guy? No.” Some roll their eyes at the relentless schmoozing of a man who has been known to conduct multiple business lunches in the same restaurant on the same day. A glad-handing Mechanic is ever-present at New York City events, and he and his wife, Wendy, are famously available at all hours to help their people find a surgeon or a reservation or fill a table at a charity gala. (Depending on their degree of jadedness, New Yorkers refer to this as either “showing up” or “relationship management”.)
Nobody, though, disputes the extraordinary centrality that Mechanic has achieved in the New York real estate world, where he seems to have a hand in every deal of consequence and a relationship with any major developer, investor or city potentate. (That includes Donald Trump, whose younger daughter, Tiffany, dated Mechanic’s son, Ross. Good luck getting anything more than a polite smile out of Mechanic on that subject. “Donald was a character back then, too,” Mechanic said, recalling his work on a lease for Gucci at Trump Tower years ago. “But there was none of this craziness.”) Each December, the dirt lawyer presides at an annual Fried Frank holiday party that brings together everyone and anyone in the property industry. (Some refer to it as “Jon’s Bar Mitzvah”.) After a Covid-19 hiatus, the party’s return in 2021 was a welcome sign of the city’s resumption.
Scotch and good cheer flowed that evening as friends and rivals reunited in the marbled grandeur of Cipriani on 42nd Street. Perhaps they were in need of distraction? Things have only got worse. What then looked like a painful but temporary crisis for the city’s property barons now appears more severe. For some, terminal. The restructurings, workouts, bankruptcies and bust-ups between partners are already under way, with more to come. Many will involve properties and parties that Mechanic has dealt with time and again. Trust will be strained. Difficult calls will have to be made. Creative solutions will have to be found. Said one property executive: “This is the time for the lawyers.”
Mechanic, now 71, has dark eyes that twinkle and a mouth bracketed by a bushy, salt-and-pepper moustache. His face is strung in the near-perpetual smile of someone who finds joy in their work and cannot quite fathom how others persist without it. He has a habit of taking a companion by the elbow or shoulder, as if literally pulling them into his world. The only hint of his age is a tight gait that suggests years spent on tennis courts and golf courses are catching up to his hips.
His father, Mayer Mechanic, was a dentist in Ho-Ho-Kus, New Jersey who was known as “the Mayer of Ho-Ho-Kus” for his extreme sociability. When Mechanic enthuses about his work serving generations of New York real estate families, one can easily imagine his father boasting: “I took care of the father and the son. Oh, and the cousin, too!”
Mechanic cannot resist showing pictures. He has some 7,000, which he displays in rotation in electronic frames. An old-school frame on his desk is reserved for Mechanic’s late friend and longtime law partner, Joshua Mermelstein, who died in 2021. One image shows him and Mechanic at a wedding, laughing riotously; in another, the two appear to be in deep concentration, as if studying the map at Yalta. “I have one on the left side of my desk and one on the right side of my desk,” Mechanic says. “He’s not here. But in my mind, and my heart, he’s here. He helped build this.”
There is another, less sentimental side to Mechanic that comes from his late mother, Bernadine, a diminutive woman who was the unlikely proprietor of an auto parts distributor in Ho-Ho-Kus. The story Mechanic tells is that one day a rival distributor owned by the Ford Motor Company opened a warehouse in the area. It was not personal, the manager tried to reassure her, it was just business. It was about market penetration. To which Bernadine replied: “All I know is whenever there’s penetration, somebody’s getting fucked. And it won’t be me.”
Mechanic did not grow up dreaming of real estate law. In 1974 he attended law school at New York University and then clerked for a federal judge in Manhattan. He joined Fried Frank in 1978 aiming for a career as a litigator. But then a senior lawyer, Hal Rosen, took him aside. Mechanic could be one of dozens in the litigation department, Rosen explained, or he could join him in the real estate group and change the city’s skyline. Real estate law was not considered terribly prestigious. The city’s white-shoe firms had long ceded it to the Fried Franks of the world, outfits usually founded by Jewish lawyers. Even within Fried it was a small department.
