Bayrock Group

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Bayrock Group
Private
Industry Real estate development
Founded 2001 (2001)
Founder Tevfik Arif
Headquarters New York City, USA
Key people
Tevfik Arif (Chairman)

Bayrock Group is an international real estate development and investment company based in New York. It was founded by Kazakh businessman Tevfik Arif in 2001.

History and personnel[edit]

The Bayrock Group was founded in 2001 by Tevfik Arif, a former Soviet official from Kazakhstan who became an international businessman. He founded Bayrock after he moved some of his businesses to the United States.[1]

Arif hired Russian businessman Felix Sater as managing director of Bayrock in 2003.[2] Sater became Bayrock's Chief Operating Officer,[3] and assisted with several projects, including management of the Trump SoHo project.[2] Sater left Bayrock in 2008[4] after a New York Times article revealed his criminal past.[5][6] In 1998, Sater had pled guilty to stock racketeering and fraud as part of a US and Russian mafia-connected $40 million stock pump and dump scheme.[4] He worked with the CIA and the FBI, allegedly offering information on a black market for Stinger missiles.[4][7] Sater later worked as a senior advisor to Trump.[4]

By 2014, Bayrock was largely inactive, with the exception of a few lawsuits.[4]

Corporate structure[edit]

According to Forbes, Bayrock is "a series of commonly controlled, but not wholly owned, limited liability companies."[3] Bayrock Group is arranged in tiers, with Bayrock Group LLC having a majority or plurality interest in around 12 subsidiary holding companies. The holding companies in turn have majority interests in companies on lower tiers. The lower tier subsidiaries correspond to individual real estate projects, with Bayrock Spring Street corresponding to Trump SoHo, Bayrock Camelback to the Phoenix hotel project, and Bayrock Merrimac to the Trump Fort Lauderdale hotel.[8] Other Bayrock subsidiaries include Bayrock Whitestone and Bayrock Ocean Club.

Bayrock Group has had strategic partnerships with Icelandic investment company FL Group and the Alexander Mashkevitch-affiliated Eurasian Resources Group. A Bayrock Group investor presentation from 2007 referred to Mashkevitch's "Eurasia Group" as a strategic partner in equity financing.[4]

Projects and properties[edit]

After moving the Bayrock Group to the 24th floor of Trump Tower,[9] Arif developed a relationship with billionaire businessman Donald Trump. Bayrock went on to collaborate with The Trump Organization on projects in Turkey, Poland, Ukraine, Russia, Arizona, Colorado, New York, and Florida.[2]

Loehmann's Seaport Plaza[edit]

Arif began developing property in Brooklyn, initially redeveloping Loehmann's Seaport Plaza, a three-story, 280,000-square-foot (26,000 m2) waterfront shopping center on Emmons Avenue in Sheepshead Bay, Brooklyn.[10] The property's tenants include Loehmann's and Nine West Shoes.

Trump International Hotel & Residence[edit]

In 2003, Bayrock purchased a site out of bankruptcy in the Camelback Corridor of Phoenix, Arizona. Bayrock announced plans for the Trump International Hotel & Residence, a $200 million, 190-foot Trump International Hotel. Plans for the project included 97 private residential units starting at $950,000 and 188 hotel/condo rooms. While the site was approved by the Phoenix City Council and the Planning Commission in 2005, the project was curbed by public opposition[11] and never finished.[12]

Bayrock subsequently defaulted on a $36 million loan from Hypo Real Estate Capital Group, who sold the site in 2010.

Moscow high-rise[edit]

In 2005, Donald Trump extended the Bayrock Group a one-year deal to develop a project in Moscow. Sater located Russian investors and a potential site for the high-rise, a closed pencil factory named for Sacco and Vanzetti.[9] Sater said, "We looked at some very, very large properties in Russia," on the scale of "...a large Vegas high-rise."[13] Bayrock organized a potential deal in Moscow between Trump International Hotel and Russian investors in 2007,[14] but the deal never came to fruition.[9]

Trump SoHo[edit]

Trump SoHo, 2014

The Trump SoHo is a $450 million, 46-story, 39-unit condo-hotel hybrid located at 246 Spring Street in SoHo, New York City. The hotel was a joint venture between Bayrock, The Trump Organization, and the Sapir Organisation, a company owned by Georgian real estate developer Tamir Sapir. Trump provided a licensing deal for the hotel in exchange for a 18% equity stake in the project.[15][4] The project was funded by Kazakh businessman Alexander Mashkevitch.[16]

In 2007, Bayrock traded future profits from Trump SoHo and other projects in exchange for $50 million in financing from Icelandic company FL Group. The arrangement led Bayrock's finance director to file racketeering lawsuits, alleging that money was diverted to people outside the company, including Salvatore Lauria, an associate of Sater's.[2]

Sater was a managing director of Bayrock and a senior advisor to Trump when construction of Trump SoHo began in 2006. Sater played a major role throughout the process of the building's construction.[17] Sater received subpoenas in the New York Southern District for the fraud and embezzlement case against former BTA Bank Chairman Mukhtar Ablyazov and former Mayor of Almaty Viktor Khrapunov.[18] Embezzled BTA Bank funds were allegedly used to purchase multiple condos in Trump Soho as a method of laundering and concealment.[19]

Trump International Hotel and Tower (Fort Lauderdale)[edit]

Bayrock worked with Trump to develop the Trump International Hotel and Tower in Fort Lauderdale, Florida.[15]

European projects[edit]

Bayrock Group developed seven waterfront hotel resorts in Europe. The hotels are managed by the Turkish luxury hotel chain Rixos Hotels.[20] The resorts in Turkey on the Mediterranean Sea include Rixos Hotel Tekirova near Tekirova; Rixos Hotel Belek in Belek; Rixos Hotel Labada near Çamyuva; and Rixos Hotel Beldibi in Beldibi.

