Jacob Frydman, (2008-2011)
and his failed 1 Billion Dollar Infrastructure Fund he called
LAMBDASTAR INFRANSTRUCTURE PARTNERS LP
In 2008 Jacob Frydman (the current CEO of United Realty Trust) had nowhere to turn. No income, and the vast real estate business at a standstill, Frydman found an industry that he would be an unknown. Frydman embarked on a mission to find a “credible partner” which he found in an unsuspecting Leonard P. Shaykin a semi-retired investment banker.
Together they persuaded Blair and Company (a Chicago investment banking firm) to put up 6 million dollars to fund the startup costs of this fund (startup means Frydman draws a huge salary and has “control of these funds”).
Frydman personally guaranteed 2 million out of the 6 million.
Frydman then unable to get the fund off the ground, “raped the coffers of the company for his own benefit”, according to his own CFO who later sued him and won a judgment. (read lawsuit and you will know who Frydman is)
The judgment remains unpaid.
Blair and numerous other vendors sued Frydman for the millions he stole from them.
Tribune-Review/Pittsburgh Tribune-Review January 23, 2009 | Boren, Jeremy
It could be difficult to find a private firm willing to spend hundreds of millions of dollars for the right to run Pittsburgh’s aging parking garages. The recession has persuaded many cities and large, private investors to wait for a stock market resurgence before betting big on parking, said Barbara J. Chance, president of a parking and transportation consulting firm in Philadelphia.
The Pittsburgh Parking Authority’s board of directors unanimously agreed Thursday to examine leasing 11 garages and thousands of parking spaces and using the money to bolster the city’s anemic pension fund. Details of its proposal won’t be ready until next week at the earliest, said Executive Director David Onorato.
“Had the economy not gone south so quickly, there were many other cities that were talking about doing this, but everything got put on hold,” said Chance, who advised a firm that bid for control of on- and off-street parking in Chicago.
Chicago raised $563 million in 2006 by leasing its downtown garages for 99 years. Its case is viewed as a success, but the economy was stronger then. In November, Harrisburg City Council unanimously rejected a $215 million bid to lease its garages for 75 years to New York City real estate investor Jacob A. Frydman.
Chance said firms such as Morgan Stanley and The Carlisle Group “make a pure return on investment calculation” based on how much they can raise parking rates versus the cost of maintaining the garages. Mayor Luke Ravenstahl last week announced his desire to see whether leasing parking assets could net hundreds of millions of dollars for the pension fund, which has enough money to cover only 29 percent of $899 million in obligations. The mayor said $300 million would increase the funding level to 87 percent in 20 years, within the ideal range.
A long-term lease agreement would not lead to the Parking Authority’s dissolution, Onorato said, or cost union workers their jobs. He said maintenance problems with garages — four of which were built in the mid- to late-1950s — would become the company’s responsibility. He could not estimate maintenance liabilities. The authority has about $108 million in debt it would pay off with a lease. Onorato said it’s too early to discuss whether the city would try to limit how much parking rates could rise.
Marc Dreves, recording secretary for Teamsters Local No. 926, said his 60 union workers are worried a private firm might initially agree to pay competitive wages and then, when the contract expires, pay considerably less. The Teamsters’ contract with the authority expires in 2011. Dreves worries commuters could suffer, as well. “I have a hard time thinking that somebody is going to pay $300 million and then allow the city to dictate prices,” he said.
Central Penn Business Journal
October 10, 2008 | Veronikis, Eric
Many questions surround the proposed 75-year lease of Harris- burg parking facilities to a private developer. The New York City developer who wants to lease Harrisburg’s parking system last week extended the time he will give City Council to make a decision about his proposal. Council Vice President Dan Miller said that means the Oct. 15 deadline Jacob A. Frydman gave was superficial. “Since they have extended the date by six months, that verifies there is no real time line,” Miller said.
Frydman, who is president of Harrisburg Public Parking (HPP), said his financier is able to extend its timeline. But with Wall Street on the brink of collapse, The Royal Bank of Scotland could change its mind. “(Miller) simply doesn’t understand how these deals work,” Frydman said of Miller’s accusation. Even without an extension, council was not going to rush a decision, council President Linda D. Thompson said.
Council recently reopened its request-for-proposal process in an effort to hire a financial consultant to review the $215 million deal. If council accepts Frydman’s deal, HPP would operate most of the city’s garages, parking lots and meters for 75 years. Reopening a search for a consultant will delay any decision. Council will no t decide before the end of October and possibly not until the end of November, Thompson said.
And that’s fine with Frydman. Council should have more time to consider such an important deal, he said. “Council has not received its opinion yet and has yet to finalize its consultant,” Frydman said. “We think it’s important for them to get that.” Another issue clouding the situation caused Frydman’s attorneys to meet last week with Dauphin County board of assessment appeals attorneys. Frydman’s team wanted to discuss whether parking facilities would be assessed real estate taxes should HPP take over operations.
