Zeckendorf

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by William Zeckendorf


  Grandfather was, for a time, owner of what later became the Copper Queen Mine. He probably grub-staked the finder and then bought him out. That mine became the basis of the Phelps-Dodge Company, one of America's leading corporations and principal copper producers. The story goes that Dr. James Douglas, a mining engineer from Canada, came down to the territory looking for mining properties. (He was the grandfather of Lou Douglas, who was on the board of Webb & Knapp and has been a good friend for many years.) Dr. Douglas dropped in on Grandfather and said, "Mr. Zeckendorf, I have examined your mine and I think it's got great possibilities. I'm going to recommend it as an investment to two young clients of mine who are just graduating from college. They're Boston people with money."

  In due course, Douglas returned to Tucson and reported his recommendation had been accepted. It was proposed that Grandfather sell his mine to the new company, keeping eighty percent of the stock. The Bostonians would take twenty percent and supply 200,000 dollars' working capital. Grandfather quickly agreed and asked the young men's names.

  One was Phelps and the other was Dodge—the genesis of the great Phelps-Dodge Company, which eventually bought out my grandfather and operates the Copper Queen Mine to this very day.

  Grandfather was also a charter member of the Pioneer Society of Arizona, but after his retirement, he spent the last ten years of his life in New York, where he died at age sixty-four in 1906. I was born in 1905 and never knew him, which has always been one of my greatest regrets.

  As things turned out, we had much in common.

  As an article in Life magazine said of me, "He led a thoroughly undistinguished childhood." This is quite accurate, but my childhood was also a very pleasant one. My father, Arthur Zeckendorf, had left Arizona as a young man. He married Bertha Rosenfield, who came of a family of early settlers in Detroit, and I was born in Paris, Illinois, where Father for a time ran a hardware business. Shortly after this, Father went into the shoe-manufacturing business on Long Island, where he eventually became a vice-president and part owner of Jacobs & Sons, one of the first mass producers of footwear for the new mail-order firms. We lived in the semirural town of Cedarhurst, where we children played at cowboys and Indians in fields where superhighways, supermarkets, and row after row of suburban houses now stand. My clearest memory is of long tramps through the fields in the company of my dog Mickey. I had many friends, but I was also a bit of a loner. By the time I was eight or nine I had discovered that if I acted up enough, I could get thrown out of Sunday school each weekend and spend the day fishing. Father, who had grown up in an adobe home in Tucson, was not much upset at this touch of Huck Finn in his son. He was a cultured, quiet, and kindly man who did not believe in strict authoritarian controls, and I was his only son. My sister Ann, five years younger than I, was even more willful (at least I seem to remember her winning most of the battles around the house). Neither of us was what could be referred to as a repressed child. Mother, who was one of fourteen children, might have scolded a bit more than Father, but she also let us grow our own way, while keeping us very much aware of being part not only of our own immediate family but also of the entire family.

  We were still living on Long Island when America entered World War I, and for us children and most adults, all that the war meant was a new kind of excitement and glamour. We attended all the parades in the nearby Long Island training camps. Soldiers and officers, including dashing young aviators from Floyd Bennett Field, came to the house regularly for supper. This glamour in the home was short-lived, however, because Mother, who had always yearned to live in New York City, finally got her way. In 1917, when I was twelve, we moved into a spacious apartment in the Darrleton at Seventy-first Street and Broadway. This was a section of town to which many well-to-do Jewish families were then moving. The apartments were new, and there was a bake shop or candy store and a fancy delicatessen on every block. The population density was high, but, at least by present New York standards, an amazing number of people knew each other. On the Jewish New Year it was the custom for the gentlemen and their ladies, in their furs, to walk up and down that part of Broadway greeting their friends.