Lawsuits involving Bayrock[edit]

Arizona suit (2007)[edit]

Trump International Hotel & Residence investor Ernest Mennes filed a lawsuit in U.S. District Court in Arizona in 2007. The suit alleged that Bayrock had skimmed money its planned Trump development in Phoenix.[5] It further alleged that Sater had called Mennes in 2006, threatening that if he revealed Sater's criminal past, that his cousin would "electrically shock Mr. Mennes' testicles, cut off Mr. Mennes' legs, and leave Mr. Mennes dead in the trunk of his car."[9] The case was settled by Bayrock[5] and Mennes was barred from discussing the matter.[9]

Kriss v. Bayrock[edit]

In the federal case Kriss et al. vs. Bayrock Group LLC et al., two former Bayrock employees, former director of finance Jody Kriss and Michael Chudi Ejekam, filed a suit in the U.S. District Court in New York in 2010.[21] The suit alleged that Sater's role in the company was hidden and that the company was "substantially and covertly mob-owned and operated."[5][22]

Trump SoHo lawsuits[edit]

In 2011, the Rockwell Group, an interior design firm, sued Bayrock and Sapir Organization for over $1.5 million in damages after Bayrock failed to pay for interior design work at Trump SoHo. Bayrock countersued two days later, filing a complaint with the New York Supreme Court.[23]

Qui tam case (2015)[edit]

Attorneys Frederick Oberlander and Richard Lerner brought a qui tam case against Bayrock in 2015.[24][25] The suit alleged that Arif, Satter, and others had been in control of Bayrock for nearly a decade[3] and had "engaged in a series of tax frauds and then took steps to hide the fraud."[3]

References[edit]

  1. ^ Sorbello, Paolo (3 January 2017). "Football Leaks: The Kazakh Connection". The Diplomat. 
  2. ^ a b c d Silverman, Gary (14 August 2016). "US election: Trump's Russian riddle". Financial Times. 
  3. ^ a b c d Erb, Kelly Phillips (28 July 2016). "Trump & Kids Named, But Not Charged, In $250 Million Tax Evasion Case". Forbes. 
  4. ^ a b c d e f g Henry, James S. (19 December 2016). "The Curious World of Donald Trump's Private Russian Connections". The American Interest. 
  5. ^ a b c d Horwitz, Jeff (4 December 2015). "Q&A on Trump real estate adviser accused of a $40M stock fraud scheme and ties to the mob". AP. 
  6. ^ Bagli, Charles V. (17 December 2007). "Real Estate Executive With Hand in Trump Projects Rose From Tangled Past". The New York Times. 
  7. ^ Kennedy, Marlene. "Convictions Won't Keep Civil RICO Suit Alive", Courthouse News Service, New York City, 24 March 2014. Retrieved on 14 March 2016.
  8. ^ Kramer, Reuben (18 September 2009). "Former Exec Says Developer Pulled a Fast One". Courthouse News Service. 
  9. ^ a b c d e Helderman, Rosalind S.; Hamburger, Tom (17 May 2016). "Former Mafia-linked figure describes association with Trump". Washington Post. 
  10. ^ Kates, Brian; Schapiro, Rich (1 October 2010). "Trump pal busted for allegedly running hooker ring on yacht". NY Daily News. 
  11. ^ Ruelas, Richard (18 March 2016). "How Phoenix residents dumped Donald Trump's hotel plans". The Arizona Republic. 
  12. ^ Buchholz, Jan (15 August 2010). "Camelback parcel once eyed by Donald Trump to be sold". Phoenix Business Journal. 
  13. ^ Twohey, Megan; Eder, Steve (16 January 2017). "For Trump, Three Decades of Chasing Deals in Russia". The New York Times. Retrieved 8 February 2017. 
  14. ^ Belton, Catherine; Stott, Michael (13 December 2016). "Trump's Russian connections". Financial Times. London. Retrieved 8 February 2017. 
  15. ^ a b Nance, Malcolm (2016). The Plot to Hack America: How Putin's Cyberspies and WikiLeaks Tried to Steal the 2016 Election. Skyhorse Publishing, Inc. ISBN 978-1-5107-2333-7. 
  16. ^ Berzon, Alexandra; Cullison, Alan; Rothfeld, Michael (1 August 2016). "Donald Trump Long Sought a Real-Estate Foothold in Russia". Wall Street Journal. 
  17. ^ Mosk, Matthew; Ross, Brian (10 December 2015). "Memory Lapse? Trump Seeks Distance From 'Advisor' With Past Ties to Mafia", ABC News, New York. Retrieved on 28 February 2016.
  18. ^ "Trump Crony Felix Sater Now Cooperating in New York in Kazakh/BTA Bank Trial". DailyKos. 
  19. ^ "Was Trump SoHo Used to Hide Part of a Kazakh Bank's Missing Billions?". Bloomberg. 
  20. ^ Bayrock Group LLC (27 July 2007). "Bayrock Group Increases Stake in Midtown Miami Mixed-Use Development". PR Newswire. 
  21. ^ "Did CIA Help a Swindler Walk?". Courthouse News Service. 14 May 2013. 
  22. ^ Putzier, Conrad (14 April 2016). "Bayrock Group named in Tate George fraud case", The Real Deal.
  23. ^ "Trump Soho developers sue project's architect". The Real Deal New York. 24 May 2011. 
  24. ^ Behar, Richard (25 October 2016). "Donald Trump And The Felon: Inside His Business Dealings With A Mob-Connected Hustler". Forbes. 
  25. ^ Bautista, Christian Brazil (11 October 2016). "Felix Sater says he's being shaken down with $250M suit over Trump projects". Real Estate Weekly.