And what does it mean for the city moving forward? [Opinion]
By Anne Trubek
In May 2019, a lawsuit “alleging massive money laundering via American real estate by Ihor Kolomoisky” was filed by the Ukrainian financial institution PrivatBank. The suit claims that Kolomoisky and Ukrainian associates funnelled illegally-obtained funds into American real estate deals. During the course of this alleged money laundering, they became the largest property owners in Cleveland. They purchased, under the name Optima Ventures, five skyscrapers between 2008-2010: One Cleveland Center, 55 Public Square, Huntington Building, AECOM/Penton Media Building, and the Crowne Plaza Building. Then they let those buildings deteriorate, and sold them at a loss. (They also bought a steel mill in Warren, which has since gone out of business, its 162 workers laid off.)
It’s an astounding story with national implications, and features some of our favorite characters from the news, including Rudy Giuliani, Dmytro Firtash, and Volodymyr Zelensky. Cleveland Scene reported extensively on this story in June: “At its height, Optima Ventures controlled 2.8 million square feet of downtown Cleveland commercial real estate. This was a larger footprint than even Forest City Enterprises at the time.” More recently, The New Republic published an in-depth article on the fraudulent schemes and subsequent lawsuit, including Kolomoisky’s current efforts to spread anti-Biden rumors, and his hiring of Trump lawyer Marc Kasowitz.
Chaim Schochet, a main player in the purchasing of Cleveland property, and one of the three defendants in the PrivatBank lawsuit, responded to Scene’s request for an interview, denying any malfeasance. “The allegations in this lawsuit—part of an orchestrated political attack by a Ukrainian bank against investors in our thriving business—are false, defamatory and utterly without merit,” he told the paper. “We are immensely proud of our extensive track record building a vibrant real estate portfolio in Cleveland.”
But their record in Cleveland is as bad as their money. AECOM went from ninety percent to fifty-seven percent occupied between 2010 and 2019, despite Cleveland’s concurrent downtown growth. Optima sold the building, which they purchased for 46.5 million, for thirty-eight million. The other properties, similarly, were left to decline, and were either sold at a loss or are currently without a buyer. Optima still owns 55 Public Square, an enormous building in the center of Cleveland’s downtown that is largely in disrepair, and part of the Westin Hotel.
How did this happen? Did anyone ask why a group of Ukrainians without any connection to Cleveland was buying up so much downtown property? Even Rudy Giuliani thinks it should have been obvious the whole thing was based on money-laundering. According to The New Republic, he said “it was so ubiquitous that it would have been impossible [for the Obama administration] not to know about it.”
In 2012, the Plain Dealer profiled Schochet in an article titled “The Most Important Guy You’ve Never Heard of: Chaim Schochet, 25, Builds Cleveland Empire.” Brian Hurtuk, a vice president with CBRE brokerage, who worked with Optima, said Schochet was well-known in town: “[h]e’s pretty much made the rounds.” Local real estate developer Ari Maron said of Schochet and Optima, “I think it’s actually really positive for the city…it’s really a coup for the city to have someone like that investing.” Local investment banker Mark Vogel stated that “I can tell you that he’s a person who cares about the city of Cleveland and wants it to do well.” The city’s chamber of commerce, the Greater Cleveland Partnership, showed Schochet around and introduced him to people; senior vice president Deb Janik said of Schocket, “His fondness for this city is really apparent…He loves the historic nature of the buildings.”
Apparently, all these prominent Cleveland real estate professionals were wrong: the reporting suggests that Optima’s goal was simply to hide its ill-gotten gains, parking them in properties no one wanted, back in the bleak days of the recession, and letting the buildings deteriorate further. No laws were broken, that I know of, by the Cleveland banks, the chamber of commerce, and lawyers who worked on the deals, but reading the Plain Dealer and cleveland.com articles about Optima Ventures with the benefit of hindsight, everyone seems entirely too credulous. The findings laid out in the lawsuit are not only incredible, but also, for Cleveland, embarrassing. How gullible the city seems! How desperate.
These days, the new possible deals that many of the same real estate leaders are excited by, including Blockland, the hyperloop, and CityBlock, are not categorically different from those Optima brokered just a few years ago. There must be lessons to be learned from the Optima debacle: due diligence into finances and motives is an obvious one, as is asking if something seems too good—or slick—to be true. But also, maybe, a need to stop chasing quick fixes to endemic problems.
It would behoove Cleveland, and every Rust Belt city still grasping for solutions to the region’s continued economic doldrums, to focus on what is happening beneath notice, outside of the headlines, and nurture the folks in town who would like to buy and build modestly and sustainably. The demand for affordable housing is growing—an extremely salutary development—but banks are making it too hard for even those with modest means and excellent credit histories to get mortgages and loans. It is harder still for non-white residents to secure mortgages, or to receive loans to purchase properties in historically disinvested neighborhoods.
I’m not the first to suggest that Cleveland and other Rust Belt cities ought to focus on inside-out development—supporting individuals and small businesses already here, people who want to make their lives in the city and who are asking for modest help—and to stop chasing ‘silver bullet’ dreams that involve cash purchases of skyscrapers with money from oligarchs in notably corrupt countries. But it’s a sentiment worth repeating. What this region needs now, more than anything else, is leadership that will protect the public interest—even if that means asking difficult questions, or turning down easy cash. ■
Anne Trubek is the founder and publisher of Belt Publishing, and was the founding editor of Belt Magazine.
Cover image of Cleveland skyline. Photo by Erik Drost (Creative Commons).
*Opinion and commentary columns are the work of their authors, and do not necessarily reflect the views of Belt Magazine or its parent organization, Belt Media Collaborative.
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