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Buffalo's hope for One Seneca Tower rides on unconventional developer

To hear Washington’s business and real estate leaders talk, Buffalo just hit the lottery jackpot when developer Douglas Jemal decided to buy One Seneca Tower.

They say Buffalo is very lucky to land someone as determined, focused and creative to redevelop the city’s tallest building. Just look at his track record in Washington as proof of what he is capable of doing in Buffalo, they say.

To hear his critics and Buffalo skeptics, however, Jemal is just another hard-nosed out-of-towner with a reputation for sitting on properties – and with a nine-year-old felony conviction for fraud to boot.

They predict he won’t follow through and won’t play well with contractors. They note his brothers’ troubles in New York City, where the family owned retailer Nobody Beats the Wiz. And they cite Buffalo’s long history of bad experience with fly-by-night real estate investors.

[Gallery: Projects in Washington, D.C., by Douglas Development]

So which is it?

Depends who you ask, and what you believe. But there’s truth to both.

Jemal, 73, is the founder and CEO of Douglas Development Corp., the second-largest commercial real estate developer in the nation’s capital, and one of the most successful when it comes to historic and adaptive reuse projects.

The Brooklyn native spent the past 30 years buying, renovating and reviving dozens of properties throughout Washington and its suburbs in Virginia and Maryland, turning derelict and neglected buildings into vibrant residential, retail and commercial space. And many in Washington credit him with taking bold risks on sketchy parts of town that ultimately transformed them into hip new projects and neighborhoods.

Hecht Warehouse is a development on New York Avenue, NE, in Washington, D.C. (Photo from Douglas Development)

Hecht Warehouse is a development on New York Avenue, NE, in Washington, D.C. (Photo from Douglas Development)

An old department store building became a retail and office center with prominent stores such as H&M and Forever 21 alongside Madame Tussaud’s Wax Museum.

The Wonder Bread factory there gained a new future after he opened up and refaced the three-story building into loft-offices and lower-level retail.

And Jemal took a historic row of buildings along 9th Street and redeveloped them into a new home for the International Spy Museum, storefronts, luxury apartments and offices for The New Republic, Washington Media Group and Varian Medical Systems.

Historic Row is located in Penn Quarter of Washington, D.C. The building is comprised of 118,676 square feet which houses both retail and office tenants. (Photo from Douglas Development)

Historic Row is located in Penn Quarter of Washington, D.C. The building is comprised of 118,676 square feet which houses both retail and office tenants. (Photo from Douglas Development)

More recently, he has grown his family-owned real estate firm by expanding his reach south to Richmond and north to Reading, Pa. And now he’s set his sights farther afield to Buffalo for one of his biggest ventures to date.

“It’s time to move on,” he joked. “I like the cold weather.”

Last week, Douglas Development announced its agreement to acquire One Seneca from LNR Partners, the special mortgage servicer that owns the tower on behalf of bondholders who held a prior mortgage. The price has not been disclosed, although sources say he is paying $12 million. The deal is slated to close in mid-October.

Unlike at least one prior contract on the tower, Jemal says the deal won’t fall through.

“I like to work on a project like Seneca One,” Jemal said. “That’s challenging.”

One Seneca Tower, Buffalo's tallest building, was purchased this week for a reported $12 million. (Derek Gee/Buffalo News)

One Seneca Tower, Buffalo's tallest building, was purchased this week for a reported $12 million. (Derek Gee/Buffalo News)

But it’s not the purchase that’s the big challenge. In a matter of weeks, the tower will be completely empty, with more than 1.2 million square feet of space devoid of any office and retail tenants that filled its floors as recently as three years ago. Experts say that is too much space to dump on the downtown real estate market at cheap rates without overwhelming it. So the consensus among most real estate leaders – including Jemal – is that the tower has to be redeveloped into a mixed-use building, with some blend of residential, hospitality, retail and office space. That will likely cost $100 million to $200 million.

[Related: No wrecking ball for One Seneca Tower]  [Gallery: Buffalo's tallest buildings]

That’s Jemal’s stated plan.

“It was large enough and intriguing enough for me to get very attracted to it,” Jemal said. “Unlike anyone else you had looking at this building before, that was looking at how much they could make, I’m looking at how much I could do.”

The question for Buffalonians is whether he will succeed.

“This is a big win for Buffalo if someone of Doug’s talent and caliber decides to proceed forward,” said Jim Abdo, founder and CEO of Abdo Development in Washington, a competitor of Jemal and a friend for over 20 years, who also has a summer house in Chautauqua. “I’m a big fan of Buffalo’s, and I’m an even bigger fan of Douglas Jemal’s. This is a very good thing for Buffalo.”

