Bill Jr.’s bet on Columbus Circle was the first of significance since William Randolph Hearst’s in the twenties. The circle is the point from which distances to and from Manhattan are measured. Could development move west and finally make it a focal point within the city, too? Zeckendorf saw it as a vital link between upper Broadway and west midtown. “We were a little bit early,” he allows, “but we had Japanese partners doing marketing in Japan, which made it much safer.” Nonetheless, that was the moment when Bill, whom the papers still called Jr., proved to be a little too much like his dad.
At the time “the boys,” as they are still often called, each had his own turf. Will, the business school grad, handled finance, and Arthur, the shyer and apparently more diffident of the brothers, design and marketing. Balding, with a slight lisp but a tenacious grasp on all it takes to develop a building, Arthur is the inside man of their team. His brother, who has a silver tongue, a full head of hair, and an uncanny knack for marketing apartments, is Mr. Outside. “Will was very smart, a very smart talker, very analytical, very nice,” says a banker who worked with them. “Arthur was much quieter.” As time went on, they would overlap and share most jobs, but Will admits that Arthur had a particular knack for visualizing floor plans in three dimensions, while he was more involved with lobbies and other public spaces of the buildings. But both managed projects, and both lived at the Park Belvedere, built by Bill in 1984 on Seventy-Ninth Street, across the street from the American Museum of Natural History. Its architect, Frank Williams, would work with the family for years, and Bill was particularly proud of its good looks and the way it fit into a neighborhood where there’d been almost no new construction since the 1930s. The market agreed. Bill got an average $400 per square foot for apartments there, and their value quickly doubled.
The Park Belvedere had been Arthur’s project. He would also eventually claim some credit for the Columbia, and two East Side condos. Will ran herd over three Hudson Towers buildings at Battery Park City and the Copley. Both boys worked on Central Park Place and Zeckendorf Towers. “There was never any doubt in my mind that I would go into real estate with my father,” Will said at the time. Bill said his goal was “an ongoing family company that will have staying power.”
Zeckendorf’s focus that year was on the city block bounded by Forty-Ninth and Fiftieth Streets and Eighth and Ninth Avenues. It had been the site of Madison Square Garden until the arena was demolished in 1968 and replaced by a parking lot. But attempts to develop the block had hit the shoals of community opposition while its owner, the Gulf & Western conglomerate, was stuck paying about $1 million in taxes a year—so they sold it. In fall 1986, Zeckendorf was assiduously pursuing the zoning variances he’d need to achieve his dream of erecting three buildings there with offices, condominiums, and retail stores surrounding an open plaza in the middle of the block. The complex would eventually be named Worldwide Plaza after Zeckendorf’s financial partner. Construction began that November and would take two years. “Our view is that Eighth Avenue will be one of the great streets in five to ten years,” Zeckendorf said.
No one doubted it. Zeckendorf’s track record of twenty completed projects worth a billion dollars made Worldwide Plaza seem like a sure thing from the moment the Zeckendorf-led syndicate bought the block for $100 million. The ad agency Ogilvy & Mather signed on as a partner and anchor tenant, sharing the building costs: $550 million. In July 1986, Zeckendorf won final approval to build it on the same day he won the right to redevelop South Ferry Plaza, the Staten Island ferry terminal at the bottom of Manhattan. That project was budgeted at $334 million. The New York Post’s story on his coup was headlined “Zeckendorf’s $884M Day.” Unfortunately, the photo illustrating the piece was of Big Bill, not his son.
It was a critical moment. The company went from one or two projects a year to as many as a dozen at a time. “Massive projects,” says Arthur. “He’s hot and the market’s strong and the banks are throwing money, Japanese banks, American banks, Canadian banks, and he buys all this land.” “He pretty much said yes to every deal that came his way,” adds Will. “He made a conscious decision to ramp it up. It was wild. Managing growth is tough under any circumstance, and managing the takeoff we had then was a Herculean challenge.”