Dauphin County Tax Assessment Office director Steven L. Howe sent a letter Sept. 25 to the Harrisburg Parking Authority. Howe told authority director Joseph V. Link that if the parking system is leased to a private operator, the garages and parking lots would be placed on the county and Harrisburg School District tax rolls. The authority would be responsible for paying the taxes, which would amount to about $2.2 million annually. County Commissioner George Hartwick III backed the opinion in the letter, saying the county stands behind the opinion of the tax assessment office, but that the matter could be appealed.
Frydman contends that the parking facilities should stay off the real estate tax rolls since they would remain a public use. “My understanding of the meeting was that the county was provided with the documentation necessary to take a more thorough and complete review of the issues,” Frydman said. “The county has indicated it will undertake this review and be back to us with this determination, and I hope they will be able to do so within a week.”
County commissioners could not be reached for comment last week.
Miller said the tax issue is huge. If HPP is confident the facilities are tax exempt, then Frydman should take out the contract clause that makes the authority responsible for tax payments, he said. “Then we could go back to reviewing this in good faith. Just because someone says it isn’t taxable doesn’t guarantee it isn’t,” Miller said. “From my perspective, nothing has changed.” Miller urged council to set up a special session to kill the parking proposal after Howe sent the letter. Thompson said she polled the other council members who agreed that no quick decisions would be made.
Miller said he doesn’t think the county will change its opinion on the tax issue because other privately operated parking lots and garages in the city pay real estate taxes. And even if it turns out the parking facilities remain tax exempt, the city should retain control of the garages, he said.
“We’ve got the goose that’s laying the golden egg right now,” Miller said of the garages. “Somebody has to give me a good reason to sell that goose.
No one has.
Central Penn Business Journal
September 19, 2008 | Veronikis, Eric
Harrisburg City Council vice president Dan Miller and developer Jacob A. Frydman this week questioned whether the two consultants who proposed to review Frydman’s bid to lease the city’s parking facilities can independently review the $215 million deal.
Miller said the Harrisburg office of Public Financial Management (PFM) Inc. did not appear to be independent because of its other ties to the city. And in the financial world, appearance is enough to keep council from picking the firm, he said.
Frydman’s company, Harrisburg Public Parking, wants to lease the Harrisburg Parking Authority’s 11 garages and a parking lot in the city. He said Peter F. Swan, who submitted the other proposal, should not have been considered because he doesn’t have the credentials.
He has a background in logistics, not public-parking assets, Frydman said.
Swan is a Penn State assistant professor of logistics and operations management. He also co-authored a 2007 study that criticizes toll-road privatization. Swan does consulting work under the moniker GW&PFS. “I don’t know Peter Swan. I have seen his résumé, and I have seen some of his writing. It strikes me that he is not credentialed. His expertise is in logistics and not analyzing assets,” Frydman said. “It’s like asking a podiatrist to look at a brain scan.” The study Swan co-authored with Wayne State University economics professor Michael H. Beizer is called “Empirical Evidence of Toll Road Traffic Diversions Implications for Highway Infrastructure Privatization.”
The report suggests that the privatization of toll roads leads to increased tolls, which in turn causes traffic congestion on secondary roads. If Harrisburg Public Parking wins the lease, terms of the deal would permit his firm to raise parking rates significantly. Swan and Beizer point to the Ohio Toll Road as an example in the study. While the Ohio Toll Road Authority did not privatize the road, it gradually raised its rates from 1996to 2002. The move caused traffic problems, including accidents, on neighboring roads, and privatizing toll roads could cause the same, according to the study.
Swan said he is leery of privatizing toll roads. But council is not asking for a toll-road analysis; it wants an independent review of what it can expect from the parking deal, Swan said. He said he would review it fairly and let council take it from there, he said.
And while he had been aware of the lease proposal in the news, he was not familiar with the deal until someone asked him to submit a proposal. He would not disclose who asked him, but it’s a task the logistics professor said he is qualified to do.
“Logistics includes purchasing, inventory, manufacturing, supply-chain management, and parking is a small piece of it, but it is a part of it,” Swan said.
Miller didn’t question PFM’s credentials. He questioned whether the group can remain impartial. PFM consults the Harrisburg Authority, which owns the city’s water and sewer systems and incinerator.
Authority Chairman James Ellison is a partner at Rhoads & Sinon law firm in downtown Harrisburg. Frydman hired Ellison to lobby for the parking deal, Miller said.
The connection between Ellison and PFM should have disqualified the firm, Miller said. Frydman confirmed he hired Ellison to work for him but said to assume that Ellison would use his influence on the authority to sway PFM is unconscionable.
Miller said there must be no connection whatsoever. “How does anyone know there is true independence when there is a connection from Frydman to Ellison to PFM,” Miller said. “If you look at standards in business, independence involves appearance, and that means the public has to trust it. Maybe Ellison is great and independent.
But why risk it on such an important deal?”
PFM did not return an interview request for this story.
Council was scheduled to meet Sept. 16 to air opinions about the two potential consultants. Council members said they could invite one back Sept. 18 for an interview or reopen their request for proposals to get more bids. Frydman has repeatedly said he might not be able to get financing for the deal if council doesn’t make a decision by next month.