Mechanic’s true apprenticeship began in 1981, when Rosen left to work for British developer Howard Ronson and Mechanic went with him. He was on the other side of the table, seeing the world through a builder’s eyes. And not just any builder. Ronson had come to New York in 1979 with dreams of conquest and, for a decade, was among the city’s most prolific developers.
Ronson was enterprising and exacting. He would spend weekends with a Dicta-phone, inspecting his building sites and listing all the flaws. “Stuff would get crossed off and stuff would get added until he was happy,” said Mechanic, who got to handle everything from construction loans to leasing negotiations. “It was lawyering and businessing,” he said.
There were lessons not taught in law school, like how to manipulate an auction. Ronson did so in 1983 when the US Mint put up for sale a building in lower Manhattan. Unbeknown to other participants, he had arranged for one of his construction executives, Jack Scaldini, to join the proceedings. “So there was Howard and a couple other bidders going back and forth, paddles and everything,” Mechanic recalled. “And finally, Howard said: ‘I’m out. Numbers are getting crazy. That’s it.’ And then Jack Scaldini raised his paddle for the first time and said: ‘I’m good for another whatever.’ And the other guy who saw Howard was out, said: ‘Well, if he’s out, I’m out.’ Then it turns out that Jack was really Howard’s guy and ended up as the winning bidder.”
In 1987, Mechanic, now married, rejoined Fried Frank and a real estate department that was bustling with work. “I learnt an unbelievable amount,” he said, reflecting on his time with Ronson. “The way I approached laws and deals, it was just different because I spent five years seeing it all through a developer’s eyes.”
The ultimate lesson for Mechanic was the importance of getting the deal done. That is, to identify those elements that are vital to the parties and shove aside the rest. If it sounds simple in theory, it is complicated in a business where there are seemingly endless opportunities to not do deals. Disputes with city authorities, lenders, partners, potential tenants and others are the obvious ones. But time itself can be an antagonist. The longer it takes to finalise a deal, the longer the wait to begin generating revenue to pay back lenders. “It’s a thicket to get things done,” Gray, the Blackstone executive, said, bemoaning the growing complexity of the business.
So New York’s foremost real estate lawyer is less a tyrannosaurus, given to legally eviscerating the other side, than a rabbi adept at settling baroque disputes and finding common ground. “All of us in real estate share a tendency to over-negotiate, and Jon knows when to pull a client back from the edge,” said Rob Speyer, the chief executive of Tishman Speyer, owner of Rockefeller Center and one of the world’s largest developers. “He’s always got his eye on closing the deal.”
Speyer retained Mechanic 26 years ago, when handling his first major lease for the family-owned firm — in that case, involving Radio City Music Hall — and has worked with him ever since. “It’s not just the idea of the compromise, it’s knowing exactly when to put it on the table,” he explained, calling Mechanic “a magician in the room”.
To Gray, Mechanic’s “superpower” is his credibility among the industry’s various tribes, especially when things turn nasty. “Jon can be working for you or me — whoever — and everybody trusts him,” he said, observing: “We always think of real estate as this down and dirty, aggressive business.” (Which it is). “Ultimately, somebody who people like and trust becomes that much more effective.”
Mechanic put it this way: “I think I’m trying to get to a place that works for everybody. Nobody’s a hero for being so tough that a deal doesn’t get done.”
Often in New York real estate, feuding parties are family. The atmosphere can be poisonous beyond the logic of dollars and cents. In one recent case, Mechanic recalled urging warring siblings to strike a deal after a year of fighting with this piece of shtetl wisdom: “If I resolve this, you never have to talk to each other again. That’s got to be a win!” They eventually settled.
