The property was, in fact, not yet for sale, and as they continued cultivating the block-teasing Avlon while he, in turn, studied them, the Zeckendorfs learned that they were only one of a number of parties circling it. “Everybody knows the property’s there. It’s not a secret,” says Will. But who, exactly, was the competition? “John will never say.”
Unbeknownst to Avlon, one tire-kicker had commissioned a study of the block by Michael Parley, New York’s go-to zoning consultant, and his opinion turned out to be harsh. “He starts cursing under his breath,” Will says. “ ‘It’s terrible.’ And he begins to send out the same sketches to everybody.” The consultant’s solution was a single-tower plan rising from a podium in the middle of the block. Other developers took his word for it. The Zeckendorfs weren’t so sure, but they were certain that Avlon was “absolutely teasing everyone.”
In Avlon’s mind, he was just playing chess, waiting and watching as the neighborhood began, finally but inexorably, to improve. Something had to happen at the Coliseum site before he could make his move because, as he says, the Coliseum “controlled the tonality of the circle.”
Time Warner proved to be the game-changer, breaking the existing record of $3,000 per square foot, set in 2000 by the Zeckendorfs at 515 Park. But not until 2004 did it become clear those high numbers would be achieved. Only then did Avlon set in motion the sale of the block he’d so carefully assembled over thirty-one long years. At last, his endgame had begun.
“We don’t do deals, we make investments,” says John Avlon. “But chess sometimes turns into poker, and you have to be good at both.” For years, he and Bob Konopka had been meeting with suitors seeking the Mayflower. “Arthur and Will were among the first and the most persistent over a long period of time,” Avlon says. But the field wasn’t theirs alone.
The Zeckendorfs heard rumors that Jerry Speyer, a builder who’d married into the Tishman real estate dynasty, and Millennium had both expressed interest. Still, though they knew the competition would be fierce, they began to suspect they had an edge. Avlon appeared to like and trust them. At one meeting, just as 515 Park was opening for business, he’d walked them out to his terrace and pointed to it. “You guys are the best, you’re the greatest, you got five thousand dollars per square foot,” Arthur recalls his saying. “He’s also extremely nice to us and very complimentary. ‘You guys hit the highest price ever in the history of New York City.’ He had a lot of respect for Will and me. And our family.”
As time went on, they learned Avlon was also talking to Related and to Donald Trump. “Everyone’s there,” says Will, “every person had the same meeting with him.” And as the seemingly endless conversation continued, they noted a shift. “He actually begins to seem like a seller, as opposed to just a farmer,” Will says. “A farmer wants his land. He really was acting like a seller. I think he was sensing the hold was coming to an end. He seemed like a different person.”
The Zeckendorfs kept their ears to the ground and heard some potential bidders had dropped out because they couldn’t play the game by Avlon’s rules. “You have to go there and have dinner with him and have lunch with him and talk to him for two hours,” says Arthur, “and he still wouldn’t say whether he’d sell it to you for two hundred million dollars.” And Avlon never wavered on his big condition—he was selling all the stock in the corporation that owned the land, and the buyer would have to shoulder the financial liabilities, as well as the problems of emptying the remaining tenants and terminating the hotel’s staff—even though he knew that would likely mean a lower sale price. “It’s a daunting exercise, mind you,” Avlon says, though he doesn’t entirely explain what made it so: The block was the sole asset of Park Summit, a corporation run by Avlon, but owned by Selborne Co., Inc., a Panamanian corporation, itself owned by Orville International Ltd. of the British Virgin Islands. “Real estate guys like to buy real estate, not stock,” Will Zeckendorf explains, but they swallowed hard and kept coming.
The next challenge was deciding how much to bid for that stock. For years, the Zeckendorfs back-of-the-envelope calculations had made them wary, despite their lust to own the block. But by summer 2003 “this crazy number that he’s always put out there—he always said to us, ‘Give me a number with a three and a very high second digit’—was beginning to make sense because of 515, because of Time Warner,” says Will. “And when Peter came up with a two-tower plan, that really changed the whole ball game.”
Peter was Peter Claman of SLCE, a sixty-year-old architectural firm renowned for its technical prowess. That spring, taking nothing for granted, the Zeckendorfs had approached Claman to take a fresh look at the block and its zoning. He first consulted Michael Parley, the zoning expert, “but to his credit,” Will says, Claman didn’t accept the expert’s conclusions. The term of art Claman uses for his brainstorm is “packing the bulk,” placing the legally required percentage of floor space in the lower portion of the block, but altering Rafael Pelli’s proposal by eliminating the full-block podium base, which Pelli had proposed be used for retail stores and recreational amenities. Instead, Claman proposed two separated buildings—“a huge, huge, huge breakthrough,” says Will Zeckendorf.
Claman and his SLCE partner Jim Davidson, who grew up at 65 Central Park West, are more modest about their accomplishment. “The real author of the building is the zoning,” says Davidson. “It mandated that the house [on Central Park West] be a certain shape and size with certain setbacks. But it’s a split zone, so a tower was allowed on the west side of the site.” SLCE had recently designed a building for a site similar to the Broadway end of the block, where an eighty-five-foot street wall was required, but there was no height limit after that setback. Because a Central Park West building was a given, the lower floors of any tower built behind it would effectively be void space lacking park views. But Claman realized that if they installed the mechanicals for the whole complex as well as the amenities for residents—neither of which are included in FAR calculations, but which take up a lot of space—and servants’ apartments, too, in those floors, they could “get as much up in the air over Central Park West as possible to give views on the park.” Parley “wasn’t wrong,” Claman says. “We just adjusted it slightly to give a better product. He didn’t see that alternative. It was a gimmick that was available and approvable.”
