March 1988 – Regardies: The Business of Wadhington, by Harry Jaffe
THE FIRST TIME Mohamed Anwar Hadid set foot in Aspen, he felt almost weightless. He stepped out of a Citation jet, took a deep breath of the crisp mountain air, and marveled at the wonders that surrounded him: the big sky, the jagged peaks, the emerald grass. A Palestinian who’d been exiled from his homeland at birth, he was a Washington developer on the rise. Now he was in America’s most posh mountain playground, and he liked what he saw.
“I was intoxicated,” he recalls.
Soon he would become infatuated — infatuated with two pieces of land, one of which sat at the base of Aspen’s main ski slope. Both were in foreclosure. Two hours after he touched down that day in May 1987, Hadid was scheming to buy his piece of the Rockies.
A week or so later, in Trump Tower, Donald Trump met with his lawyers from Aspen and New York to discuss the design of a hotel that Trump planned to build at the base of Aspen’s main ski slope. Trump had put down $ 17.5 million to buy the six-acre property out of a pending foreclosure, and in a few days, when a waiting period expired, the land would be his. He’d heard that someone else was trying to acquire the property, but he didn’t believe that anyone would challenge him. “We’ll name the hotel Trump Palace,” he said. On June 26 Hadid was back in Aspen. He’d discovered that there was a priority debt on the hotel site that Trump coveted. By paying the loan he could preempt Trump’s contract. At 2:10 P.M. that day a London bank wired $ 42.9 million to Hadid’s account in Aspen. Hadid presented the money to the public trustee and became the owner of Trump’s hotel property, along with 66 acres of meadow across town.
Bye-bye, Trump Palace.
“Trump still claims that no one has ever beat him in a deal, but that’s not true anymore,” says Hadid. “I beat Trump.”
The deal was vintage Hadid. It was quick, it required a lot of money in a short time, it was bold, it was risky. It was the kind of deal that has cloaked Hadid in mystery. WHO IS MOHAMED HADID? asked a headline in an Aspen newspaper.
The same question is being asked in Washington, where Hadid has been wheeling and dealing since 1981. He works the capital with the same brassy style that he used to out-Trump Trump. A prize office building on Connecticut Avenue near the White House came up for sale last summer; Hadid snapped it up in a week. Two years ago he was broke; a year later, in a flurry of consumption, he contracted to buy five properties in the East End. Today Hadid claims to control $ 400 million worth of Washington-area real estate — nearly as much as the Japanese own. Yet he also has been known to overstate his net worth and to push banks to the brink of foreclosing on his deals.
These traits are common among some developers, but Hadid’s style sets him apart. Maybe it’s because he’s a Palestinian or because he doesn’t socialize with other developers. Maybe it’s envy. For whatever reason, he has a mystique, and his fleet of Rolls-Royces, his flamboyant style, and his seemingly magical source of quick cash have made him the subject of some fanciful rumors.
“I know Mohamed,” says a developer whose deal-making rivals Hadid’s. “On the record, he’s been very successful. He started with very little and was able to build major projects. He’s very resilient. Off the record, his best attribute is his ability to raise money. Where it comes from is one of the greatest wonders of the world.”
“I know where he gets his money,” says a local real estate professional. “It’s Lebanese drug money laundered through banks in London.”
A real estate broker swears that Hadid’s company is a conduit for the Saudi Royal Trust, the financial arm of the Saudi Royal family. A banker who’s never done a deal with Hadid alleges that his money comes from the shah of Iran’s family. Says another real estate maven: “His dough comes from the PLO.”
“That’s crazy stuff,” says Hadid. “I get my money from the same place every other developer does: the bank.”
Like many of Hadid’s assertions, this one is only partly true. Getting the full story behind his finances and his way of doing business took six months. The trail led from his birthplace in the Middle East to his estate on the Eastern Shore to Georgetown and to Aspen. The journey offers an education about how dairy farms in Zimbabwe and poultry farms in Georgia figure into the financing of real estate ventures in downtown Washington. It ended at the source of Hadid’s money: a nonprofit foundation that funds development projects in Islamic countries.
Hadid’s biggest and boldest project is the Aspen deal — a 292-room hotel in a self-obsessed little town that believes it’s the most precious resort on the face of the earth.
Hadid and his hotel have become the subject of daily news stories, screaming matches at city council meetings, and even referenda designed to drive him out of town.
“Michael is a charmed individual,” says Bob Holland, a developer who’s known Hadid since the early 1970s and still calls him by his Americanized name. “When I say charmed, I mean he’s the luckiest person I’ve ever met.”
And he might need luck to pull off the Aspen deal and keep the rest of his budding empire afloat.
HADID IS 2,500 FEET ABOVE THE Chesapeake Bay, at the controls of his twin-engine plane on a hazy day in May. He flips toggle switches nonchalantly, but his accent gets in the way of communication with air traffic controllers. Buck, his flying chauffeur, does the talking. Hadid tips the right wing down, banks the plane into a lazy curve, and points out the window at a small peninsula that juts into the bay. “That’s my farm,” he says.
The farm is a 1,000-acre estate that was once the hunting lodge of Walter Chrysler, the automaker. Hadid bought it in 1981, at about the time he bought his first airplane. That was years before he began to make a killing in real estate, but he was already living by the philosophy that still guides his deals. “I always reached high,” he says. “I bought what I couldn’t afford — a plane, a big estate, an office building — then I worked hard until I could afford it.”
I met Hadid in the fall of 1987, just after he’d bought his property in Aspen — something else he couldn’t afford. At the time he was recovering from a bruising break-up with his partner, Walter Cheatle. Hadid hadn’t been heard from for eight months after the split, and word on the street was that he was bankrupt. But he sure didn’t look it. Sitting in the conference room of his high-gloss Rosslyn office, he looked like a model from the pages of GQ. His suit was custom made, and gold cufflinks peeked properly out of the sleeves. His opaque opal eyes seemed shy, but he talked bold.
“We’ll have $ 2 billion worth of real estate under our control if everything is built-out nationwide,” he said. He spread his hands wide on the black marble conference table. “We’re talking to Ritz-Carlton about putting up hotels. We’ll do one in Tysons Corner. Write that down. I’ll be the biggest . . .” He hesitated. “Better not say that.”
