OCTOBER 17, 2023 – Unlike marketable securities, real estate can be a highly problematic asset to hold, price, sell, and convert to cash. In all these respects the Rutherford properties—seven adjoined parcels—were especially challenging.
At one time in history the crown jewel, of course, had been my great grandparents’ dream home at 42 Lincoln Avenue[1]. Ninety years after its completion, UB had turned it into a garbage house encased in heavy vegetation after he’d destroyed the place in a four-alarm fire.[2] To put mud in the pie, he restored the house interior according to his wacky notions of design and utility and filled the once grand home with trash and an extreme OCD level of gay porn. It would take more than a brigade of “Merry Maids” in league with the “polish lady” to render “42 Baghdad Street” habitable.
Next door to the severely tarnished crown robbed of its jewels was the haunted house at 50 Lincoln Avenue[3], the parcel Grandpa had acquired in the 1950s and rented for life to his retired secretary of some 40 years, Emily Jones, and her sister. No one could have guessed that Emily would live—at home—until she was 103 (she died at 106). Once she had vacated the rambling house (years after Grandpa himself had vacated earth), UB actively allowed the home to go to wreck and ruin. Within a few years the forces of nature had expanded the means of ingress and egress to numerous openings in the roof, the foundation, and where windows once kept the elements at bay. A new set of tenants had moved in—all of them furry and four-legged.
The borough had been on UB’s case for years to take the “Halloween” out of 50 Lincoln. In his massive collections of paper I’d found multiple notices from the borough demanding that he address various infractions of local building ordinances. Cliff told me that UB’s response was to ignore the first and second rounds of each periodic notice, then on the third, “go crazy like a rabid fox.” A year or so would pass before a fresh set of notices were issued. Grandpa’s reputation as the borough’s longtime Godfather—even after he was no longer Godfather and no longer alive, for that matter—seemed to insulate “the crazy son” from actual citations and saved the haunted house from outright condemnation and demolition. Of course, Cliff played a widening influential role in preserving the status quo. He knew how to work the system—without being crazy.
After UB died, however, I couldn’t assume the role of “crazy like a rabid fox”—at least not convincingly—although I got a laugh out of Cliff when I suggested that next time the building inspector got huffy about the dilapidated state of 50 Lincoln, he should be told that the middle name of the “managing heir” happened to be “Bruce.” Cliff had helped run interference for decades, but once UB was dead, no more time-outs were allowed. The borough made an end run: the house would have to be rehabilitated or demolished, but either way, at the family’s expense.
When our “non-relative-relative” friend and architect, Ed Nilsson (See 9/23/23 (note 5) and 10/1/23 posts), inspected the house (after we’d temporarily evicted the critters), he pronounced “the bones” to be in surprisingly excellent shape, but to rehabilitate the premises would be costly, and its resurrection as a free-standing residence conflicted with a comprehensive redevelopment plan incorporating the other parcels. In the end, Cliff and I made the economic decision to raze the house. Of course, Cliff knew a demolition guy whose arm Cliff could twist, and the parcel was cleared for a price far less than we would have otherwise paid.
Next were the five parcels adjoining the backsides of 42 and 50 Lincoln Avenue. On these commercial parcels sat the ancient warehouses and hodgepodge of smaller structures that together formed a kind of Dickensian village[4]. They were an eyesore by anyone’s standard—except UB’s, of course . . . and, as Cliff and I would discover, the residential neighbors next door when they caught wind that after 125 years, we had designs to redevelop all seven parcels into something “different” from the status quo in perpetuum.
Everyone who has ever bought and sold real estate is familiar with the central feature of value: “location, location, location.” In our case the seven parcels occupied one of the premiere locations for miles around. They were at the heart of Rutherford, “the Borough of Trees,” which occupies a mile-square of high ground within easy sight of Manhattan; a place of big old homes shaded by the big old trees; the last stop on the newly planned commuter rail line from New Jersey to New York City—the stop where already a million bucks had been invested in the restoration of the small architectural gem that served as the ticket station for local rail lines.
One side of the “Dickensian Village” faced Park Avenue—diagonally across from the old borough hall, within sight of the post office, the library and between them, the tall World War I Memorial in the traffic go-around, and most notably, just up the street from the collection of well-appointed restaurants that had recently given Rutherford favorable print and photos in the food section of The New York Times, as one of “the best local places for Valentine’s Day dinners.”
Another side of the properties faced Lincoln Memorial Park, a handsomely landscaped green space covering an entire irregular-shaped block, where ancient trees filled with spring and summer birdsong shaded lush grass, a modest band shell, benches pleasing to the eye and derriere, and monuments to the fallen president and veterans of the Civil War.
