Developer With Stealth Reputation Changes Tactics to Build Syracuse Megamall

June 19, 2003

Metropolitan Desk

By Michael Brick, The New York Times

Big-time real estate developers tend to come in two basic packages. There is the extroverted visionary who seduces the public with elaborate renderings and boundless enthusiasm and who plays mayors and other politicians against one another for tax breaks. Then there is the clandestine operator who consorts with silent partners, buys up land in tiny parcels and eventually maneuvers his project past environmentalists and neighbors.

For most of his long and lucrative career, Robert J. Congel, the Syracuse founder of Pyramid Management Group, has hewn to the stealthy stereotype. He has built a small empire of more than two dozen shopping centers and malls in the Northeast, including the 4.3-million-square-foot Palisades Center Mall in West Nyack, N.Y., with its 220 tenants.

Risking his own capital to get his malls finished and to retain control, Mr. Congel has kept a low profile, though he has left a trail of lawsuits wherever he has gone.

The strategy has made Mr. Congel rich, with assets of $700 million, according to an estimate last year by Forbes magazine, which ranks him among the 400 wealthiest Americans.

Now, working on his grandest project ever, Mr. Congel, 67, has changed tactics. He has thrust himself and his proposed supermall, called DestiNY USA and planned for Syracuse, into the political spotlight on a statewide level.

Mr. Congel has asked Gov. George E. Pataki to embrace the project by pushing through the Legislature a bill to guarantee certain tax breaks for years ahead in a manner that could help Mr. Congel secure less costly financing. According to some drafts of the bill, now before lawmakers in Albany, the developer would be able to use as collateral the tax rebates owed him by the state under the Empire Zone program, even if the state decides to end the economic development program.

The request has generated political heat, as Democrats are beginning inquiries into the lobbying efforts of well-paid political allies of Mr. Pataki. Mr. Congel and his companies have spent more than $100,000 in the past two years to hire lobbyists: Alfonse M. D'Amato, the former senator who was Mr. Pataki's mentor; John O'Mara, a former judge who has been the governor's special counsel in negotiations with Indian tribes; Kieran Mahoney, Mr. Pataki's top political consultant; and Thomas Doherty, a former Pataki appointments secretary, according to state lobbying commission reports.

Some critics also note that Mr. Congel and his family have donated more than $37,000 to Mr. Pataki's re-election campaign in the last two years.

At the same time, questions are being raised about the viability of DestiNY USA and whether it truly is, as billed, a salve for some of upstate New York's economic troubles.

''Why does he need public money?'' asked Matthew L. Ostrower, an analyst at Morgan Stanley who covers retail-oriented real estate investment trusts. ''He's going to put it across as a benefit for a place that wouldn't otherwise get it.''

Whether a megamall in Syracuse can generate enough traffic to sustain itself is another matter.

''What he's probably not being as forthright about is that, certainly in this location, in this market, it doesn't make economic sense,'' he said.

Mr. Congel began his development career in the late 1960's, when shopping centers and office towers were financed by commercial banks and insurance companies. Wall Street did not invest in real estate in any significant way, and a developer was often described as either a hired manager or an independently wealthy, self-proclaimed visionary. He was neither of those.

Instead, Mr. Congel gathered partners, including Michael Falcone, who has gone on to become a prominent office developer, and he started with small shopping centers. An early break, according to articles published in 1987 in his hometown newspaper, The Post-Standard of Syracuse, came when the partners began working with a former executive of J. C. Penney. That helped Mr. Congel and Mr. Falcone secure the big department store tenants that are crucial to obtaining financing for a shopping center. As Mr. Falcone turned his attention to office development, Mr. Congel went on to build larger and more expensive malls, often on unattractive lots.

''He looks for pieces of land that can get rezoned, and they usually have environmental problems,'' said Lynne B. Sagalyn, director of the real estate program at Columbia University's business school.

Instead of going public, as many of his contemporaries did, Mr. Congel kept forming partnerships, pulling together private equity capital and quiet, institutional financiers. For each of about two dozen mall projects, there was a new general partnership. For each new general partnership, there was a so-called sponsoring partner, a public face to handle publicity and controversy.

Along the way, he drew a scolding from a state ethics panel that investigated his campaign contributions. The records also show a history of lawsuits from environmentalists and from his own contractors, and a judge's order to pay punitive damages to joint venture partners.

''He's going to get his way no matter what, through politics or his connections or by being a 900-pound gorilla,'' said Steven G. DeRegis, a member of the Syracuse Common Council, who has battled Mr. Congel over his mall contract.

''If you sign a contract with him, you'd better read the fine print. If you don't read the fine print, you're going to get dimes on the dollar on what he owes you,'' Mr. DeRegis said.

Mr. Congel, through a spokesman, declined interview requests, and several senior executives of his main company, Pyramid Management Group, did not return phone calls.

Developers get sued, but some of Mr. Congel's companies' legal fights are unusual even by the standards of big-city builders. Several project partners accused him in an unresolved civil case in federal court in the Northern District of New York of violating the Racketeer Influenced and Corrupt Organizations Act and of draining funds owed to his co-investors to finance new malls and expansions.

Mr. Congel came close to getting out of the business in 1998, hiring Chase Manhattan to explore a sale of the equity in Pyramid, according to Wall Street bankers and news reports at the time. Instead, he stayed in the business and turned his attention to DestiNY USA.

Robust and active, he is said to enjoy hunting, skiing and tennis. But his passion is said to be business, particularly negotiating, and the DestiNY USA project apparently appealed to him on many levels. Besides its ambition, it offers him, he has said, the opportunity to improve his hometown for his children and grandchildren.

''This could be his legacy,'' said Richard W. Latella, a managing director of the real estate services firm Cushman & Wakefield who has worked on Mr. Congel's projects, often as an appraiser for his lenders.

Since the project was first floated in the summer of 2000, Mr. Congel has variously said it will include hotels, a golf course, environmentally sound construction methods, movie theaters, parks and concert halls. It is estimated to cost $2.2 billion and would expand the 1.5-million-square-foot Carousel Center mall in Syracuse by 3.2 million square feet.

Some critics said he has kept the actual shape of the project murky on purpose. ''He's trying every angle he can to make himself eligible for these tax credits,'' said Michael J. Wasylenko, a professor of economics at Syracuse University.

Mr. Latella said that is understandable: ''If you're going to build it, build it with other people's money, that's for sure.''