  At that time New York still had one of the finest public-school systems in the country. I was enrolled in the local school, and on my first day there something happened that taught me a very important lesson. It was the classic new-boy situation; I was teased and taunted, and the hazing went on during most of the day. I finally turned to the biggest of my tormentors and said, "All right, meet me outside." Everybody knew there was going to be a fight. When school was dismissed, a gang of kids was milling around by the steps of the back yard, waiting. My opponent was waiting too. I was frightened, but there was nothing to do about it. I took off my coat and started running down the stairs at my enemy. My seeming eagerness must have startled him, for I noticed that he wilted just a bit. The fact is, I was expecting to get knocked down and was rushing in to get it over with, but when I saw him flinch, I gained new courage. He gave up after one or two punches. This minor incident was soon forgotten by almost everyone but me; it taught me a lesson that later applied in business every bit as much as it did in a high-school playground: If you show hesitancy or fear, you may already be half-defeated. If you put on a bold front, and fight with everything you have, you can win. Moreover, once you have won a few battles, you are usually left alone: in the jungle, no animal thoughtlessly attacks the lion.

  I did not finish high school; most of the courses bored me completely. In order to enter college, I prepared at a cram school, Clark's School for Concentration, and completed sixteen regent's exams in one week, something of a record at the time. At age seventeen I entered New York University. It was 1922, I was in my teens, and America was in its Roaring Twenties. College meant football games, raccoon coats, parties, delightfully giddy flappers, and not much work. I majored in commerce, played football, joined a fraternity, became its president, and wrapped myself up in the life of "Joe College" for three years.

  Though I now hold four honorary LL.D.s, I was a college dropout. The social life was pleasant, but classes were dull and a waste of time. Anxious to be in the real world of business, I quit college in my junior year to work for my uncle, Sam Borchard. I left a "thoroughly undistinguished childhood" to begin what seemed to be a thoroughly undistinguished career.

  ▪ 2 ▪Apprentice to the Trade

  PRIOR TO the 1920's my uncle Sam Borchard had begun shifting his energies and capital from the shoe industry into real estate. By 1925, when I went to work for him, he was an important New York real-estate investor-builder worth quite a few millions. I was an untrained new employee, and Sam put me to work in the housekeeping end of the business. This consisted of collecting rents, placating those tenants with service complaints, and buying shades, awnings, soap, and fuel for Sam's various properties. Having neither interest nor patience with this end of the business, I kept popping into Sam's office with suggestions and ideas that might get me into the sales end of the operation. After many months, I finally got my chance. Sam had purchased 32 Broadway, an office structure next to the Standard Oil building in downtown New York. In spite of its strategic location, 32 Broadway was little more than half-occupied; poor management and an office-building boom had combined to strip it of key tenants. The building had cost Sam 1.2 million dollars. The yearly rent, he felt, should amount to at least $400,000, but it was only half that amount. Sam had called me into his office to explain all this, and said, "William, I am going to Europe with your aunt and the children for a few months. I want you to go down there and rent that building. You get that building rented, my boy, and you can be sure of a great future here with me."

  So Sam went to Europe, and I went to work on his building. I tackled the job by taking the elevator to the top floor of each building on Wall Street. Then I worked my way down floor by floor, canvassing each office on each floor. On the theory that every third tenant's lease expired that year (three-year leases were then the norm), I would march i
n with the bold statement, "I understand your lease is expiring, and I'd like to show you space at 32 Broadway." My canvassing was very soon noted by the buildings' owners, who rightly suspected that I was stealing their tenants. They began asking, "Who do you want to see here?" before letting me onto the elevator. Only once was I caught short and escorted out of a building. After that I had someone photograph the directories of every building in advance and was always prepared with the name of a tenant in case I was questioned.

  Of the prospective tenants I approached, perhaps one out of five would come over to 32 Broadway to have a look. Of every five that looked, perhaps one would take a lease, but that was enough. Bit by bit I began to fill our building. By early fall, when my uncle was due back from Europe, I had all but two small offices rented. When Sam's ship docked, I was at the pier waiting with the news. After the inevitable customs delay, Sam, in his dark suit and gray hat, came through the gate, dutifully trailed by my aunt Eva, my cousins Evelyn and Stewart, and a string of porters. Immediately after the first happy round of hellos, I gave Sam the story on 32 Broadway. I stood there waiting for the smiles and congratulations I thought were my due, but Sam merely turned solemn and nodded. Then, as we headed toward the taxi line, he shook his head, saying, "William, about those two offices—how long before you can get them rented?"

