By summer 1991, they had commitments from the Gap, Loews Theaters, and an LA-based chain of health clubs. They subsequently sold the J. P. Morgan bank a piece of the building as a training center and traded a building that Morgan owned on Madison Avenue for six floors of apartments to house its trainees and visiting executives. Eight more floors with fifty-six apartments were sold to a group of Saudi investors, and Millennium kept thirteen floors as rentals. The partners even induced the US Postal Service, which had a post office on the property, to move out temporarily and then return as the owner of its own new condo post office. “It all took years,” Aarons says. “It was groundbreaking.” And it was successful enough that Millennium was eventually able to develop three more buildings on the northern end of the bow-tie-shaped intersection of Broadway and Columbus Avenue.
Will and Arthur Zeckendorf would eventually adapt aspects of Millennium’s mixed-use formula at Fifteen Central Park West. They knew that formula well because they’d helped sell it as they transitioned from working for their father to working for themselves. After Marty Raynes and Bill Jr. both wiped out of the deal, the Japanese and Goldman (who had joined forces with the Saudis who owned the floors below) agreed to buy the top eleven floors in order to develop and sell eighty-eight luxury condos, complete with their own entrance, lobby, and elevators; it would be called Millennium Tower to differentiate it from the Park Millennium on the floors below.
Arthur and Will approached Dan Neidich, the number two man in Goldman’s real estate investment department and offered their services to Millennium Tower, “and [Dan] kept us on to do development management and sales,” says Will. “A little messy but it was nice of Dan to keep us.” That partnership would eventually lead to Fifteen Central Park West.
Jerry Karr was a senior member of the Goldman real estate team and its overseer on the project. The son of a homebuilder, Karr had worked on his father’s jobs as a teenager and looks like a construction foreman. He speaks with visible delight about the intricacies of construction and knew the kind of condos the Zeckendorfs had built until then. “Fairly standard product,” he says, “a step up from rentals.” The Millennium Tower units—two-bedroom apartments larger, grander, and better appointed than those beneath them—were a step up from that. By the time they’d all sold in 1995, “we’d gotten the highest prices in the city,” says Arthur—bringing in an average $675 per square foot, with the best apartments commanding $890, which nudged the prices of better two-bedroom units over $1 million.
Neighbors screamed that Millennium had committed fraud on its applications and was insensitive to the environment, and that the building would create traffic jams of both cars and pedestrians on the Broadway side of the building, where a nine-screen theater (including an IMAX auditorium) would open in 1994 along with the rest of the building, followed hard by Millennium’s One Lincoln Square (nearby on Columbus Avenue) the next year and the Grand Millennium on Broadway in 1996. The protests led to revisions of the Special Lincoln Square Zoning District. New, post-Millennium rules and restrictions on height would shortly define what could be built a few blocks south, in the oddest corner of the Special Lincoln Square District, a single block at its southeastern end that extended like a notch all the way to Central Park West: the future site of 15CPW.
But the truth was, in a city where new construction had essentially stopped, the Millennium Tower and its siblings were heaven-sent. Celebrity tenants such as Howard Stern, Liam Neeson, Jon Bon Jovi, and Regis Philbin made them magnets even if NIMBY neighbors didn’t agree. The West Side renaissance was at last under way. And thanks to Millennium Tower, Goldman and the Zeckendorfs had taken their first steps into business together and were set to embark on bigger things. First, though, the brothers made an acquisition that nudged them even higher up the luxury-residential food chain.
Brown Harris Stevens was a carriage-trade real estate brokerage that had seen better days. Early in 1995, the Zeckendorfs and several partners bought it from Harry Helmsley, an elderly developer. Helmsley had been trying to sell BHS ever since he’d been found mentally incompetent to stand trial for income tax fraud and his wife, Leona, had been found guilty and sent to jail for thirty months for income tax evasion. Seventeen Brown Harris Stevens employees had also been implicated in a conspiracy by city managing agents to extort kickbacks from building contractors and suppliers, and the firm was forced to pay a $1 million civil settlement.