Hadid was getting ahead of himself, getting carried away by the image he longs to create from the raw material of his immigrant past. For a decade he’s nurtured the image of a super-suave, slightly mysterious, fabulously wealthy, international deal-maker. Beneath the facade, however, is a young man with a hankering to prove himself in his adoptive country. He isn’t unlike other second-generation immigrants who’ve made it big in Washington real estate — Ted Lerner and Alan Kay, for example. The things that are important to Hadid are success and family. He tries to call his mother every day, and he bought her a fur coat with the proceeds from his first big deal. He loves to bring the entire Hadid clan to his place in the country for the weekend.
But under pressure Hadid can come across like a rookie senator puffing himself up for the hometown press. John Sarpa, Hadid’s second-in-command, told an Aspen newspaper that his boss “tends to be hyperbolic at times in his statements. . . . He thinks he means exactly what he says, but it’s a little off the mark.”
“Mohamed is a bit insecure,” says Rick Gross, the lawyer who represented Hadid in his negotiations with Trump. “He’s a sweet guy with a good heart, and he wants everyone to like him. He takes it to the point of being too much of a gentleman in a deal and picking up a tab even when he doesn’t have to.”
Hadid’s expansiveness and his opulent office give one the impression that he’s fabulously wealthy. But he’s been known to exaggerate his net worth, as some developers do. A financial statement circulating in Aspen claimed that his net worth was $ 71.9 million; it listed a jet that he doesn’t own as an asset. He also pumped air into his financial statement by inflating the value of his projects. The statement circulating in Aspen set the value of his holdings there at $ 72 million; he’d be lucky to sell the land for half that amount at the moment. He says that his project at 1620 L Street is worth $ 55 million — a good price if it were up and leased, but it’s still under construction. No matter, Hadid is still worth a considerable amount of money, and it shows in the way he’s tuned up the old Chrysler place.
Hadid noses the plane toward a field in the middle of his estate. He touches down smoothly on the grassy landing strip and taxis toward a break of trees. A Jeep Cherokee waits to take us the few hundred yards to the main house, a 25-room affair at the end of a cul-de-sac. Hadid says that the estate was in sad shape when he bought it and that he’s spent millions of dollars to restore it. “Everything works now,” he says.
Before I know it he’s giving me a tour of his spread, which would suit Jay Gatsby. There’s a pool with a pair of cabanas, a bowling alley, a two-story guest house, and formal gardens that Hadid says he designed. Across the gravel driveway is a golf course that Hadid says he also designed (though he doesn’t play golf), a meadow populated by a flock of sheep, and stables filled with Tennessee walkers. Hadid stops to admire the horses. “I gave one to Jack Kent Cooke,” he says. Cooke doesn’t recall receiving the gift.
We move on, past a skeet-shooting range and the caretaker’s huge house. Past the boat house, which is located in a cove surrounded by marshland that lures canvas-backs and mallards. Hadid conducts hunting camps for bankers every fall. He also loves to cruise the Choptank or the bay in one of his three powerboats. “That one’s a Donzi,” he says, pointing to a low-slung bullet of a boat. “It’s the fastest boat around, but I really don’t need the power. I just like to have it.”
Hadid has always liked attention-getting transportation. By the time he’d bought Chrysler’s estate, his trademark vehicle was a Rolls-Royce — sometimes a different one every day. There’s an easy explanation for his wealth of wheels in those days: he was in the classic-car business. He drove ‘em and then sold ‘em.
In fact, there’s an easy explanation for almost every facet of Hadid’s business career. He was born in 1948 in Nazareth, Palestine. His father taught English at the University of Jerusalem. When he was two months old, his mother took him to stay with her mother in Damascus. While they were there, the state of Israel was born in Palestine. When Hadid’s mother returned to Nazareth with the baby, she found an empty house. Hadid says that his father had been expelled. Hadid became a refugee.
“My mother loaded our possessions on a donkey and walked to Damascus,” Hadid says. “She thought my father was dead.”
Hadid tells the story as we bump along in another jeep through a field of winter wheat on the side of the estate that faces Tilghmann Island. He’s donned a greasy John Deere cap for the occasion. “We lived in Syria for 18 months. My mother checked with the Red Cross, but she couldn’t find any trace of my father. Finally my uncle found us and told her my father was alive, and we were reunited.
“My parents never told me the complete story until a few years ago,” he adds. “They didn’t want me to feel hatred for the Jews. It sounds too good to be true. They taught us that hatred stops you from moving ahead.”
Hadid’s father found work with the U.S. Information Agency in Damascus. A year later the agency transferred him to Tunis, where Hadid and his seven brothers and sisters spent the next 10 years. In 1964 Hadid’s father took a job with the voice of America in Washington, and the family moved to Northern Virginia. Hadid was 15. He spoke a bit of English.
It was a hard time for Hadid. There were few foreigners at Washington & Lee High School, and he was the only Arab. No one understood his sense of humor. He didn’t drink, he didn’t smoke cigarettes, and he didn’t smoke pot. He was a soccer player at a football-crazed school. He was an outsider who wanted to make it, and he made it at math.
“I felt that I had to be the best,” Hadid says. “I couldn’t excel in English or history because you need language skills, but math is an international language. I used it to prove my intelligence and creativity, and through math I exceeded at engineering and architecture after high school.”
Hadid’s college education has become a matter of some controversy. One of Hadid’s brochures says that he graduated from North Carolina State University and that he got a graduate degree from MIT. It turns out that he didn’t get a diploma from either school, and his opponents in Aspen have used the discrepancies to charge him with misrepresentation. Hadid brushes off the criticism with an overdose of bravado. “I don’t have to prove anything to anyone,” he says. “I don’t need a diploma to carry around. It means nothing to me. I have enough training in engineering and architecture for 10 degrees. I have to train my architects.”
The facts are that he took enough courses to graduate from North Carolina State but he left school for personal reasons before graduation. He also took some graduate courses at George Washington University and at MIT.
But like most entrepreneurs, Hadid didn’t need a diploma. After college he began to cultivate the image of the man who would soon sit atop Hadid Holdings. His first venture was a nightclub on the Greek island of Rhodes, which he operated for two seasons in partnership with an Englishman who sold cars in London. In 1973 the Brit and Hadid started to import old Rolls-Royces, Bentleys, and MGs for sale in Washington. Hadid named the company Georgetown Classic Motor Corporation. He worked out of a lot at the corner of Wisconsin and Q streets.