As a new group of office towers regenerates Manhattan’s skyline, Fried Frank has played its lawyerly part down below. It helped SL Green negotiate concessions from the Metropolitan Transportation Authority (MTA) that allowed it to build One Vanderbilt, one of the city’s newest and most expensive towers. It represented JPMorgan on its plan to dismantle 270 Park Avenue and rebuild a new 2.5 million square-foot headquarters there. The deal required the purchase of air rights from nearby Grand Central Station. (Partner David Karnovksy ran point, Mechanic notes). Just down the street, the firm is representing Citadel as it builds a new 1.7 million square-foot tower at 350 Park Avenue.
On the west side, Mechanic’s legal fingerprints are all over Hudson Yards, the largest development in North America and a veritable city within a city. The underlying legal transactions upend the quaint idea that a developer builds a building and tenants move in. They also show the incestuousness of the industry.
First, Fried Frank represented The Related Companies in negotiations with the MTA for a series of ground leases that would allow it to build multiple towers atop an old rail yard. Then Mechanic switched sides and represented the luxury retailer Coach, which was the first tenant to commit to the project’s first office tower, 10 Hudson Yards.
The deal was structured so that Coach would own half of what was then a speculative building. Its commitment helped Related attract other tenants and investors, then a construction loan — the latter of which is a twisty tale that involves four banks, private equity firm Starwood and an unusual capital structure in which the debt went in ahead of the equity.
Fried Frank ended up representing the other tenants at 10 Hudson Yards in their leasing negotiations with Related. Later, when Coach decided it wanted to capture some of the value in the new building, it sold its piece to Related and leased it back — represented by Mechanic.
Surely at some point Mechanic must have been tempted to become a developer himself? That is, to leave his own mark on the skyline. There are plenty of frustrated lawyers who put their training to profitable use as developers. Chief among them is Stephen Ross, Related’s billionaire founder. Mechanic admires developers: “You have to overcome so many things to get these things done — and there’s all this shit that happens that you didn’t expect. There’s a hurricane. There’s Covid.” But he seems to know them well enough to realise that he is not one of them. “Sometimes you have to know what your strengths are,” Mechanic said. “I’m really good at what I do. And I enjoy all the relationships that I have. So why would I give that up?”
On a recent evening “Mee-ster Mechanic” was warmly greeted by the staff at Casa Cipriani, the private club that occupies a restored beaux arts ferry terminal just across the street from Fried Frank’s lower Manhattan offices. A maître d’ led him to a prime table in a dining room cluttered with wealth.
Mechanic slipped into storytelling mode. There was a familiar arc to many of his tales: a big deal was at risk of unwinding amid a bruising negotiation. Mechanic intervened to save the day, and warring parties emerged as life-long friends. As he chatted, the son of “the Mayer of Ho-Ho-Kus’’ could not help but glance at the door to see who would pass through next. Eventually, a man with flowing white hair, a deep tan and an unbuttoned linen shirt sauntered over.
“This guy’s the greatest!” he said, gripping Mechanic’s arm.
“No, this guy’s the greatest!”
The big real estate news that day was that Barry Gosin, the chief executive of Newmark, had poached a team of heavy hitters from rival brokerage Cushman & Wakefield. Later, as Mechanic passed through the bar on the way to the door, a group of up-and-comers trailed after him, eager for his take. They sounded like characters from a David Mamet play, lost in the eternal hustle.
“It’s because Barry wanted it,” one of the men said of the poaching.
“Barry wants everything,” another replied.
They looked to Mechanic for enlightenment. He smiled and then disappointed them with a consigliere’s discretion.
The subtext of the big news was this: why would anyone pay for top real estate talent when the sky is falling?
Overnight, the pandemic made remote working mainstream. Now even diehard landlords have come to acknowledge that the genie will not be returned to the bottle. Even on “busy” weekdays, many New York City office buildings are half empty. When leases expire, most tenants are renewing them for less space — or at deep discounts. One-third of the city’s office space could be wiped out without any consequence to the market, one developer recently told me.
Owners have been understandably slow to accept the reality that their buildings — some of which may have been in the family for generations — are no longer worth what they thought they were and may not have an obvious future. Simultaneously, they have had to cope with sharply rising interest rates after a long and inebriating period of cheap money. In some cases, developers with loans coming due are simply cutting their losses by “giving the keys back to the bank”, as they say.