Brown Harris, its new owners pledged, would strengthen its hand as the city’s premier management firm for exclusive cooperative buildings and also expand its existing brokerage business. They immediately invested $1 million, bought a new building to house the company, and upgraded its computers. Part of that investment went to developing software to track data and trends in Manhattan real estate. Brown Harris Stevens was, the Zeckendorfs figured, a life preserver that might keep them from the fate of their father. “It was ‘How do we survive?’ ” Arthur recalls thinking. “Developers have four good years and then four bad years.” With a steady stream of income from a well-run brokerage and management businesses, their future would be far more secure.
Goldman Sachs were impressed by the Zeckendorfs’ strategic maneuver. Developers could outsource the creation of a building: they could hire architects, contractors, and salespeople. But the trick to selling condos, especially in a depressed market, was getting the deal right, knowing how to size and design apartments to create the right mix to make the biggest possible profit. Residential developers need to know what customers want, and there was no better way to get that real-time knowledge than to own a management and brokerage company.
The more they talked to Will and Arthur, the more confident in them the Goldman real estate executives became. Goldman had just launched a fund called Whitehall to attract outsiders to invest in real estate alongside the bank. Dan Neidich was chairman of its investment committee; while he ran them, the Whitehall funds would raise $12 billion and buy $50 billion in real estate worldwide. Whitehall money would regularly fuel the third Zeckendorf generation’s projects as they segued from sales and marketing and followed their grandfather and father into development.
Goldman’s next investment in the Zeckendorfs was to buy Bill Jr.’s debt on the Gotham, which stood on the old Gimbels parcel on Third Avenue, where only 90 apartments had been sold and 150 were rented out as a holding action until the market improved. Within a year, as the rental tenants moved out, the Zeckendorfs sold them all.
Next, the Zeckendorfs took over another failed deal of their father’s. In 1989, in partnership with a US subsidiary of Tobishima, the Japanese construction company that had invested in several of Bill Jr.’s projects (and ultimately bought him out of many of them), he had paid $38 million to buy 515 Park Avenue, a vacant twelve-story apartment house built in 1912 at the southeast corner of Park Avenue and Sixtieth Street. Just outside the Upper East Side Historic District, it had an odd but intriguing location, on the border of the midtown business district, close to residential Park Avenue, yet just far enough away that a developer would be allowed to put up something quite tall there.
But their father’s deal was, Will Zeckendorf says, “underwater,” due to the declining value of the land, which was encumbered by a $60 million mortgage held by yet another Japanese company, Mitsubishi. And as their father had failed to meet his obligations on that mortgage and taxes, Tobishima had paid his bills for him, diluting his share.
Will and Arthur owned one-fifth of their father’s rapidly declining half share in the deal, and all through the nineties they’d kept tabs on the loans. “It was a complicated, delicate relationship with the Japanese,” says Arthur. The trick was to stay involved and keep the Japanese from torpedoing the deal by writing it off and bailing out, instead convincing them to extend the loan throughout the economic downturn with the notion that eventually the value of the property would be restored. “It was a ten-year effort, pretending the loan still had face value,” Arthur continues. “Will and I took
them out every month. Ten years of whiskey bars—we’d spend a hundred dollars on whiskey and these Japanese girls would come talk to you. They would speak English to us and Japanese to the Japanese. That relationship kept bad things from happening to the property.”
“It was fun,” says Will, chuckling, but it was business, too, and after years of watching helplessly as their father tried to sell the project to third parties, and then as Tobishima went into receivership, Will had a revelation when he heard that Mitsubishi had given up and was going to foreclose and schedule a live auction to sell the mortgage. “Why don’t we just buy it?” he asked.