Negotiations to rent the remaining office space at Worldwide Plaza proceeded through 1987, with Cravath, Swaine & Moore, a stuffy white-shoe law firm, N. W. Ayer, another ad agency, and Polygram, the record company, all circling, but not committing, and the entertainment conglomerate Viacom making a handshake deal to rent space there. Just after, Ayer agreed to rent four hundred thousand square feet, but then it lost the US Army account (it had created the slogan “Be all that you can be”) and backed out. Then, in October, the stock market crashed and the building craze that had lasted nine years abruptly ended.
Wall Street payrolls and profits contracted, and all over the city real estate suffered. In the late eighties, developers had rushed projects in order to collect government incentives and tax abatements that were set to expire, raising construction costs and glutting the market with condos. Suddenly, lenders grew wary. Leases weren’t renewed. Apartment prices fell. More than 60 million square feet of office space sat vacant.
At Worldwide Plaza, still a construction site, Viacom suddenly lost interest in leasing a new headquarters. To hook Cravath (which wanted thirteen floors) and keep Ayer interested, Zeckendorf had had to put more bait on his hook: equity in the building plus bargain-basement rents. Polygram and, later, lesser tenants got sweetheart deals, too. Making matters worse, well into the midnineties the blocks surrounding Worldwide Plaza that Zeckendorf had believed would radically improve after he started building did not. A quarter of the condos, which were sold for an average $380 per square foot, would still be vacant in 1990. More than a quarter of the retail space in the development stayed stubbornly empty, too, the New York Times would later note, because the area “sometimes feels threatening to tenants and visitors alike.”
By then, Bill Zeckendorf was in worse trouble than the neighborhood—thanks to his itch for development. “Go from ’83 when he had one project, the Park Belvedere, to 1990 when he had eight or nine massive projects under way,” says son Will. “You can’t manage that. Developing a major building takes four years, and once the process begins, it rarely stops, even if the market slows down.” Arthur was uncomfortable and voiced his concerns. “You’re stuck,” he recalls grimly. Asked if his ambitions had grown too large, their father sounds impatient. “The market had turned,” he says now. “You’re always ambitious, but you go with the market.”
Zeckendorf Co., Bill Jr.’s post-Colin company, had grown to 150 employees with half a dozen executives overseeing separate departments dedicated to specialized areas such as construction and retail leasing. Things still seemed like business as usual—even to Will. “It was a very late-eighties capital structure,” he says. “Highly, highly, highly leveraged.” But that was normal. Or so Will himself thought until fall 1989, when his father suddenly blurted out, “I think I’m broke.” “I don’t know,” Will answered. “I think things are going pretty great.” But father knew best. The Zeckendorfs had made commitments and had to keep going, straight into a financial abyss.
Even though Wall Street was frozen and represented 40 percent of the condo market, keep going they did. In 1990, Will was the project manager on the Alexandria, a new condo at Broadway and Seventy-Second with a vaguely Egyptian design and apartments conceived to fill the gap between the sprawling units popular in the late 1920s and the studios and one-bedrooms in undistinguished brick buildings that represented the pinnacle of residential urban architecture after World War II.
Each of their buildings had improved on the last. “Bigger apartments, higher ceilings, more generous amenities, better design,” says Arthur. At the Alexandria, Will targeted baby boomers with children who wanted larger apartments but were willing to trade old-style amenities such as dining rooms for the building’s setback balc
onies and its basement health spa complete with a pool. To counter the still-lingering memories of what had been known just a few years earlier as Needle Park, a gathering place for drug addicts just across Broadway, the Zeckendorfs paid to fence, plant, and light it. Though it was clearly in their economic interest to do that, the Alexandria also evidenced the family’s belief in the West Side. Their target price for sales of about $425 per square foot was a bet that the neighborhood was on the upswing. Their father kept making deals south of Columbus Circle, too. “It’s a natural area for new development,” he told David W. Dunlap, a real estate reporter at the Times, simultaneously revealing his plans and his unabated self-delusion.