In those days Hadid ran with a group of friends that included Jean Pierre Safati, one of Georgetown’s best-known hair stylists. “Mohamed was always a good liver,” says Safati, who now operates Bruno Dessange. “He was a typical bon vivant — a different car every night, very kind, very hospitable, and a great cook.
“I don’t think he’s been affected by his money, either,” adds Safati. “He could say, ‘I’m up here and my old friends are down here,’ but we’re still close. I cut his hair. He cooks for me at his farm. People are waiting to see him fail, but they’re just jealous because he got where he is all by himself. I’m proud of him.”
Some of Hadid’s friends describe him as generous. Paul Cohn, a Georgetown restaurateur, says that Hadid came through with some money when he needed it a few years ago. “That separates the wheat from the chaff real fast,” says Cohn.
Holland, whose company, Holland & Lyons, developed the Paper Mill and other projects in Georgetown, went into the shirt business with Hadid. Later they ran a limousine service. “It never went anywhere,” Holland recalls. “It was one of those businesses where we wound up using the profits to drive around.”
Holland & Lyons rose fast, borrowed too much, became overextended, and in the early 1980s crashed hard, leaving plenty of investors in the lurch. Holland’s style was to put on a big show for investors, and Hadid learned the lesson well.
“Michael was fabulous at putting on a show,” says Holland, who’s still trying to pay off his debts. “Sometimes if the show is good enough, you can make reality of it. People will believe it. You can put a deal together based on it.
“That’s not a damning thing,” he adds. “It’s a talent, and Michael has it.”
And soon Hadid would have enough money to put his talent to work as a developer.
IN 1978 HADID FORMED AMERICAN Export & Development Company. At the time the Arab countries were flush with oil profits: Saudi Arabia, Qatar, and Kuwait were building cities in the desert. Hadid saw an opportunity to make a killing.
“I went over there with bags full of catalogs,” Hadid recalls. “I would sell whatever was needed. I was there at the right time. I spoke the language. People trusted me.”
Eventually Hadid met Arab contractors who needed heavy equipment, and they wanted to buy American. “Suddenly I was selling tens of hundreds of containers of goods, They said, Could you find us trucks? Cement? Heavy equipment?’ I was making plenty of money.”
By 1980 the Arab money was drying up, so Hadid returned to Washington. But he didn’t come back empty-handed. He had established ties with wealthy Arabs who wanted to invest in the United States, and he positioned himself to sock their money into Washington real estate. At the time Holland was assembling property in Southwest Washington along Virginia Avenue. His company was falling apart, so Hadid took over. When the land was assembled, Holland was out of the picture, but his associate, Walter Cheatle, was in. Hadid and Cheatle, whose name and style suggest a Dickensian character, became partners.
Like Hadid, Cheatle was also in the midst of a career change. He’d been a lawyer in Virginia for years, but his days in that profession came to a sudden dose in 1979 when he was arrested for embezzlement. He was tried but not convicted. Before Virginia could disbar him, he started to deal in real estate.
Hadid and Cheatle’s first venture was an office building at 400 Virginia Avenue, SW. Hadid formed Oasis Development with $ 500,000 in seed money from Abu Err Rubb, an investor in Qatar. They bought the land from Ted Georgelas, a Washington developer.
Hadid and Cheatle formed Hadid Investment Group. Hadid had the final say on most decisions, especially those that involved design and financing. Cheatle was the detail man, the manager. Their formula was simple: Hadid would use cash from Arab investors to tie up property. He would finance through small savings and loans or local banks. He would return the cash, and the Arab investors would get a piece of the action.
One early investor came away believing that Hadid had bilked him. Adnan Aidi, a Syrian-born banker who lives in Paris, was introduced to Hadid through the late Mitchell Cuder, a prominent DC real estate lawyer who was instrumental in many of Hadid’s early deals, including the purchase of the Chrysler estate, Aidi says that Hadid courted him with elaborate promises and then deceived him.
Hadid acknowledges that Aidi loaned his company more than $ 1 million to develop a building in Vienna, Virginia. Aidi claims that he and Hadid had formed a 50-50 partnership, but when the building was sold, he got his original investment back with 15 percent interest. Aidi asked for more but decided not to sue.
Hadid calls Aidi’s assertions “absolute bullshit” and contends that he was nothing more than an investor. “Everyone wants a piece of me the minute I start making money,” Hadid laments. “I paid Aidi more than he deserved. I don’t know why he’s complaining.”
Aidi was involved in other ventures with Hadid. He is listed as the chief financial officer of Hadid Investment Group in a financing package for 400 Virginia Avenue that Hadid sent to Paris in 1983. The package is an example of the kind of artifice that Hadid resorted to in his early days. It included a letter from National Real Estate Investment Incorporated that appraised the property at $ 47 million; National Real Estate Investment was run out of Hadid’s office by Walter Cheatle.
LaSalle Partners of Chicago bought 400 Virginia Avenue less than a year after it was built. Hadid used the profits of the sale to roll the dice at the big table. In 1985 he was able to tie up some speculative buildings in Washington’s East End; he bid on the Tysons 11 property; he bought a piece of Port-America but sold it almost immediately. The deals cast Hadid in the role of speculator rather than developer, and the reputation has stuck, though he resents it. “I’ve never flipped a property,” he says. “That’s just what people think.”
In fact, however, Hadid flips as much as he holds. In 1985 he bought three buildings — one in Dupont Circle and two in Rosslyn — from a distressed developer and flipped them to LaSalle Partners for a $ 5 million profit and some equity. He assembled and flipped the Greyhound site recently for a hefty gain. Everything in his inventory is for sale at the right price.
“He’s a broker’s dream,” says John Kyle of Vector Realty. “One day he’s buying, the next day he’s selling, and the next day he’s doing both.”
A deal in Rockville became a bad dream for Hadid. In 1985 he paid $ 575,000 for a piece of city property and promised to build a hotel on it. When the hotel market went soft, he wanted to put up an office building, but the city demanded that he stick to his promise. In a grand charade, Hadid put up a tent, brought in some bulldozers to push around some dirt, and let the mayor stick a shovel in the ground. A week later he pulled the bulldozers and never returned. The city sued for the land and the money, and so far two courts have sided with it, though the case is on appeal.
HADID RECEIVED SOME BAD PRESS OUT of the Rockville venture, but he was in for more devastating news. In February 1986 Cheatle abruptly pulled out of their partnership. He cleaned out his office while Hadid was away on vacation. “It was horrendous,” says one of Hadid’s friends.