  I walked off that pier like a dog whose master had given him a kick in the ribs, and then and there decided there could be no real future for me with Sam Borchard. The next day I walked into the office and announced my decision to quit. Sam was surprised. He said, "Why should you quit? I just raised your salary from twenty-five to forty dollars a week." That did it—the commissions to an outside broker on the leases I had made would have come close to $25,000. I told Sam what he could do with his forty dollars a week and left.

  I decided to go to work for Leonard Gans, a personable young real-estate broker about town. Gans was about twelve years older than I and had already made an excellent reputation for himself. He had recently gained control of large sections of property in Manhattan's East Forties for the great real-estate developer Fred French. On this land French was building fashionable Tudor City, just across from where the UN now stands. Gans had taken over the land so discreetly that neighbors had not become alarmed and prices had not got out of hand. I had met Gans in the course of business, was intrigued by what he was doing, and went to him with a proposition. He had no property-management department. I still don't know why, but I talked Gans into creating a management department which I would head. I ran this business for a few months, but I became more and more restless. I was a late riser in those days, and I also went to bed very late, and it was a dark-of-winter's-morning call from a tenant complaining about plumbing that finally convinced me I was in the wrong field.

  "I just wasn't cut out for this," I admitted to Gans, and gave up management to join him in general real-estate brokerage. For one year I lived on a drawing account of forty to fifty dollars a week against future earnings. I made not a single dollar. Through friends I had met and fallen in love with a young girl named Irma Levy, whose parents became very friendly with mine. Irma and I wanted to marry, but I had to earn some money first, and finally I found a good deal, the Pasadena Hotel at the southwest corner of Sixty-first Street and Broadway.

  The hotel lease was held by a blowsy, tough-looking woman from California who must have weighed three hundred pounds. This elderly flapper was so heavily made up and so unkempt that she could have passed as a madam of a whorehouse. Certainly the hotel was little better. The smell of Lysol was heavy in the dingy rooms. The lady boarders gave visitors appraising looks, and furtive men were continually scurrying in and out the doors. Madam looked sixty. Her husband, a fine-drawn, nervous little fellow, who chain-smoked cigarettes, looked eighteen or twenty and never said much. It was always Madam who did the talking, and persuading that flower of the Golden West to agree to sell her lease for $75,000 took many visits over several weeks. When she finally did agree to a sale, she stipulated that she must be paid in cash. When I brought her a certified check for $75,000, she threw it back at me, saying, "I said cash, kid; that's not cash. I want my money in fives, tens, and twenties, and I want it delivered to my vault, in my bank, the Corn Exchange."

  We cashed her check and sent two pistol-toting guards with two satchels of money to her place in an armored car. She and her husband sat down cross-legged on the floor, and the two of them counted the cash. Then they counted it again, and again, and a fourth time. When they were sure it was all there, we went to the bank. She put her money in the vault, and the deal was completed.

  My commissions on sale of the fee and leasehold of that building came to eight thousand dollars. I could marry. I was twenty-three and had never before had so much money. It made me uncomfortable, and I thought we had better spend it quickly.

  Irma and I were immediately married and sailed to Europe for our honeymoon on the Paris. On board we encountered a new world on the way to the old. We met a crowd of young boys and girls, some going over to school in England and France, others on the Grand Tour, and some "just along for the ride." This was 1928, and although America was immensely prosperous, this was long before the days when the average youngster traveled abroad. These were young society people and definitely out of our spending league. We put on as expensive a front as possible, however, and enjoyed every minute of the trip. There were bridge and poker games, dinner dances, and drinking bouts till the small hours of the morning. By the time of the Captain's Ball we were all one great, friendly group busy with plans to meet again on the Continent.

