The negotiators for the Irving Trust handled themselves beautifully. In that sense it was a classic series of negotiations, but after a certain point they knew and I knew what the land was worth to them, and we settled at a worthwhile figure; land values are only a relatively small portion of the total cost of a new structure. For instance, take the new Chase building: it ended up costing 120 million dollars. The original land cost $4,670,000 (more land was added later). But, if the original land had cost eight million, this would not in the long run have mattered. Once a course of action is set, a wise negotiator knows what its parts and pieces are worth to him. If he can get it for less, fine; but he will not scuttle his plans on a matter of minor increments. You can lose that much money in the door knobs for a new building.
The Irving Trust deal was concluded in June, 1961, but I still had to find a buyer for the twelve million dollars we had tied up in the lease we held on 40 Wall Street. We got a ten-million-dollar mortgage on this lease from the Chase. This left us with two million in equity on a profitable property, but I needed a buyer to get out our sorely needed cash, and in time one came to me. A London-based real-estate financier named Charles Clore was merging with another Englishman, Jack Cotton. They were starting an American real-estate company. I had previously talked with Clore about 40 Wall Street, with no success, but now the phone rang; it was Clore in London.
"Do you still have 40 Wall?"
"We do."
"Do you want to sell it?"
"Yes."
"What will you take for it?"
"The same price."
"What's that?"
"Fifteen million for the leasehold."
There were more talks and conferences, but eventually he bought it. The 40 Wall Street chapter was closed, and our game of musical banks was ended with a grace note. Seven years had gone by. We had moved the Chase. We had moved the Chemical and Morgan banks. We had moved the Hanover Bank. We had persuaded the Irving Trust to take over the Hanover properties and sold off a half-dozen ancillary properties on the side. Webb & Knapp's profit of perhaps ten million dollars from these combined deals amounted to little more than music teacher's pay for our efforts. The Chase Bank financed many of our moves, but we put up Webb & Knapp assets over and beyond those of the subject properties as collateral; we were the prime risk-takers. The total volume of business involved directly and indirectly amounted to some 250 million dollars. Considering five percent is the average broker's commission, with no risk involved, our take at four percent was indeed modest. We were in business for profit, so why did we do this? We did it because it had to be done, and nobody else could do it. There is a tremendous satisfaction to individuals and corporations alike in leaving an important constructive mark in their trail. There was excitement and fun in putting the puzzle together, but, second only to our United Nations deal, the Wall Street Maneuver was the most important thing we ever did in the New York community, and we were happy to do it. Expanding the effects of these maneuvers, David Rockefeller and his associates have sparked an imaginative renaissance and reformation of downtown Manhattan which Webb & Knapp tried to further make use of and accelerate.
Throughout our Wall Street maneuver the very first building we had purchased, the Chemical Bank headquarters at 165 Broadway, had been burdening our books. We had had to pay Norman Winston such a surcharge for his stock in this fifty-story structure that the return on investment was negative. Over the years, however, land values in the area promised to rise, thanks to our maneuvers, and, thinking in terms of land values instead of building costs, I began to sense a possibility. If I could buy everything south of 165 Broadway for two blocks, including 111 and 115 Broadway, we would have a tremendously valuable plottage. Other buyers and sellers were thinking in terms of return on investment on existing buildings. But if we could buy the whole sweep of land, we would have enough underlying value to make it worthwhile to tear down the existing buildings, seal off or overpass the existing streets, and create a new superbuilding. West of this site, near the Hudson River, the Port of New York Authority, guided by Rockefeller, was planning an enormous World Trade Center. Our plottage, lying directly between the Trade Center and the new Chase Plaza, would become a people-magnet between these two areas. The more I thought about it, the better it looked. The New York Stock Exchange needed new quarters and would sooner or later have to move. The slot between the Chase Plaza and World Trade Center would be wonderful for them.
Actually, we had not bought full ownership of 165 Broadway from Winston, only a controlling interest. As in the case of 40 Wall Street, we then had to buy up two-thirds of the rest of the stock and bonds, go to the court requesting a reorganization, and in that way take over the whole property. This took about three years. This done, I set about buying adjacent properties. The biggest was the Singer Building, into which the company had just put 1.5 million dollars in automatic elevators and a general modernization. For reasons of his own, Donald Kircher, the chief at Singer, liked the idea of moving. He was in the process of trying to spark up and revive this old dinosaur of a company, and a move to new quarters might loosen some of the encrusted tradition that still befuddled the company. However, he wanted eight million dollars for his building; after all, there was all the money he had spent on elevators. Since we wanted to tear the structure down, the elevators, to us, represented a waste of money, but Kircher had his books to think about and was adamant. I argued and bargained again and again, getting nowhere, and we finally agreed to pay his price. Now we had two big buildings and respectable plottage, but because of the high cost of both structures, our average costs per square foot of land were still prohibitive; we had to buy more. I began buying in the next block south of the Singer Building and west to Church Street.