It would get worse. After Cheatle left, Hadid discovered that Cheatle’s sidekick, James Quirk, had fleeced him out of hundreds of thousands of dollars and saddled him with a nasty lawsuit.
Hadid says he had absolutely no idea that one of his top employees had set up a slush fund to skim brokerage fees from every lease that his company signed. His defense held up through two trials, and it’s probably true.
Hadid was oblivious. But the fact that he was out of touch is itself an indictment. He was guilty of placing his trust in the wrong people, especially since he had warnings from the outset.
Cheatle and Quirk were close friends; Quirk was one of the few people who stood by Cheatle when he was charged with embezzlement. Cheatle brought Quirk into Hadid’s company. As a businessman, Quirk had a reputation as a good old boy who drove a Mercedes 450SL and had a drug problem. “He used every drug known to man, from cocaine to marijuana,” Cheatle would later testify. “He was heavy into alcohol.”
Quirk spent seven weeks in Dominion Psychiatric Clinic, a drug-treatment facility, before he went to work for Hadid in early 1984. He came into the office for a few weeks, but in May he checked into the Springwood Psychiatric Center for eight weeks. Hadid says he wanted to help Quirk and welcomed him back. He put Quirk in charge of property management, but Quirk botched the job. So Hadid “tried to put him someplace where he couldn’t do any harm.” He made Quirk the company’s marketing director; his job was to act as a liaison between Hadid Development and the area’s real estate brokers.
At the time Hadid was leasing three office buildings: one in Washington (400 Virginia Avenue), one in Vienna, and one in Rockville. Smithy Braedon was the exclusive leasing agent for all three; it had charged $ 5 for each square foot it leased in the Washington property and $ 4 for each square foot it leased in the suburban buildings. But Quirk altered the arrangement. He directed Smithy Braedon to bill an additional $ 2 a square foot for the Washington property and an additional $ 1 a square foot for the other two. Quirk then told Smithy Braedon to kick back the surcharge in checks made out to American Real Estate Company, a dummy corporation that he set up to filch the funds.
The agreement raised eyebrows at Smithy Braedon, a starchy, traditional brokerage firm. An internal memo that was circulated among its top executives said: “Essentially it appears that it was a case of Hadid paying Hadid. . . . It’s not a particularly clean’ deal.”
Nevertheless, the brokers went along. “Why not?” asks one. “Everyone was making money.”
In 1985 Smithy Braedon billed Hadid’s company for roughly $ 1.4 million in brokerage fees, and then paid $ 299,000 to Quirk’s company. The kickbacks took the form of cooperating brokers’ fees, though neither Quirk nor his firm were licensed to broker deals.
In 1986, after Cheatle and Quirk had walked out of Hadid’s firm, Smithy Braedon sued Hadid to recover $ 450,000 in brokerage fees it claimed were due; the details of Quirk’s scam were brought to light in the ensuing legal proceedings. Both sides claimed the $ 299,000 in kickbacks, and everyone had a different account of what he knew and when he knew it.
Quirk admitted that he set up American Real Estate and siphoned the funds. He protected Cheatle by saying that he knew nothing about the scam. Yet Cheatle was on the board of directors of American Real Estate, and court records show that he received $ 144,000 in checks and cash from the slush fund. But Quirk also said that he’d worked closely with Hadid and that Hadid knew everything about his slush fund.
Hadid testified that the first time he had any inkling that Quirk was running a scam came in late 1985. According to Hadid, Quirk came to him and said, “I’ve become a born-again Christian, and I have a confession to make.” Quirk said he had stolen $ 23,000 from Hadid Development and wanted to repay it. He never mentioned American Real Estate, Hadid said. Court records also show that Hadid signed some checks made out to American Real Estate. As a defense, Hadid asserted that he delegated all leasing matters to Cheatle and Quirk. Hadid, the president of the company, never reviewed a lease.
One judge threw out Smithy Braedon’s case, but an appeals court decided that it should be tried. In the middle of the second trial, as the facts of the case began to emerge, Hadid asked Smithy Braedon’s president, Jim Eichberg, to settle. The firm did, for an undisclosed sum.
Today Hadid dismisses the affair as a nuisance. “It was best to settle with Smithy,” he says. “We have to live together. I could have won, but what would I have gained? I need them and they need me, and I want to keep doing business with them.”
Cheatle now runs Huntmar Associates, a development company based in Tysons Corner. Hadid is scrupulous about not saying anything critical about his former associates, but he can’t resist saying that Cheatle — and for that matter his other teacher, Holland — would have done well to stay with him. “Cheatle would have been 100 times better off,” he says. “I have a billion-dollar company. I know what he has. Nothing. Maybe $ 10 million.”
As Holland says, Hadid leads a charmed life. Just when he was facing the biggest crisis of his career, he discovered a way to get well quick, as they say in the development business. He tapped into the financing source that was to fuel his dramatic comeback.
LUNCH IS JUST ABOUT OVER AT THE Hadid estate. We’re eating on the screened-in veranda that overlooks a lawn shaded by enormous oak trees. Beyond a low seawall, sailboats drift by on the Choptank River. Hadid’s wife, Mary, and I are trying to finish off a bottle of white Bordeaux; Hadid is drinking Diet Coke. He takes a few moments to kibitz with his two little girls, and then the conversation turns to one of his favorite subjects: real estate deals.
“You always attract people of your own kind when you’re successful,” he says. “Japanese attract Japanese investors. Arabs attract Arabs. Arabs feel comfortable with me. If they want to invest in this country, often they’ll do it through me.”
To make his Arab partners comfortable, Hadid has inscribed the phrase “God willing” in Arabic at the top of his stationery. Arabs often punctuate their conversation with the phrase,
Hadid says that he has $ 400 million to $ 500 million at his disposal. He drops the number as if he could withdraw the money from the nearest ATM with his bankcard.
Hadid felt he was ready to enter the development game on his own at about the time that Cheatle split. Immediately after the breakup, he kept his company afloat by convincing bankers to extend more credit. He also sold three properties — the Maharishi Building on H Street, the Greyhound site on New York Avenue, and 1620 L Street, NW — to Carlyle Associates, a group of Persian investors who’d been his partners in 1620 L Street, NW. He sold the sites with the first option to buy them back. This kept his hand in and protected them from Cheatle, who’d been in on the original deal and might want to hold Hadid up for some money.