Zeckendorf must have known that, in 1989, the real estate market had hit a speed bump. Sales slowed, credit tightened, real estate values flattened and declined across the country, and inflation jumped just as troubled savings and loan associations across the country started dumping their real estate assets at fire-sale prices. By the following year, when Zeckendorf gave Dunlap that optimistic quote, he was already in serious trouble. “The music stops and he has six or seven projects in midstream,” says son Will. Adds a wistful Arthur, “If the dance had continued, it would have been great.”
More dominoes fell. Integrated Resources, a financial-services company that specialized in tax shelters, collapsed and went bankrupt shortly after signing a lease for three hundred thousand square feet at Zeckendorf Towers. Bill’s hotel on Times Square had another two hundred thousand square feet of unrented office space. Five of his condo projects had unsold units, too. Zeckendorf was renegotiating loans on two other deals that were both suffering from cost overruns, redeveloping the Herald Square and Upper East Side sites that had been home to Gimbels department stores. Zeckendorf sold a big assemblage on Fifty-Seventh Street between Park and Madison to the same hotel group that years before had bought the Mayfair. Most significant of all, he was negotiating the sale of a majority of his company to Tobishima, a Tokyo-based construction company. The dollar was falling against the yen, and Japanese had started snapping up real estate all over America, from condos at Central Park Place to troubled trophy properties, Rockefeller Center among them.VII
In September 1990, the Wall Street Journal ran an exposé of Zeckendorf that “effectively ended his career because, when the banks saw it, they flipped,” says Will. He thinks a banker leaked the story. His brother blames an attorney. Regardless, the piece, headlined “New York’s Realty Woes Hit Zeckendorf, Who May Sell Stake in Firm to Japanese,” was devastating. “Bill Jr. was a risk-taker,” says one of his bankers. “I wouldn’t say gambler, but he was willing to sign guarantees. He had an unusual personality. He was very ‘Don’t bother me with details.’ He’d listen to a fine-tuned analysis and halfway through he’d say, ‘How much per square foot?’ That was all he was interested in. He just liked to do deals.”
Luckily, he was also well liked, so his creditors were inclined to help him work things out. He was hardly alone. “There’s a lot of wreckage in that cycle,” says Will. A number of other major developers, including Donald Trump and Larry Silverstein (who was one of Zeckendorf’s partners on the Gimbels deals), had gotten caught in the collapse of realty values and restructured at that time. Bill Jr. finally admitted to the Washington Post, “Things are as bad as I have ever seen them—for everybody.”
At the time, a broker he’d worked with predicted that Zeckendorf would be back when the market improved, but five years later he was still shrinking. He’d lost control of Zeckendorf Towers and his Columbus Circle office building. The former “was his undoing,” said Crain’s New York Business. He’d paid out millions to brokers and to build out Integrated Resources’ space, which sat empty until Zeckendorf could no longer service his loans. The Times Square hotel was so delayed that Zeckendorf, who’d sold the place but was still responsible for finishing it, ended up in litigation with its builder over costs that ate up all his profits. Falling condo prices hurt as well. He was being nibbled to death. Worst of all, Zeckendorf Co. was no longer Bill Jr.’s business. Crain’s also revealed that his sons had quietly taken it over a few years earlier.
For Will and Arthur Zeckendorf, the early nineties were a nightmare. “From ’90 to ’92, it’s all hands on deck with fire hoses, trying to save the ship,” says Will. “By the middle of ’91, I know it’s an utterly hopeless situation.” During those years, though formally still employed by their father, “we worked for banks,” says Arthur. Within the small circle of Bill Jr.’s close associates, it was said that the boys “more or less threw him out of the office,” according to an architect the Zeckendorfs worked with.
“It was my decision,” Bill Jr. insists. “At that point, there was much less to do and I decided I should give the boys every opportunity.” Regardless of whether he was physically in the room, he remained a tangible presence as they helped his lenders understand his deals and, as projects were foreclosed or restructured, worked out rescue plans based on intimate knowledge that let them map the road to ultimate success. When a Japanese bank took over the Gotham, for instance, the Zeckendorfs convinced the bankers to make it a rental for the moment and wait for better times to sell the apartments. “Why sell for ten cents on the dollar when we can recover all your assets?” Arthur asked them. They did the same at Worldwide Plaza, which was taken over by the Blackstone investment bank, “who, as a thank-you note, kept us on as asset managers for three or four years,” Will says.