Arthur agreed, and they made a deal with their father, who still controlled the land; he said that if they could find a way to recapitalize the project, they could have it.II They then approached Goldman Sachs, “and thank goodness we did,” continues Will. Neidich and his team put them off at first, worried about the location. “They didn’t take us seriously,” Arthur says. “It was no, no, no, but then eventually, yes.” Finally, even though deferred interest of $12 million had by then increased the technical indebtedness, which also included about $47 million in principal, the bank’s executives came around.
“Their father opened the door; they walked through it,” says Ralph Rosenberg, a younger member of the Whitehall team who arranged for one of Goldman’s bond traders, who had a relationship with Mitsubishi, to buy the loan at auction at a steep discount. Whitehall was reported to have paid about $20 million, when, actually, to win the auction, it would have to bid much more than that. The numbers were so high, says a Goldman executive, “people thought we were fucking nuts.” But they weren’t as crazy as they sounded.
The customer base for condos had finally expanded beyond the international set. More and more people wanted to live in the cleaned-up Manhattan of the Giuliani years. Instead of moving away, young families were opting to stay, older people who’d spent years in the suburbs were opting to return, and even dyed-in-the-wool Manhattanites were getting restless in old-school co-op apartments they’d occupied for decades. Due to restrictions on renovations, they were often forced to move out for a year or two to upgrade them. “People had long been reluctant to buy condos because they were so inferior to the great old buildings,” says Robert A. M. Stern. But the latest crop of luxury condos offered an alternative. “Just sell and move into a new place.” The city’s rising demand for large apartments had altered the equation.
The night of the auction, Will says, Rosenberg called them at 8:00 p.m. The bidding for the mortgage had passed their maximum bid of $38.5 million and hit $40 million, he told them. Although that was the number the Zeckendorfs felt the property was worth, Rosenberg said Goldman would likely have to go to $43 million to win the $60 million note. To do that, he wanted them to agree to lower their development fee by $1 million and told them he needed an immediate answer as he was on a plane that was about to take off.
“I don’t care,” Will remembers Rosenberg saying. “It’s going into the dead-deal file. Tomorrow morning you can read that Donald Trump owns the mortgage. What’s your decision? The phone is going off and the dead-deal file is open.” Will describes it as “tough love, Goldman Sachs style.” On the spot, they agreed to cut their fee. Goldman won and Whitehall tore up the note because, Rosenberg says, by then “we knew Will and Arthur as partners and we’d made a deal.” Will is more effusive. “I’ll say this: Goldman Sachs was utterly brilliant, fabulous.”
Goldman was taking a leap of faith, but judged the risk acceptable. “Will and Arthur were just beginning to develop a track record,” says Dan Neidich, “but the site was unique—the last buildable site with height on Park Avenue and protected views to the north and west. It was more about the site than their track record. We bought it cheaply enough to make it worthwhile.” Goldman’s involvement also encouraged banks to issue the loans that covered some of the mortgage as well as construction costs. “It was a very difficult time and the banks had a lot of comfort based on our involvement,” says Neidich.
Finally, it was Will and Arthur’s turn to show what they could do, and their father had prepared things well. Sitting on the northern border of the midtown commercial zoning district, the hundred-by-sixty-foot property could only be redeveloped as a big residential tower if a portion of the building had a commercial or community use. Next door on East Sixtieth Street were two brownstones, but just past them was the headquarters of Lighthouse International, which was just the kind of community facility Zeckendorf needed. So he’d reached understandings to buy the air rights from the Lighthouse and one of the town houses. Immediately after closing their new deal with Goldman, his sons bought air rights to the other town house just to the east of their property; conveniently, Goldman had a relationship with its owner. The Zeckendorfs then combined the four properties into one zoning lot and transferred the air rights from all three neighboring buildings to 515 Park, enabling them to add eleven stories to the thirty-two that existing zoning allowed on the site.
“Will and Arthur drove that,” says Rosenberg. “We were copilot, but day-to-day they did it.” But still, the bankers didn’t let the young developers stray far off the leash. “We said we’d give them a shot because they controlled an intriguing asset,” says Rosenberg, “but we’d have close interaction with them” through Jerry Karr, who “was as important as Will and Arthur on that project. We didn’t give them the keys to the car.”