In early 1987 the new Mohamed Hadid emerged. It took him less than a month to buy back the three properties from Carlyle and to add a fourth, at 1010 New York Avenue. “It was time to strike,” he explains. A few months later he was able to knock Trump off the mountain in Aspen.
There’s a connection between Hadid’s resurrection in Washington and his debut in Aspen. Hadid is coy about the source of his money; at first he would only describe it as “an educational foundation.” A bit of digging turned up the name of the organization: the Saar Foundation. It’s a nonprofit corporation that has for-profit arms that operate ventures such as poultry farms in Georgia. Hadid invests some of the foundation’s funds in real estate deals, though Saar also places funds with other developers.
Saar has been able to avoid any publicity, but I was able to arrange a meeting with one of its officials through a lawyer at Kirkpatrick & Lockhart.
Saar’s vice president, M. Yaqub Mirza, explains that Saar is the brainchild of a group of Moslem scholars and scientists from the Middle East and Asia. In the 1970s the group started to raise funds and donate the money to finance antihunger, educational, and appropriate-technology projects in developing Islamic countries. Their biggest donor is the Al-Rajhi family. For instance, Saar runs the biggest dairy farm in Zimbabwe, and it’s building a school on the Ivory Coast. It also contributes to the Red Cross, the March of Dimes, and Fairfax Hospital. Last year, Mirza says, Saar funded a dinner for the homeless through a related foundation, the Safa Trust.
According to Mirza, the foundation changed course in 1983. It moved to Herndon, incorporated as a nonprofit foundation, and altered its fundraising approach. “We asked investors to give us one large lump sum rather than smaller amounts every year,” he explains. “This way we were bringing in from $ 10 million to $ 20 million a year. Then we started investing the principal.”
And when it came to investing in real estate, Saar placed some of its money with Mohamed Hadid, though he isn’t the only developer to avail himself of Saar’s capital.
“He’s a pleasant man,” Mirza says of Hadid. “We have a good personal and business relationship with him. But he definitely has a tendency to do too many things. He wants to acquire more and more and have everything under contract. Sometimes that’s not possible.”
Saar’s relationship with Hadid began just two years ago. Since then the foundation has gone into partnership with Hadid Development on a dozen projects, which puts it into virtually every development in Hadid’s portfolio. So much for the Saudi Trust, the shah’s family, Lebanese drug money, and the PLO. Hadid has some long-standing relationships with Arab investors, but mostly he has Saar and its array of for-profit companies.
“To me, Saar is an institution that has funds,” Hadid says. “They’re going to put their money somewhere. It might as well be with me.”
The Aspen deal was funded by Mar-Jac Investments, one of Saar’s profit-making affiliates. Mar-Jac owns poultry farms in Georgia, and it was through Mar-Jac that Hadid and Saar were able to raise the cash for the Aspen deal. Saar became a limited partner in the venture, and Mar-Jac loaned it the $ 42.9 million. Most of the money came from Mar-Jac’s Saudi investment bankers in London.
Mirza says that Saar uses the same formula to invest with developers in Indianapolis and Canada. “We try to be as aggressive as possible in our investments,” he says. “In some ways we’re similar to other foundations such as Mellon and Rockefeller, but in some ways we’re unique. We work hard with the tax laws to see how we can maximize our return. Sometimes property is owned by Saar; sometimes it’s held by the for-profit companies. We can’t trade too much real estate, though. It creates a bad appearance.”
In the middle of 1987 Hadid’s backers at Saar concluded that the foundation was investing too heavily in the Washington area. They asked if Hadid knew of any good deals in the rest of the country. Hadid said he didn’t, but one of his associates did. The associate’s name was Alan Novak. The deal was in Aspen, Colorado.
ASPEN WAS A STRANGE PLACE FOR Hadid to pick as the first spot to invest Saar’s funds outside of Washington. He’d never set foot in the Rocky Mountains. He knew nothing about the exclusive ski resorts real estate market. Yet a week after he’d arrived in Aspen he was willing to plunk down $ 42.9 million to buy land that some of the best-known developers in the country had passed over.
“He paid three times the price that land was worth,” says Nathan Landow, a seasoned developer from Bethesda who vacations in Aspen. “Developers from all over the country vacation there, and no one would make that deal. I think he’s going to have a very difficult time making a profit.”
“He jumped into the whole thing without covering all his bases,” says Andy Bigford, who’s covered the deal for the Aspen Daily News. “Aspen is a very volatile community. What you have one day you may not have the next.”
So why Aspen?
“He must be going for the glory, not the gold,” says Kyle.
Indeed, there’s plenty of glory to be had in Aspen, and the fact that Hadid would go there to seek it says a lot about him. Aspen, a town of 5,000, is one of the most pretentious places in the United States. It’s Hollywood in the Rockies. The cops drive Saabs, the local McDonald’s is dressed up like a brasserie on Rodeo Drive, and everyone wears designer everything. “This is the home of the beautiful people,” says a local observer. “If Hadid makes it here, he’ll be a real star, if that’s what he wants.”
Hadid says he isn’t looking for stardom, and Aspen might give him something he really needs. “I love this community. I’m not bullshitting you,”he says. “I never had a real home. Suddenly this town takes me in and treats me as if I were a hometown boy. At least maybe that’s what I’m trying to achieve.
“I’m more well-known than the mayor,” he says. “I walk down the street and everyone knows me. I’m like a myth out here.”
There’s no myth about how Hadid got to be a big player in Aspen, though. There are just connections, smart maneuvering, and Saar.
The man who accompanied Hadid on his first trip to Aspen, Alan Novak, was no stranger to the town. Novak, a short, stout lawyer from Brooklyn who’s lived in the Washington area for a number of years, has dabbled in the art business and recently hooked up with Hadid as a consultant. But in 1985 he was in Aspen to try to get zoning approval for a 447-room hotel on the site that Hadid eventually acquired.
Back then Novak’s partner was John Roberts, whom the publisher of the Aspen Times calls “a typical Texas go-go guy.” Roberts represented himself as a trader, says a lawyer who’s familiar with his dealings. “He’d trade horses, banks, land. He flew in and out of town in a fleet of Lear jets,” says the lawyer. When Roberts bought the hotel site and an adjacent 66-acre site out of bankruptcy in 1984, he also had control of Commerce Savings Association of San Antonio, which loaned him $ 42.9 million to acquire the property. As Novak pushed through the zoning in Aspen, Roberts handled the finances, and in 1985 the town approved construction of a 447-room hotel.