“We were on a risk diet,” he continues. “We don’t want to take risk. And we’re trying to earn enough income to support ourselves and the employees and their families. There’s not much left of the old Zeckendorf Co. at that point. I don’t want to say ‘lights out,’ but it was close to lights out. The company is basically Arthur, myself, and a secretary. I’d say ’91, ’92 were the lean years. My worst two years.” But in 1992, they started their own business, Zeckendorf Realty, and began offering their services to others. “They had to go into the fee business to use their knowledge and skill set as opposed to risking capital because you have to have capital to risk it,” says a banker who met them at the time.
The hotelier who’d bought Bill Jr.’s Fifty-Seventh Street project hired them to help develop what became I. M. Pei’s and Frank Williams’s Four Seasons Hotel. They were hired by banks that had foreclosed on other developers, too. “We said, ‘We have no debt. We have no problems with banks. We’re clean. Do you want an experienced developer to work the property out for you?’ ” Will recalls. “They hired us to finish construction, do marketing and sales and asset management. By ’93, it was a new kind of life. It was kind of liberating, actually.”
Though Bill Zeckendorf “packed his bags and moved” to New Mexico in 1992, in Arthur’s words, and was no longer involved in the business in any way by 1995, it took the rest of the decade before he let the world know that he’d left the arena and created a new life in Santa Fe. At age seventy, Bill gave his last interview to the Wall Street Journal. Sitting on a pillow designed to cushion a back so bad that he’d had a pump surgically implanted in his body to give him constant doses of painkillers, he blamed a lifetime of horseback riding not just for ruining his back but for hastening the professional downfall kicked off when the market cratered in 1987. But he also acknowledged other crushing problems: “Millions of dollars in court-ordered judgments for failing to pay debts,” the Journal said.
A few months earlier, a longtime business associate had even hired a safecracker to enter Bill’s Park Avenue penthouse and appropriate valuables to pay off a $4.8 million loan guarantee on a condo project in the Bronx that had failed in the eighties. It was, in Yogi Berra’s phrase, déjà vu all over again. He was accused of hiding assets while living large, just as his father had done. Thus, a collection agency, a city marshal, two cops in uniforms, and a locksmith had arrived at the Delmonico in February 1999. Escorted to Bill Jr.’s penthouse by a manager, they broke in, videotaped a Modigliani and a Degas sculpture, but found no saf
e and took nothing with them. Will and Arthur later swore in court that the artworks were theirs and on loan to their father.VIII
“Mr. Zeckendorf lacked the toughness frequently required in development’s sharp-elbowed world,” the Journal said in its scathing indictment. “He often lost sight of the day-to-day details . . . was too eager to please outside investors,” and finally, worst of all, cared more for building than making money. Thus he’d given personal guarantees against business loans and ended up destroyed by debts. Refusing to declare bankruptcy out of respect for his family name, or to ask his sons for help, he’d ruined himself.
He’d since worked out a settlement with one former partner and would do the same with others. When he could (as when he sold the former Adonis Theater block he’d assembled just north of Worldwide Plaza to fellow developer Harry Macklowe early in 1997), he paid down his debts. When he couldn’t, he stopped. Sometimes, he ended up back in court. Eventually, his sons say, he was left in peace.
In a brief conversation, Zeckendorf, now eighty-three and ailing, rejects the idea that he grew too ambitious and too like his father. But he also rejects the notion that he was merely another casualty of inevitable market cycles in real estate. He acknowledges that after the stock market crash of 1987, his fortunes turned downward, “but it affects you on a building-by-building basis,” he continues, adding that it’s fair to say he was putting out one fire at a time.
“I took certain risks,” he admits, “maybe too many, but I got most of the projects built, and I’m very pleased my boys have had the successes they’ve had. I have tremendous respect for what they’ve been able to do. They deserve everything that’s come their way.”
House of Outrageous Fortune: Fifteen Central Park West, the World’s Most Powerful Address Page 9