All this has prompted much hand-wringing about New York City’s future. Fewer commuters coming into midtown Manhattan offices each day means less money to sustain local businesses. A real estate downturn will eventually hit the city’s finances, forcing it to cut back on services, making the city dirtier and more dangerous, and so prompting more people to leave. On top of the usual burdens, the city is also now bearing the cost of an epic influx of migrants — many from Venezuela. Some of the rich have already left to low-tax states like Florida and Texas. “New York is at a crossroads,” Dan Doctoroff, the man who guided the city’s economic development under former mayor Michael Bloomberg, told the planning commission at a recent meeting. “In a world where people can increasingly work anywhere, we have to answer the question: why New York?” To which some New Yorkers shrug: New York is always at a crossroads.
Mechanic’s baptismal real estate crisis came in the early 1990s, when America’s savings and loan industry collapsed. It was a mess that took years and costly government intervention to work out. His old boss, Ronson, nearly went broke and ended up leaving the city. “The world turned upside down, and Howard got caught. A lot of the portfolio moved across the table to the creditors,” Mechanic said.
He remembered his anxiety during a meeting with his old mucker Mermelstein in the Morgan Stanley cafeteria in the depths of the crisis. “We were looking at each other like the world had just stopped. We were thinking, ‘OK. You and I have been doing this for a long time now, but where are we going here?’”
Eventually, the real estate business resumed and so did the city. Its ability to withstand that crisis and then a succession of others — 9/11, the 2008 financial crisis, Covid — has instilled a faith in Mechanic’s generation that New York City bounces back, always, even if no one is quite sure how or what it will look like on the other side. In any case, there will always be work for lawyers. “‘Whether it’s up or down, the worst is sideways because no one is doing anything,” Mechanic observed. “But it’s more fun when you’re creating something than when you’re trying to repair the damage.”
At the moment, the big issue for the industry is digesting an enormous loss of value, particularly for older buildings lacking the most modern amenities. There haven’t been many deals, because the market has been frozen — but there have been indications of the damage. Blackstone recently sold the office tower at 1330 Avenue of the Americas for one-third less than the price it commanded in 2006. The sudden loss of value means buildings are now buckling under debts that looked reasonable just a few years ago. A recent study by broker JLL found that 73 New York City buildings were worth less than the value of their loan balances.
“It hits everybody,” Mechanic said of the losses. In some cases, he predicted, owners would lose their property. In others, they would try to salvage something by recruiting new investors. The key, he went on, is who has capital and who has a plan for the asset. “You have to have a vision. You can’t just say, ‘Oh, I’m going to buy it cheap.’ What are you going to do with it?”
The idea of a wholesale conversion of obsolete office towers into desperately needed housing, as New York City’s Mayor, Eric Adams, has proposed, seems far-fetched. There are too many complications, architecturally and financially. But there are signs of what may be a more gradual transformation, and Mechanic has been involved.
A trio of developers recently joined forces to convert 25 Water Street, a chunky 1960s office building into apartments. Fried Frank represented Nathan Berman, a developer known for his mastery of the esoteric art of conversions. Another partner is GFP Real Estate, a family-owned firm whose co-chief executive, Brian Steinwurtzel, happens to be the son of a Fried Frank partner and is “a dear friend” of Mechanic. They partnered with Rockwood Capital, whose managing partner, said Mechanic, is also a friend. “So we did the JV with Rockwood. And then the three of them borrowed money from MSD Capital, which is the Michael Dell firm. And the two people who run the debt platform there are also friends,” said Mechanic. “So we did that loan.”
Then the fixer turned reflective. “I spend a lot of my life doing that: trying to figure out a way that gets two people from one side of the river to the other side of the river without both drowning on the way. And that’s a talent.”
Joshua Chaffin is the FT’s New York correspondent
Follow @FTMag to find out about our latest stories first
Read the full article Here