Investment bankers are, to a great extent, gamblers. But they generally try to know the odds before they make a bet. “We happened to hit at a great time,” says Rosenberg. “I remember saying all you need is forty rich people. It wasn’t that complicated a bet to make.”
Since Olympic Tower, the rich had shown not just a willingness but an eagerness to invest in condominiums in midtown Manhattan towers. As Trump Tower begat Museum Tower, Metropolitan Tower, CitySpire, Central Park Place, and the Millennium Tower, the prices realized had continued to climb, and now they’d neared the magic number of $1,000 per square foot. All it would take was a little nudge—perhaps apartments designed to appeal to both domestic and foreign buyers—and that figure would look quaint.
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I Among the rare exceptions were another Milstein rental building at 30 Lincoln Plaza and a tower on Sixty-Second Street west of Broadway. It replaced a 1904 movie house that was later the site of Walter Winchell’s radio broadcasts and was then converted into a troubled dance venue by Rebekah Harkness, the widow of a Standard Oil heir. Guri Lie Zeckendorf would spend the last years of her life living on its top floor.
II Bill Zeckendorf Jr. doesn’t entirely agree with his sons’ description of the resurrection of 515 Park. “They saw an opportunity and we made the most of it,” he clarifies. “They certainly worked it and became the developers,” he adds, but “I got money out of it. I had an ongoing equity position.”
Part Four
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CIRCLE GAME
What I like to do is recognize a great piece of land and conceive a suitable edifice for it.
—WILLIAM “BIG BILL” ZECKENDORF
In the late 1980s, when Bill Zeckendorf Jr. was building standard-issue condominiums on the West Side, his son Will, then in his late twenties, would regularly walk up and down Broadway, looking for potential development sites and stopping, “of course,” he says, to notice the “big, huge, empty square block” between Sixty-First and Sixty-Second Streets.
It wasn’t entirely empty. Emery Roth’s Mayflower-Plymouth Hotel still stood on the Central Park West blockfront, but all the other buildings had been demolished, and a chain-link fence barred access to the rubble-strewn lot, an eyesore and an obvious opportunity. After sixty years, Columbus Circle, a block to the south, remained a promise unfulfilled. Since the pre–World War I days of William Randolph Hearst, the circle had consistently resisted upgrading. At the same time that Will Zeckendorf was taking his Broadway walks, David W. Dunlap, the New York Times reporter who lived at the Century and daily
stared down at that empty lot, wrote a story about the fifty-five blocks on Broadway between Columbus Circle and Columbia University where ten new towers containing two thousand apartments had recently opened. But new construction had ground to a near halt after the eighties building boomlet ended, leaving Broadway, Dunlap wrote, “more a hodge-podge than ever, vibrant and schizophrenic.”
Among those Dunlap interviewed was John J. Avlon, the owner of that empty Broadway lot. “You’re going to see exciting, eclectic, daring architecture” there, Avlon predicted. But Dunlap seemed to pooh-pooh him. “An enormous tower may rise one day on that parcel,” he wrote. “But current plans envision only a parking lot for the adjacent Mayflower Hotel.” Long after the last automobile showroom had left the neighborhood, cars were still better served than people in the environs of Columbus Circle.
A half dozen years later, the chain-link fence was still around the lot, and something akin to a war zone had sprung up around it. The economic slump that followed 1987’s stock market debacle and the end of the real estate boom had soured New York City on itself. Quality-of-life issues—the deterioration of public behavior and the public life of a city that was, in large part, defined by its street culture—loomed large. New York’s legendary tolerance was being stretched to its limit. Politicians seemed paralyzed; criminals felt empowered; and all over the city, shantytowns reminiscent of both the Great Depression and of the West Side in its earliest days sprang up again, aural, visual, and olfactory symbols of apparent decline.
House of Outrageous Fortune: Fifteen Central Park West, the World’s Most Powerful Address Page 12