Things began to unravel soon after. Texas bankers were squeezed by the impending collapse of the Texas oil industry, and Roberts found himself short about $ 19 million on a note for the property. The man he found to keep him from going under was Adnan Khashoggi, the Saudi arms dealer who was once considered to be the richest man in the world. Then Khashoggi ran into financial trouble of his own in Salt Lake City, and he pulled out of the deal; he sold his loan to Mainland Savings Association of Houston. Eventually Roberts went belly-up in Aspen, and Commerce foreclosed on his loan. Mainland was left holding a bad loan for $ 19 million. The properties sat idle.
Enter Donald Trump, who was eager to find a western hub for his real estate empire, a complement to his Manhattan towers and Atlantic City gambling casinos. Aspen was to be the town, and the site at the base of the mountain was to be the place. Trump dickered with Roberts’s bankers for a year and finally agreed to buy out the Texan’s interest in the hotel site for $ 17.5 million. He made his deal with Commerce and sat back. “We intend to have in Aspen the greatest mountain ski hotel anywhere in the world,” he proclaimed in May 1987.
Meanwhile, back in Texas, Mainland Savings had gone bust. Its bad loans, including its $ 19 million to Roberts, were in the hands of the federal government. The loan would prove to be Mohamed Hadid’s Trojan horse. But he had help from Colorado’s redemption law, which was designed to give the state’s bankrupt ranchers a break. The law gives landowners 75 days in which to redeem their property, after a prospective buyer offers to buy it. In this case, the prospective buyer was Trump. And while the clock ticked, Hadid snapped into action.
When Hadid and Novak returned to Washington after their brief visit to Aspen in mid May, they sat down with their lawyers and tried to figure a way to make the deal. Novak knew it from the inside, and Hadid’s lawyers knew the banking laws. They consulted Roberts to help them plot against Trump. They knew that the Federal Savings and Loan Insurance Corporation would sell Mainland’s loan to Roberts for a substantial discount, so Hadid offered to buy the defunct bank’s $ 19 million loan for $ 1.25 million. The FSLIC agreed, and Hadid was in a position to make a deal with Commerce. Trump had offered Commerce $ 17.5 million for the hotel site. Hadid offered the bank $ 42.9 million for the hotel site plus another 66 acres once owned by Roberts, thus clearing the whole loan. Saar agreed to front the cash. Hadid paid off Commerce, and Trump was vanquished — for the moment.
The weekend after the Aspen deal went down, Hadid was at his Eastern Shore farm when Trump called to offer his congratulations. Trump asked Hadid if he would like a partner. Hadid said maybe. Trump said he was going to Russia and that Hadid should call him when he got back. A week or so later Trump went to court and charged Hadid with illegally interfering with his contract.
Hadid countersued. Matters were at an impasse until New Year’s Eve 1987, when Trump’s lawyer called Hadid’s lawyer, Rick Gross. Trump wanted to bury the hatchet and go into partnership with Hadid.
In early January Hadid and Gross met Trump and his lawyers for lunch at the Waldorf-Astoria Hotel in New York City and struck a deal in principle: Hadid would develop a hotel on a lower section of the property, and Trump would put up some cash and develop luxury condominiums on some ground above the hotel. The lunch turned into a love fest. Trump even talked of building his Aspen mansion next to Hadid’s house. But Trump never came across with any money, he never dropped his lawsuit, and the deal never came off. A few months later Trump and his minions were burning up Hadid’s phone lines again. This time Trump offered to drop his suit if Hadid would pay him $ 6 million. But by that time there had been some preliminary rulings in Hadid’s favor, and Hadid was on more solid financial footing; the Ritz-Carlton chain had agreed to a joint partnership in the hotel.
“I think Trump’s ego, which is even bigger than Mohamed’s, got in the way of the Aspen deal,” says Gross. “He wanted it all to himself. Now he knows the deal’s going to get done and he’s pissed. But his lawsuit is meaningless. It might go on for 10 years, but it has nothing to do with our deal anymore.”
WHEN ROBERTS AND NOVAK SECURED the zoning for their hotel in 1985, Aspen was in an economic slump. It was a one-season tourist town where a few celebs played in the snow — and if it didn’t snow, the community starved. The Aspen Institute lent the town some intellectual cachet, but it didn’t help the businessmen, who were pressuring the town fathers to bring some cash into the community. One thing Aspen lacked was a new, first-class hotel, so the town council approved Roberts’s plan.
Since then, Aspen’s economy has become very strong. In fact, things have become too good. Entrepreneurs have opened even more glitzy boutiques and restaurants, and land prices have gone sky high. The changes are great for the rich folks and the businessmen, but the locals can’t afford to live in their own town anymore. When lift tickets hit $ 35 a day and ski bums couldn’t afford to hit the slopes, the locals rebelled.
Although the boom occurred before Hadid arrived on the scene, he’s become the symbol of the outside forces that are transforming Aspen. Hadid and his hotel have divided the town into no-growth and progrowth camps, and there’s open warfare. Hadid has willingly negotiated with the city — he reduced the number of rooms from 447 to 292, altered the hotel’s design, and agreed to put in a skating rink — but he still hasn’t found any peace.
“No one’s lukewarm here,” says Gideon Kaufman, a zoning attorney in the Aspen area. “Hadid’s caught in a community in flux. Some people think his hotel’s the best thing that’s happened; others think it will destroy the town. He’s caught smack-dab in the middle of a philosophical battle in this community, and he’s the lightning rod.”
Hadid’s lavish lifestyle has launched him into the town’s party circuit, a move that hasn’t helped him to win over the voters. In Aspen the truly wealthy generally try to look like hayseeds; Hadid has imported his antique Bentley soft top and drives the streets as if he were cruising Hollywood Boulevard. The Hadids are the subject of wild rumors. A woman called the daily newspaper with a hot tip about Mary Hadid being the leader of a PLO support group in Georgetown, and Hadid has developed a reputation for being a blatant womanizer because he’s often seen in the company of a beautiful blond; the woman happens to be his wife.