Rutherford, founded in 1884 and home of the poet-physician William Carlos Williams and generations of commuters to the skyscraper offices of Midtown and Lower Manhattan. Rutherford, now in late 2017, a highly desirable setting for a whole new generation of people drawn to New York City and environs by life-style attractions and economic opportunity. If ever “location, location, location” were favorable, our properties lay at the bull’s-eye.
That was our working assumption, anyway, and Cliff and I were eager to draw arrows from our respective quivers—his connections; my professional experience—notch the shafts to the bowstring, aim a little high and . . . hit the center of an easy target.
From the time UB moved into assisted living in early 2016 I’d referred to Cliff as the family’s “accidental business partner.” By then I’d witnessed extensively his business acumen and the centerpiece of his success: his combination of charisma, problem-solving ability, and extraordinary network. Need to retain the best land-use lawyer in New Jersey? Talk to Cliff. Want to hire the most highly-regarded local architect in good-standing with the Borough of Rutherford building committee? Ask Cliff. Curious as to who’s on first, who’s on second among council members? Consult with Cliff. Desire to increase the rents while you plan redevelopment of the properties but need an electrician, a plumber, a carpenter, a clean-up outfit, and upwards of 50 dumpsters—all for cheap but without compromising quality? Cliff can get them on-site, on-time, and under budget. And when it comes to the really big picture, is your objective to lease space in the interim and sell at a premium at the end of the game? Again, Cliff knows the right people.
Given all that he’d contributed over the previous 30 years to the “management” of UB, Ground Zero, and 42 Baghdad Street—not to mention helping out my grandparents in times of medical emergencies—Cliff deserved remuneration. All he’d ever asked for was “to be treated fairly,” and in meeting the challenge of addressing this part of our family’s inheritance—the Rutherford properties—the time had arrived “to treat Cliff fairly.” My motivation wasn’t limited, however, to a sense of fairness. I knew that to optimize the value of the properties, I needed Cliff. I was dependent on his connections, his problem-solving ability, his determination, his full skill set in its innumerable manifestations. And perhaps most of all, I needed his commitment and unfailing sense of humor. In exchange for this broad basket of assets, I had to provide ample incentive.
On a handshake, I made him an honorary nephew of UB, a financial partner with equal standing to each of my sisters and me. The informality of this deeply deserved arrangement was contrary to every objective legal bone in my body. To any client in my position, I would’ve counseled—insisted upon—formal memorialization of the partnership; a complex agreement documenting our business relationship, detailing with excruciating verbosity our respective rights and obligations under every conceivable exigency.
My older sisters, distant from Rutherford actually and figuratively, were only casually acquainted with Cliff. Their interaction with him had been limited to a smattering of superficial exchanges. Though I kept my siblings well informed of issues relating to UB, nothing but marathon communications could have given my sisters the full picture and story of my work with Cliff and my observations about his extraordinary abilities, capacity, and most important of all, his character.
Consequently and often to varying degrees, Nina and Elsa, my elder sisters, were skeptical of my handshake arrangement with Cliff. “He’s benefitted too,” they’d say. And “Isn’t it a bit rich to be treating him as an equal?” I thought too, they believed that if anything, Cliff and I had become too close, causing me to lose objectivity. Jenny, my younger sister, was more by nature, more trusting, less skeptical than our elders.
Given their distance from Ground Zero, I, the kid brother, couldn’t fault Nina and Elsa for their reservations about my treatment of Cliff.
The base reality, however, was that we confronted two choices: deprive Cliff of incentive, list 42 and 50 Lincoln with a residential realtor and the other five parcels with a commercial realtor and let the chips fall as they may; OR . . . incentivize Cliff and develop a redevelopment plan incorporating all seven parcels.
The first choice would likely result in a quick sale of the residential lots—“as is”—given the torrid local market. We’d pocket the proceeds and dash out of town, leaving Cliff in the dust of disillusionment. The remaining five parcels, however, would be worth far less after secession from the two adjoining residential lots. No investor would likely offer more than minimal value for the “Dickensian Village,” given its vastly reduced redevelopment possibilities[5]. Only with Cliff in the picture—appropriately motivated and thus actively engaged—could the total value of all seven parcels be optimized.
But first things first. Before we tackled climbed the next mountain in Rutherford, Cliff and I needed to embark on a special memorial mission . . . to the Green Mountains of Vermont.
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© 2023 by Eric Nilsson
[5] The “highest and best use” of all seven parcels was a multi-purpose development, consisting of mixed-housing (apartments and townhomes) and ground floor retail, but that would require ample parking. If the sizable residential lots (42 and 50 Lincoln) weren’t part of the mix, parking space would be severely restricted, vastly reducing an investor’s return on the five commercial parcels.
