A Tough Year for Hedge Funds? Not That Real Estate Has Noticed

A Manhattan penthouse on the Upper East Side with sweeping views of both the Hudson River and the East River was sold this summer for $37.9 million. The person behind the purchase was hidden behind a limited liability company with the cryptic name CRE Acquisition.

It turns out that the mystery buyer was not a wealthy foreigner, but a local Wall Street celebrity: Larry Robbins, the hedge fund manager and founder of Glenview Capital Management, according to documents reviewed by The New York Times and conversations with people knowledgeable about Mr. Robbins’s personal investments.

That the buyer is a hedge fund titan may not be so surprising. Hedge fund managers own some of the most expensive properties in Manhattan. In September, for example, Kenneth Griffin, founder of Citadel, reportedly spent about $200 million to buy several floors in a new luxury condo tower being built at 220 Central Park South.

Still, Mr. Robbins’s big real estate deal comes during a particularly trying time for his $8.8 billion hedge fund. Last week, he wrote an apology to investors for losing 15 percent of their money so far this year.
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Larry Robbins, chief executive of of Glenview Capital Management. Credit Eduardo Munoz/Reuters

In the seven-page mea culpa, Mr. Robbins told investors, “I’ve failed to protect your capital.” He promised to forfeit his pay for this year.

His letter combined with his latest purchase illustrate a fundamental truth about the biggest hedge fund managers: They may have had a rough year with volatile markets, but they remain incredibly wealthy.

Mr. Robbins’s hedge fund stumbled after several years of knockout returns. Mr. Robbins, 46, has profited handsomely from his firm’s strong performance and has a net worth of $2.3 billion, according to Forbes.

Glenview Capital charges a yearly administration fee of 2 percent of investor capital and 20 percent of the annual gains, helping Mr. Robbins to earn $570 million in 2014, according to a report by Institutional Investor’s Alpha magazine.

His new apartment in the Charles condominium on First Avenue will be used as a second home, according to mortgage documents. Mr. Robbins’s primary residence is a sprawling mansion located on more than four acres in Alpine, N.J. The Manhattan penthouse he purchased was created by combining two duplex penthouses. It now totals 11,740 square feet, including private terraces that cover 1,300 square feet. Monthly fees are $10,547.

The property was bought through a limited liability company that was incorporated in Delaware. Mr. Robbins took out a $22 million mortgage to finance the purchase, according to documents filed with the New York City Department of Finance.

A family member shielded by another limited liability company bought an adjoining penthouse in the Charles for $20.7 million.

The second penthouse purchase was for investment purposes. It was acquired with a limited liability company called Charles NCP and was financed with a $12.9 million mortgage, according to the documents.

Mark Horowitz, the president at Glenview, is the authorized signatory on both mortgages. He is the authorized signatory for Mr. Robbins’s house in New Jersey and serves in a similar capacity for Glenview Capital on regulatory filings.

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Because most of Mr. Robbins’s net worth is tied up in the hedge fund, Mr. Horowitz acts as a signatory for Mr. Robbins’s personal, tax and estate affairs, according to someone with knowledge of Glenview who spoke on the condition of anonymity.

Mr. Robbins did not respond to a request for comment.

The price for Mr. Robbins’s new apartment is the highest paid for any apartment on the Upper East Side, east of Third Avenue, according to real estate tracker CityRealty. The average apartment price for the neighborhood is $1.5 million, cheaper than apartments located between Park Avenue and Fifth Avenue in part because the area is farther away from transportation.

“It’s a very big number for that area,” said Gabby Warshawer, the director of research at CityRealty.

Yet the price for both penthouses at the Charles combined still pales in comparison with other recent luxury apartment acquisitions by billionaire hedge fund managers.

Besides Mr. Griffin’s record purchase in September, William A. Ackman, founder of Pershing Square Capital Management, is part of a group of investors that earlier this year closed on a deal to pay $91.5 million for a splashy six-bedroom apartment at One57, another luxury residential tower in Manhattan.

“I thought it would be fun,” Mr. Ackman said last year of owning the One57 apartment.

Mr. Robbins is not the only hedge fund manager who is struggling this year. Some of the industry’s best known and most skilled investors have lost billions of dollars of investors’ money. Mr. Ackman’s Pershing Square, for example, is down 19 percent so far this year.

The value of Mr. Ackman’s position in the Canadian pharmaceutical company Valeant has plunged about $2.2 billion in recent weeks as the drug maker has come under criticism from short sellers, raising broader questions about its distribution networks and pricing policies for some of its drugs.

Mr. Robbins told investors in his Oct. 26 letter that Glenview Capital did not hold a position in Valeant because “to the best of our current knowledge, they are guilty of what looks to be poor judgment in historical price increases on acquired products.”

In that same letter, Mr. Robbins told investors that he thought his portfolio of stocks, which include drug companies, hospital and managed care, and pharmaceutical supply chains, was “a bedrock of strength in a world of choppy seas.”

“That judgment,” after several months of market turbulence, “was 100 percent incorrect,” he wrote.

Before founding Glenview Capital in 2000, Mr. Robbins worked as a stock analyst at Omega Advisors, the hedge fund founded by Leon Cooperman. Mr. Robbins employs an activist strategy, which involves buying shares in a company with the intention of having a say in how a company is run, but he prefers to be called a “suggestivist.”

In recent years, he has made handsome sums for his investors with campaigns like a proxy battle against Health Management Associates, and with bets on health care stocks like Humana, Thermo Fisher Scientific and HCA Holdings.

Even with a disappointing performance, Mr. Robbins in his letter sought to solicit new investment for a new fund that would charge no fees.

“Unfortunately, opportunity often feels like a punch in the face,” he wrote.

A version of this article appears in print on November 7, 2015, on page B1 of the New York edition with the headline: A Tough Year for Hedge Funds? Not That Real Estate Has Noticed.

Dale Holman can help you with all your real estate needs in Maine.

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