The perpetrator of most of these rumors is Dick Butera, a businessman from Philadelphia who moved to Aspen 10 years ago and now owns a pair of hotels and a tennis club. “We’re bigots, we’re elitist, we’re discriminatory, but we don’t want any more people in this valley. Fuck ‘em,” he says. Though Butera is operating on naked self-interest — his hotels will suffer if Hadid builds the Ritz — he’s managed to spearhead a political movement against Hadid. He’s brought lawsuits to challenge Hadid’s building permits; he’s testified against Hadid’s project before the city council; he’s organized a petition drive to call the matter before the voters in a referendum that’s scheduled for October 11.
“We’ve got two lawsuits and two elections that will drive Hadid out of town,” says Butera. “He’s deader than a doornail.”
Hadid has tried to stay above the fray, though he’s gone nuclear,” in Sarpa’s words, after a few contentious city council meetings. For the most part, he entertains the rich and powerful while his staff haggles with the zoning types. The only time he cracked was when the Aspen Daily News published an openly racist “cartoon to the editor.” The crude drawing depicts three Arabs, one of whom is smoking a hookah, sitting around a Monopoly board. The caption reads: “I khan buy as many khotels has I like. . . . It’s my property.”
“Hadid’s biggest weakness is that people don’t know that much about him,” says Bill Turnage, the head of development of the Aspen Ski Corporation. “It’s been used against him in a racist way because of his links to the Middle East.”
Gross notices the same pattern in Washington. “I think a lot of the rumors here about Mohamed are racist in origin,” he says. “If Mohamed were Jewish, he’d be much less extraordinary. There aren’t a lot of Middle Eastern developers in town.”
By late last summer Hadid was again turning property into cash in Washington. The Greyhound deal closed for a profit of nearly $ 10 million. He was negotiating to sell two downtown properties, and he was about to bring in a partner to help complete the office building at 1620 L Street. The selling spree started tongues wagging about Hadid’s imminent collaspe, but he didn’t hear them; he was in Tokyo trying to arrange the $ 80 million in financing for his Aspen project.
“I have no fear,” says Hadid. “I’m not fighting for my life out there, I’m shaping the future of the town. I own so much of it.”
Despite Hadid’s assurances, his position in Aspen is extremely precarious. He’s tied up $ 43 million worth of Saar’s money, and it doesn’t come free; bank notes on record in Aspen say he’s paying 15 percent interest. He also took out a second loan for $ 7.5 million at a high interest rate from a lender in Louisiana. All told, Hadid has more than $ 50 million worth of outstanding loans in Aspen. That would be a manageable amount except for one problem: the referendum has stalled his hotel construction financing.
It’s not clear what effect the vote would have on Hadid’s current plans because he already has certain vested rights. But voters do have power. Until Hadid’s path to develop the hotel site is clear, no lender will finance the deal. Morgan Stanley is circulating an $ 80 million financing package and Hadid says a Japanese bank has agreed to take the whole deal, but nothing can be completed until Hadid makes peace with Aspen.
That may take some time, too. Butera and his forces have threatened a second referendum if they fail the first time out. Meanwhile, Hadid owns 66 acres on the other side of town that has no zoning, and the neighbors want it to remain an open meadow. Hadid says he’ll sue if the town reneges on his zoning rights, but that won’t free his loans. A lawsuit could keep his $ 50 million locked up for years.
Hadid has threatened to liquidate some of his Washington projects and build the Ritz in Aspen with his own money, but he isn’t likely to follow through. He’s even acknowledging that he’s in over his head. “I figured this would be a gamble,” he says, “but I didn’t figure I’d have to deal with a town that would take away my approvals. That’s just unfair, and it’s made things very difficult. But difficult doesn’t mean I’m going to walk away. I’m not going to sell out.”
Even if Hadid wanted to sell out, there might not be any takers. The precariousness leaves open the possibility that lenders, perhaps even Saar, may lose faith in his nose for a deal. Hadid says he’s under no pressure to sell or refinance, especially since Saar is his partner in almost all of his Washington projects. And besides, who needs Saar?
“If Saar wants out,” Hadid says, “I already have someone to take its place. The reason that developers fail is they lack funds. I always have funds available. For me, it’s the easiest thing in the world to find money. I don’t seek money; I’m sought. It’s no longer a challenge.”
But would that still be the case if Mohamed fell off the mountain in Aspen? As Hadid proved in his early years, development, like politics and sports, is often based on appearances and intangibles such as momentum. For the past two years Hadid has had the big mo. But fortunes and favorites can burn out quickly in the world of development. If his pilgrimage to Aspen turns out to be a $ 50 million failure, Hadid may not be a beggar on the street, but he could once again be a simple seeker of funds, just like other mortal developers.
Mohamed and the Mountain
IT’S AN IMMACULATE SUNDAY AFTERnoon in the Rockies, and Mohamed Hadid is as happy as the sky is clear. Yesterday some ultrarich Saudi financiers in Geneva asked him to be their U.S. developer. Now he’s driving around Aspen — all decked out in faded jeans, new suede cowboy boots, and a straw cowboy hat — in his charcoal-gray Range Rover. Mary, his gorgeous wife, is riding shotgun; their two girls are in the back with me. We’re off to tour Hadid’s piece of the rock.
“I own all of this,” Hadid says with a sweep of his arm, gesturing toward a small hotel that he’s redeveloping and the huge hole that he hopes will become a Ritz-Carlton hotel. We drive to the base of the ski lift. “I own all of that,” he notes, pointing left and right and sounding a bit like a giddy teenager, although not without justification. The site is choice.
The next morning at 8:15, as Hadid starts his workday, the giddiness has disappeared. The sky is in turmoil, as is the week ahead. Tonight Aspen’s city council will decide the date of the referendum on his hotel. Later in the week the council will rule on the design of the second phase of development and the zoning commission will review the plans for Hadid’s skating rink. It’s 10:15 in Washington, and Hadid has already called his Rosslyn office several times to check on developments at home. He looks haggard.
“I thought this was going to be just another development project,” Hadid says. “If I knew it was going to be like this, I never would have gotten involved. Now I have to play politician just to keep my zoning.”
But Hadid can be an adept politician. Though he may not like the role, he can play it well enough to get through this day of Mohamed in the mountains.
8:30. Breakfast at Poppycock’s. Hadid meets with two of his top staffers: Perry Harvey, a former head of Aspen’s planning and zoning board, and John Sarpa, a senior vice president of Hadid Development who’s overseeing the Aspen project. Hadid has a short stack with fruit and coffee. He wears a plaid shirt that’s open to the sternum, black jeans, and black tasseled loafers. No socks.