He’s a ‘hoot’

Jemal has never been afraid to be a little different. In fact, as a pioneer in retail and then real estate, he seems to embrace being different.
“He’s a great visionary. He’s not afraid of taking risks on transitional areas,” Abdo said. “He follows through. He’s got the financial capacity to do whatever he says he’s going to do.”

Yet Jemal has been panned by some for his business practices and abrasive personality, and he has faced criticism for letting some of his properties languish for years before tackling them.

But he also has been praised for his willingness to tackle projects no one else will touch, and for his innovative ideas in how to redevelop and reuse older properties. Where others see futility, he sees a challenge.

“They have purchased many buildings that other developers have felt were too complicated or complex, or that involved historic preservation issues or were unusual,” said Uwe S. Brandes, a former economic development and planning consultant who helped with original design plans for Buffalo’s Inner Harbor in the 1990s. He now is associate professor and founding executive director of the master’s program in urban and regional planning at Georgetown University. “Their company has really built an incredible reputation of adaptively reusing old buildings in creative new ways.”

[Related: How a 'twin' of One Seneca Tower was repurposed in Portland, for $139 million] 

Those who know him describe him as “unconventional” and “a hoot,” and say he’s “a little bit of a cowboy” with an independent streak and a willingness to snub convention. He has been known to attend black-tie affairs in blue jeans and a shirt.

Rather than using street addresses to name subsidiary companies that own each building, he chooses odd and humorous monikers – like Jemal’s Darth Vader LLC for an all-black and somewhat forbidding office building, or Jemal’s Up Against the Wall LLC for a building that backs up to a wall.

And he’s old-fashioned in style, still doing deals on a handshake and drawing his own conclusions without an army of advisers.

“There won’t be a lot of MBAs running around trying to figure out how to make it work,” said Robert A. Peck, a principal at the national architectural and engineering firm Gensler in Washington.

That’s his charm and attraction for many, including other developers who admire and sometimes partner with him. He describes himself as a straight-shooter, and supporters say he does what he says.

“You’ve got to give him a lot of credit. He was investing in downtown Washington when nobody thought it could come back,” Peck said. “We had an abandoned downtown, and Doug was part of making it an incredibly lively place today. Washington’s kind of fortunate.”

Peck was a friend of Tim Russert, once worked for New York Sen. Daniel Patrick Moynihan, and often traveled to Buffalo.

For some, Jemal’s purchase of One Seneca Tower makes a lot of sense.

“They seem like a logical buyer of the building,” Brandes said. “They are long-term real estate developers and owners. They are not a flash-in the pan. They buy a property, hold onto it for a long time and figure out how to creatively reuse it.”

“I’m still a Buffalo booster, and they have the potential to do wonderful things with Seneca Tower,” said Laurene Schrenk McTaggart, an urban planner with the city of Alexandria, Va., who graduated from the University at Buffalo and worked for Douglas. “It would have been pretty cool to work on that project. It’s just very exciting.”

Retail to real estate

Despite his acclaimed success in real estate, Jemal actually got his start selling general merchandise and electronics, following in the footsteps of his father, Norman, who owned a discount retailer in lower Manhattan. Douglas Jemal went to Washington in 1966, and he and his brother Lawrence opened a dollar-store business called Bargaintown DC at 7th and F streets, near downtown Washington. The store evolved over the years to sell music and electronics, such as vinyl records, tape recorders, radios, binoculars and other small items, and grew to become a successful retail electronics chain.

Lawrence returned to New York and joined with two other brothers, Marvin and Stephen, to launch in 1976 what later became Nobody Beats the Wiz, a well-known electronics retail chain that lasted about 20 years before big-box retailers drove it into bankruptcy.

Douglas Jemal initially was a partner in the Wiz. although he remained in Washington. He sold his stake in 1993.

“It was really hand-to-hand, and being in the retail business, you had to know how to dress a window, and make signs and merchandise to bring customers in,” he said. “I got tired doing that for 30 years.”

By then, he had already started investing and developing real estate, beginning in 1981 with a parcel at 425 7th St. NW and adding small buildings and strip centers in the city,. He then branched out into larger residential and commercial projects and expanded into the suburbs. Most were small ventures, but they added up to an empire.

Today, his family-owned business – his two sons, Norman and Matthew, are also executives at the company – owns more than 9 million square feet of leasable space and 8 million square feet of developable land in the pipeline, with 180 properties in Washington, Virginia, Maryland and Pennsylvania.

In particular, Jemal is known for his work in redeveloping historic and underused properties, transforming them into successful retail, office and residential space. Perhaps most notably, he’s credited with leading the charge in redeveloping the East End of downtown Washington around the Chinatown district, where the Verizon Center is now located.