  On arrival, Irma and I made straight for Paris and quickly learned that the "in" place was the Ritz bar; most of our shipmates were there. At that time the favorite pastime for most affluent Americans was playing the stock market. Americans in Paris would gather at the Ritz at three P.M. Paris time in order to place their "bets" just as the New York Stock Exchange opened at nine A.M. in New York. They followed the price quotations by means of the transatlantic cable. Our acquaintances all had money, plus a bad case of investor's fever, and they bought and sold stocks as if playing a casual game of roulette.

  On our second afternoon in Paris, a couple of men came over to me and asked, "Do you want to do any trading?"

  "Of course."

  "What would you like to buy?"

  Before I had left New York I had met Matthew C. Brush, president of American International, and that company was the first I thought of. Everyone was trading in thousand-share lots, so I said, "Buy me a thousand shares of American International." It was selling for about eighteen dollars.

  A few drinks later they came around again saying, "Hey, Zeckendorf, that stock . . . "

  "What happened to it?" I thought I had been wiped out.

  "We need cash to meet the margin requirement for your stock. By the way, it's gone up four dollars."

  "Sell it," I said after precisely one second's thought.

  This was a "wash" sale, giving me profit on no actual cash investment. It is something not now permitted by the Stock Exchange, but at that time it was fairly common. Now I had a four-thousand-dollar profit, and with those winnings we left town. We traveled in high style in a chauffeur-driven car through France, across Switzerland, and down to Italy, sampling wines, museums, cathedrals, and vistas. Six happy weeks later, in Naples, we boarded the steamship Roma for home, and back in New York I concentrated on making a career.

  New York real estate, like every other business in the country, was booming in the twenties. I was a young real-estate broker still learning my way around, but I had fine mentors such as Sam Brenner, a real-estate operator of unusual ability who was strictly a speculator. He never built anything and didn't want to, but he was a great man at buying and selling. He bought in the morning and sold in the afternoon. The greatest of all such traders, however, was Fred Brown, who treated real estate as other dealers treat commodities such as wheat. He knew how to handle the market, he was trusted by
other brokers, and he took small profits on a large volume (ten or fifteen properties in a day). But it was such developers as Fred French and Henry Mandell who were New York's builders of vision. Mandell, for example, built office buildings at 1 and 2 Park Avenue and created London Terrace, the excellent block-long apartment complex on Twenty-third Street on New York's West Side at Ninth Avenue. Mandell improved any property he touched, and it was to Mandell that I made my next big sale, by contacting Otto Kahn.

  Mr. Kahn, the railroad and financing magnate, patron of the arts and man-about-the-world, was an unusual and attractive personality. He was an elderly but imposing man. A lover of fine opera (and of lovely opera singers), Kahn had bought a great deal of property on Fifty-sixth and Fifty-seventh streets between Eighth and Ninth Avenues. He had offered the site, at cost, as a new home for the Metropolitan Opera Company, but his offer was rejected, and that fine property lay idle.

  Though I was an insignificant New York broker to Kahn, I managed to arrange a meeting with him through one of my wife's cousins who worked for the investment house of Kuhn, Loeb. The old gentleman graciously granted me an audience in his paneled downtown offices, and I asked if he would permit me to sell his Fifty-seventh Street plot. He agreed, and I contacted Henry Mandell, who bought the site and built the Parc Vendome Apartments, which are a successful property to this day. I made some thirty-thousand dollars on that deal, but it was the last big money I would see for some time. It was now 1930. The Depression had arrived, and it was knocking us all galley-west.

  The aftereffects of the 1929 crash were nationwide and cumulative, as industry after industry buckled and then folded. Real estate, even more of a credit operation than the stock market, was hit three times as hard in time, but it went its merry way for a good twelve to sixteen months before it began the great plunge. The delay was due partly to the fact that major real-estate borrowings are arranged months and even years before time. The real-estate business can thus ride out most recessions but tumbles farther and longer than most other businesses in a real depression. The Great Depression, for instance, was at its lowest ebb in 1937–38, but the low in real estate did not come until the early 1940's. Through the early 1930's, however, things were terrible enough.

 

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