“It took me a long time to get used to not wearing a shirt and tie to work,” he says. “I need a tie to think.”
9:45. Hadid Aspen Holdings’ offices are on the second floor of a two-story building on East Cooper Street. All the surfaces are new and hard and made of high-tech materials, except for Hadid’s trademark — a marble starburst — that’s been inlaid into the wood floor. Laurie, the fluffy blond receptionist appears with coffee. Hadid signs some checks. David McClaughlin, the president of the Aspen Institute, calls; Sarpa talks to him about a land swap.
10:50. Hadid calls Don Johnson, the star of “Miami Vice,” to thank him for taking his family riding on Sunday afternoon. Johnson invites the Hadids to a barbecue at his house that evening; Hadid invites Johnson to a party he’s having the following night. Hadid calls his farm on die Eastern Shore and asks his cook to double the order of crabs and fish he’s airlifting to Aspen for the party.
“This is a party town,” says Hadid. “I’m invited to seven a day. I hardly go to any of them. We’re not social climbers.”
11:15. A lawyer calls from Washington and offers to buy the lease on a parking lot. Sarpa makes the deal.
11:45. A meeting with Sarpa and Harvey on the design of the skating rink. As part of his agreement with the town, Hadid has offered to contribute $ 600,000 toward the design and construction of a rink in front of the planned Ritz hotel. Blueprints are spread out on the black-lacquer conference table. Hadid and Harvey discuss the design, cost, and construction materials. Should they use quality wood? “Do it, even if it costs more,” says Hadid. Should they retain a cupola that would block the view of the Ritz? “Lose it,” says Hadid.
The conference moves out to a sundrenched patio. The subject is the West Meadows, the 66 acres upon which Hadid wants to build a cluster of single-family homes. The land is adjacent to the Aspen Institute and to land leased by the Aspen Music Festival. Hadid is brainstorming. The institute is feuding with the town and might move. Hadid wants to keep it in Aspen because it enhances the value of his land and he likes to rub elbows with the intellectual types who attend its workshops. He suggests to Harvey and Sarpa that they could solidify their position by making a deal with the group that runs the music festival. “We give them land on our side and build them a new facility; that keeps them happy. We build a lodge to house the institute’s staff at cost; that keeps them happy. Then we can go to the town as a unified force and get zoning.” And then Hadid can build his houses and make good on his investment in the 66 acres.
Hadid wants to can the Aspen Institute immediately and make a deal. The lodge would cost $ 6 million, he’s told. Sarpa wants to make sure the numbers are solid. Hadid is impatient and grabs the phone to call the institute; Sarpa stops him. They call an accountant in the Rosslyn office and ask him to check out their assumptions. Hadid agrees to postpone the call until after lunch.
12:45. Ted Georgelas, a buddy of Hadid’s, calls from Washington. Hadid owns three lots in McLean, and he wants Georgelas to build luxury homes on them. Hadid floats a few numbers — $ 450,000 for the land, an equal amount for the value of the planned houses. He paces, chews his fingers, sits down, and puts his feet up on the sleek black conference table. They strike a deal. Hadid hangs up and winks.
12:55. Harvey walks into Hadid’s office and slaps down a copy of the morning newspaper open to the sports page. Hadid’s girls, soccer team was crushed the night before. “That’s embarrassing,” Hadid jokes. “It kills our image.”
1:15. Lunch with Mary and the kids at a slick Italian joint named Mezzaluna. Hadid enters through the back door. He greets a huge guy named Moose who says he used to play tackle for the San Diego Chargers. Moose starts talking banks in Miami; Hadid winks and promises to get back to him. A thin, bespectacled man stops by Hadid’s table; Hadid says he’s the son of Paul Nitze, the arms control expert. Hadid’s a natural schmoozer. He chats with the waiters and the tan, svelte owner’s wife. He’s already arranged to bring Mezzaluna to his building at 815 Connecticut Avenue. He loves being the big man in town.
2:10. Back in the office Hadid returns a few calls and then meets with the architect who designed the hotel that’s supposed to go up next to the Ritz. Hadid doesn’t like the plans. Everyone sits except Hadid, who hovers and paces. Finally he sits down next to the architect and picks up a pencil. He changes the roof line and asks the architect to alter the design of the balconies. He’s firm but not domineering. He says that the architect has one more chance to get it right.
3:00. Jim Nelson, the business manager of the Aspen Institute, calls. Hadid describes the deal he’s conceived for the institute and gives Nelson an accounting of the development costs and potential income from the lodge. Nelson says he’ll study the numbers. Hadid asks if Nelson can get the head of Sumitomo Bank to attend one of the institute’s workshops. Nelson says it’ll be no problem. Hadid hangs up and winks.
4:00. A strategy meeting with Sarpa, Harvey, and a local lawyer to choreograph moves at the city council meeting that evening. The lawyer points out that Hadid can’t challenge the call for the referendum, so they decide to make a point of being gracious about the democratic process. The crucial issue is the timing of the vote. The council is expected to approve the plans for the Ritz on September 12, so Hadid wants the vote to take place after that date. But if the vote is delayed too long, his financing will be held up. The ideal date for the vote is September 27. The plan: Sarpa will play the good guy, the lawyer will play the heavy, and Hadid will stay in the background.
5:00. We drive out of town and up a winding road to Hadid’s new home in Starwood, the most exclusive enclave in Aspen. Rupert Murdoch and John Denver are among Hadid’s neighbors. We pass through the manned security gate and arrive at Hadid’s house. The first floor has a glass wall that gives a breathtaking view of Roaring Fork Valley, the town of Aspen, and the peaks beyond. The house has two redwood decks. Downstairs is a lap pool, a sauna and steam room, and a weight room. Hadid showers and changes. “It’s a rough life,” he says.
5:45. The council meeting is under way. Hadid is seated in the second row. The referendum is being discussed by the five councilmembers. Sarpa stands up and says nice things about the importance of letting the people decide. Hadid’s lawyer challenges the lawyer who presents the date of the referendum. Sarpa, Harvey, and Hadid huddle for a moment. After some confused discussion and lugubrious parliamentary procedures, the council falls into Hadid’s hands and schedules the vote for October 11 — not too late to hold up his financing.
6:15. Hadid celebrates by cruising the site where he hopes to put up the Ritz. “Ah,” he exclaims, “my beautiful hole.”