Though I negotiated earnestly and long, we never did get to purchase 111 and 115 Broadway. These buildings were owned by a man named Benjamin Miller, one of the most unreliable and difficult people in New York to deal with. He was an incorrigible delayer. He was trying to hold us up, and succeeded. I finally decided to go ahead without him. We had enough property, what with street closing and overpassing, to give us plenty of land at two hundred dollars per square foot of cost. We could put up our building and let him go his own way. In all, we spent twenty-eight million dollars acquiring 165 Broadway, the Singer Building, and other properties, but while all this was going on, of course, I had been working on the New York Stock Exchange as future tenant.
The man I went to see was John Coleman, who, though little known outside the Street, is one of its most influential members. He is head of the firm of Adler Coleman, who are specialists and probably have more seats on the Exchange than any other firm, except Merrill Lynch. Coleman's father was a policeman, and John Coleman had started as an office boy working for a man named Adler. He finally became a partner, and the firm became Adler Coleman. When Adler got in trouble, Coleman, who had an excellent reputation, carried on. He was a central figure in the Exchange, which is generally run by and for the specialists, and as we drove downtown in a cab one morning, I said, "John, here is a sketch of where I think the Stock Exchange should be."
"You mean we can buy all that property?" he asked.
"You can buy it or lease it, I don't care which. I'll give you everything from 165 Broadway down to 115 Broadway, and I can even buy 111 and 115 Broadway and bring you all the way down to Trinity Place.
"There will be the new Trade Center to the west. You have Chase Plaza to the east. One-forty Broadway will replaced by a new building. The axis between the Trade Center and Chase Plaza, with its access to parking and subways, will make for a year-round people-passage. We will have covered walks, malls, shops, and restaurants. Set the Stock Exchange on our site, and it will be the very heart and core of the entire financial district."
We talked further in his office, and Coleman finally said, "O.K., Bill, you deliver those buns, and we'll buy them."
I figured that conversation was enough to move the Stock Exchange.
I thought Coleman did business that way; it is the way I did business. I walked away from his office and soon after agreed to pay Kircher his eight million for the Singer Building. Webb & Knapp then began buying south of the Singer Building. We formed a new corporation called Finance Place and set our architects to designing the greatest possible column-free area for a new Stock Exchange trading floor.
It is simple enough to build a giant auditorium or theater, which is what the Stock Exchange floor is, but it is something else to put an office building three-fourths the size of the Empire State over such a manmade cavern. I turned the task over to Pei and his partners, and Henry Cobb came up with one of the most ingenious building designs I have ever seen. One solution to the problem would be to create our "auditorium," then put a giant 25,000-ton, 270-foot-long truss or bridge of steel over the open space to support the skyscraper. This would be a brute-force and very expensive solution. What Cobb did, instead, was design a building that was seemingly conventional in all but two respects. First, the building would be sloped inward from a 270-foot width at the base to a 90-foot width above its forty-fifth office floor. In a sense, it would be something like a beautifully tapered Mayan temple. Across the 90-foot-wide top of the building, however, we would have a series of 28-foot-deep steel trusses. During the construction phase, the building would be put up with conventional steel girders rising through the center section to support the framework above. However, when the 28-foot-deep trusses were finally placed across the roof, all the great girders cluttering up the bottom-floor space where the Stock Exchange would go would be cut out with acetylene torches and carted away. Instead of being held up by center-floor girders, the office floors above this "auditorium" would hang down from the roof trusses, much as a nonmoving elevator hangs by its cables from a building's roof. The Stock Exchange area would therefore be entirely column-free.
It is dangerous to design a speculative building with only one prime tenant in mind, but I had decided to do so. We had a fabulous and distinctive design, and an ideal location. We also had, or thought we had, unofficial but powerful backing within the Exchange, so we went ahead. More accurately, we tried to go ahead—but didn't get very far. In fact, we lost out. As to the details of this story, I must be vague. I was, unfortunately, never entirely privy to what was actually going on. What I do know is that during the time of our planning of and assemblage for Finance Place, Keith Funston, president of the Stock Exchange, had been negotiating for a new site with another real-estate group headed by Sol Atlas and my friend John McGrath, a fellow trustee of Long Island University. Down close to the tip of Manhattan, near the Battery, Atlas and McGrath had a five-acre site, part of which they had offered to the Stock Exchange. The site had started out as an urban-renewal project, and the original assemblage was very cleverly done and neatly dovetailed. There had been some quite adroit use of city planning and street widening, so that by street-widening condemnation, original owners who might have held out against the assemblers were easily swept up and away at a relatively modest cost. Then, at the proper time, there had been a rezoning of the area, so the assemblers could charge top rates for later sale to the city. The area had originally been intended for some kind of housing project which the Wagner administration was increasingly attacked about. Therefore, the plot was turned into an office development. Moving the Stock Exchange to the Battery site would very neatly get the Wagner administration off an uncomfortable hook, so the whole thing was deep in local politics. Coleman was very close to the Wagner administration. Perhaps he was, or thought he was, tied into something he could not get out of. As I say, I still don't know the full story. I thought I had backing, but at the crucial moment it turned out not to be there. By this time, the infield who were running the Exchange had their own deal lined up and wanted no inside comment, and certainly no outside suggestion whatsoever. However, the logic of the situation spoke so strongly for Finance Place that I kept trying. I made calls, made presentations, argued and pleaded my cause. In time, individual Stock Exchange members also began to argue against the foolishness of moving the Exchange so far south. Even The New York Times wrote a strongly worded editorial to the same effect. Over many months the ensuing dialogue generated a great deal of heat. It also brought a certain amount of light on a matter that the Exchange managers would have preferred not to debate, and for which they gave me no thanks.