The Woodward & Lothrop building is located in Penn Quarter in Washington, D.C. There is about half a million square feet that encompasses an entire city block. The retail tenants include: Madame Tussauds, Zara, H&M and Forever 21. (Photo by Douglas Development)

The Woodward & Lothrop building is located in Penn Quarter in Washington, D.C. There is about half a million square feet that encompasses an entire city block. The retail tenants include: Madame Tussauds, Zara, H&M and Forever 21. (Photo by Douglas Development)

Over the last 20 years, Douglas Development redid Chinatown’s historic row, the nearby Woodward & Lothrop or Woodies Building a block away, the Atlantic Building, 1155 F St. NW, and other buildings in the neighborhood.

And what had become a “rough” area in his old neighborhood around 7th and F streets in Washington, near the Gallery Place Metro station, is now again a vibrant retail, restaurant, entertainment, residential and office destination.

Other signature projects include The Coliseum, Uline Arena, the Wonderbread Factory in Northwest Washington’s Shaw neighborhood, the Hecht Warehouse District on New York Avenue in Northeast Washington, Tenley View and 655 New York Avenue.

Jemal has also been a philanthropist in Washington, donating to Children’s Hospital, Columbia Lighthouse for the Blind, the Cystic Fibrosis Foundation and other organizations. And he’s been honored with various economic development, historic preservation, civic and humanitarian awards.

He now is stretching to other cities, working on redevelopments of the 23-story Central National Bank Building in Richmond and the Reading Station in Pennsylvania. So looking to lower-cost Buffalo makes sense, friends say.

“We’ve been playing in this sandbox for a long time,” Abdo said of the Washington market. But “this is a sandbox that’s getting very expensive to play in.”

Certainly, Jemal admits he could “sell and retire,” as he acknowledges the substantial value of the business he has built – not to mention enjoying his children and grandchildren. But “I love the challenge.”

“I really love to work and create. I’m probably a mad scientist,” he said. “I’m attracted to bringing things back that once were. That’s the type of stuff I really enjoy doing.”

The conviction

Not everything has gone smoothly for Jemal, of course. He’s been criticized, including by some in Washington, for buying and holding onto properties for years before doing anything with them.

“He had some properties he held onto for a long time, and did the best that he could with them with the market that was there,” Peck said in his defense.

The developer has been attacked for not paying property taxes promptly, both in Washington and in Richmond. He also has had to worry about his brothers’ problems implicating him. Marvin, who declared personal bankruptcy after Nobody Beats the Wiz folded, was arrested in 2014 and charged with bank fraud and money laundering for an unrelated scheme. Stephen attempted to develop waterfront condominiums in Brooklyn, but the venture failed and he wound up filing bankruptcy and getting sued by investors.

Most significantly, though, Jemal’s own success story was nearly derailed a decade ago. In September 2005, Jemal and his son Norman, along with another employee, were indicted by a federal grand jury in Washington for conspiracy, bribery, fraud and tax evasion.

The eight-count indictment accused them of paying cash and other bribes to a corrupt city official to obtain his help in real estate matters and falsely taking $430,000 from a construction loan to buy another building. Jemal was also charged with paying the employee with “substantial income” that wasn’t declared on tax returns. The city official, who was targeted by prosecutors in a broader investigation, previously had pleaded guilty to bribery and conspiracy charges in 2004.

After a seven-week trial, a jury found Jemal guilty only of wire fraud for misusing the loan proceeds. He faced a recommended three-year prison sentence. But to the shock of prosecutors, the judge instead sentenced him to probation, citing a “rare case” of good works. The judge received testimonials from more than 200 people about the positive impact Jemal has had on the city through his business, his kindness and his generosity. Jemal also apologized in court to his family, friends and the city for “some careless and sloppy business practices that he blamed for his legal troubles,” according to a Washington Post story at the time.

To this day, Jemal remains defiant over the conviction.

“I didn’t do a damn thing wrong,” Jemal said. “I don’t think the jury understood it. The judge did. He was swayed by what he heard as far as testimony. There’s some things that people just don’t understand, and real estate is a complicated business.”

The conviction comes up among people who don’t know him. But his business ventures have only grown in size and stature since then, and he still works with lenders.

“It is obvious that as an extremely reputable corporate citizen, his track record speaks for itself,” Abdo said. “He is highly regarded by the leadership of this city, and is clearly well-regarded, both by the leadership of this city, and is clearly well-regarded, both for his character and for his approach to business. That speaks volumes. People know that this is a man of character.”

email: jepstein@buffnews.com

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