One immediate result of all this was that Webb & Knapp and Finance Place lost out: the Exchange managers flatly refused to consider our site.
Part of what happened was that the Stock Exchange, a free-ride monopoly controlled by a small group of insiders, is a very sensitive and defensive institution. Like the old-time barons in Europe who charged a handsome toll for all boats using the stream by their castles, the Stock Exchange membership charge fees out of all proportion to the services they actually perform. Aware of and nervous about this, they habitually overreact to any outside interest or criticism of their situation. As a case in point, when Mayor Lindsay suggested a transfer tax on Stock Exchange transactions. The reaction was an immediate threat by Funston to move the Exchange out of town. The truth of the matter is that in spite of Funston's thundering, no Exchange members ever thought seriously for more than half a minute about moving the true heart of their operation out of New York. However, as happens at a time of pressure, politics, and propaganda, the Exchange, which officially was still committed to move to the Battery site, used this situation to extricate itself from the Battery move which so many of its members were now opposed to. Claiming the need for flexibility of action in their contest with Mayor Lindsay, they publicly rescinded the planned move to the Battery.
Shortly after the above incident, Funston left the scene. That the Stock Exchange might yet decide to move to the site we suggested to them was a very faint possibility, but the loss here was to the Exchange and not to Webb & Knapp. By then we had sold off that property, at a modest profit, to the U.S. Steel Corp.
During our assembly of the Finance Place properties and earliest wooing of the Exchange, the cash demands of the assemblage were relatively low. But, come law day, when we would pick up the various deeds and pay out over twenty-four million dollars for our purchases, we would need cash. The assemblage was good enough so I could borrow eighteen million dollars on the properties. If I could sell, lease, or borrow another ten million, we could get all our cost out, and some profit; if not, we would have one more potential disaster nipping at our heels. The difficulty was in finding a big enough and strong enough buyer or combination of backers to come into the thing with us. For months I had been casting about in my mind, and finally came up with the name of the single, most logical one of all possible entrants: the U.S. Steel Corp.
U.S. Steel, in spite of its size and ramifications, is an introspective company with very few outside interests. They might not immediately recognize that they were the logical buyers of Finance Place, but I planned to remedy that. By now we were working very closely with Alcoa on a great many fine projects. I called Leon Hickman, Alcoa's executive vice-president and chairman of the finance committee, and asked him if he knew Roger Blough, head of U.S. Steel.
It turned out that Hickman and Blough were great friends. As a matter of fact, it was Hickman who proposed Blough to the United States bar.
That phase of the bar is much like proposing a man's name to an exclusive club, and when Hickman said, "Would you like to meet him?" I replied, "I would, very much."
A few days later I got a call, and a voice announced, "This is Roger Blough. I understand you want to meet me."
"I do, Mr. Blough."
"Well, I'll be in town Saturday. I'm officiating at a Pennsylvania Society meeting; we are going to give Jim Simms of the Penn Railroad a medal as 'Man of the Year in Pennsylvania.' "
Blough then said, "I could be in your office at twelve o'clock."
"Would you like me to call on you, Mr. Blough?"
"No, I'll be there."
I had our architects and
staff alerted. We had a beautiful model of Finance Place set up in our upstairs conference room, and at twelve o'clock the next Saturday, in walked Mr. Blough, accompanied by one other gentleman. Blough introduced the second man, Tyson, as chairman of Steel's finance committee. I thought to myself, "That's the guy I really want to see." We shook hands all around, and we took them upstairs to see the model. Though other metals had lately been entering the picture, steel's great competitor in construction was concrete. Steel, however, had great advantages over all its competition, and one advantage I wanted to point out right then was its use in the truss. Only the truss, by overpassing the streets, could free architects from the design limitations imposed by city street patterns. Most architects, I remarked, are little more than zoning lawyers. The truss, however, could help architects break into new areas, I said, and pointed to the intriguing detail of our model as a lively example of what I meant.
Blough and Tyson were quite interested and pleased by the idea (we all like to see our product well used), and as this little exposition came to a close Blough said, "I want to thank you very much, for showing us all this."
They both got ready to leave, and I said, "Gentlemen, I didn't exactly go through this for my health or because we are running a school; I had a purpose in telling you what I did.
"The purpose of this discussion was to point out that the concrete industry is taking the cream of the building business right away from you.
"When I was a boy, all these buildings around here were going up with nothing but steel. Concrete was for one- and two-story structures only. Today, structural concrete is doing the job in sixty-and seventy-story structures. In fact, it is becoming the rule to use concrete and the exception to use steel. You people are dying in the high-rise market. You are losing ground every day to concrete.
"I'll tell you what your real difficulty is: you've got mastoid trouble."
Zeckendorf Page 32