By hiring SLCE well before the auction to create that preliminary design for the building, the Zeckendorfs gained “a supersolid understanding of the project, the economics, the market studies,” Will continues, “and that’s going to become relevant in about six more months.” Because by then, Claman had even proposed apartment layouts to demonstrate how many they would be able to build, and based on his drawings, they had a firm idea how many would have straight-on views of Central Park, and began to consider how much of a premium those views would command. Another key decision was the placement of two separate banks of stairs and elevators in each building, which meant that almost every apartment could be a floor-through.
All those decisions “raised the pro forma price per square foot we thought we could achieve,” Will says, and allowed them to value the apartments higher and bid more to win the deal. Simultaneously, in collaboration with one of their executives, Judy Kessler, they’d begun writing a business plan that advanced what they’d done at 515 Park, “to hark back to the grand 834s, 740s, 960s, and translate that into modern living,” Arthur repeats.
Only after all that was done did they call the executives at Goldman Sachs, tell them the block would soon be in play, and ask if they would serve as advisers on the deal, as well as their equity partner. They knew that buying a company rather than land and buildings would be complex, and that Goldman had the resources they needed to make it work. In late September 2003, Goldman signed on.
By year’s end, Claman had calculated unit-by-unit square footage that allowed them to project apartment prices. Construction manager Bovis Lend Lease was poised to finalize a budget and project schedule. But e
arly in 2004, there was a snag. “The deal was too big for Goldman,” says Will. “We were not short of cash,” clarifies Stuart Rothenberg, the Goldman partner then in charge of all its real estate investments. “It was just a judgment decision that we did not want to allocate any more dollars to that one deal. We said, bring in another partner.”
So in April, the Zeckendorfs informed Avlon that Eastgate Realty, an affiliate of the Ofer family’s real estate group, would be an investor, too. Ofer, it turned out, owned two investment buildings just across Broadway from the empty lot and had been watching it with interest, too. “Everybody in the city who had two dollars to knock together wanted to participate,” he says. He also had more than deep pockets. His family and the Goulandrises had been friendly competitors for two generations and worked together in an insurance association for shipowners. “So we approached them and told them we are very interested to acquire the property and asked them what it would take,” Ofer says.
Peter Goulandris, Ofer continues, explained that his family and the Avlons had “been doing for many many years the same type of acquisition of land and strategic locations, assembling them, zoning them, and then selling them, never wanting to be involved with any actual nitty-gritty of brick and mortar.” Goulandris confirmed the price level they hoped to achieve and added that their intention was to decide quickly, likely on a first round of bids, but that beyond the price, they would also take into account the character and style of any buyer, which could eliminate a contender regardless of the size of the bid. “One of which they mentioned was Trump,” Ofer says. Their Columbus Circle neighbor had somehow offended the ever-correct John Avlon—another participant describes “a massive blowup, a screaming match.”
“I tried to get it,” Trump admits. “But the number was so crazy, I said they must be kidding.”
“So Avlon told him, don’t even bother,” Ofer says.
Everything had to be kept hush-hush. Though the Zeckendorfs were feeling out their brokers at Brown Harris Stevens and Halstead about what superluxury apartments needed to be, they had to keep their designs on the Mayflower a secret, so they gave the project a code name, Project W, for “West Side,” and wouldn’t divulge the location. “Supertight lid, everybody’s sworn to secrecy,” says Will. The same held true in Avlon’s camp, where the project was code-named Beagle.
In spring 2004, Beagle got real. “We narrowed it down to five finalists and notified each that the bidding would be closed, limited to the five. We sent them the terms of the contract and asked them to just fill in a price,” in what’s known as a first-price, sealed-bid auction, John Avlon says.IV There would be no second round. “And I stuck to my word,” Avlon adds. “I did hear through the grapevine that two bidders were stunned that we meant what we said. Nobody in New York real estate does that. But it was time for us to go and for someone else to come in.”
The Zeckendorfs got that message at another Mayflower meeting, where Avlon laid out his rules and explained there would be no deviation from them. They brought Stuart Rothenberg, who’d replaced Dan Neidich as the head of Goldman Sachs’s worldwide real estate business; Justin Metz, a younger banker who’d been named Goldman’s point man on the 15CPW deal; and Ofer and Samuel Kellner, the head of Ofer’s Eastgate Realty. The Zeckendorfs wanted “to demonstrate the credibility of our team,” says Will.
The meeting began, as sessions with Avlon often did, with a lengthy stretch of “shooting the breeze,” as Kellner puts it, “talking niceties.” But then Rothenberg, who thought he’d just been invited along to say hello but found himself mired in those niceties instead, took a cell phone call that seemed to go on forever. “Stuart was up and down and running around,” says a party to the meeting. Frustrated, Avlon asked Kellner to step out to his terrace, where, in his quiet way, he went ballistic. “I don’t like that,” he whispered. “How do we overcome this?”
“You know Will,” Kellner assured him, “and your [Goulandris] family knows the Ofers. Our word is our bond and we take responsibility.” Avlon studied Kellner, then briefly turned back to the view before walking back inside, vowing, “I take you at face value.”
Rothenberg can’t recall that Kellner told him, “Get off the phone.” Perhaps as a matter of discretion, Avlon professes to not remember it either, but allows that he would think it impolite if someone used his cell phone in a meeting. “The deal happened in spite of Rothenberg,” Kellner says. “His attention was elsewhere. His aspiration was to build Whitehall in megasteps and this was not a megaproject.” Henceforth, Rothenberg would have little direct involvement; Metz would handle the deal side, and Jerry Karr would watch over the development itself. But the moment signaled that relations with Goldman Sachs wouldn’t always be smooth.
Shortly after that meeting, contracts arrived from Avlon with a request for their return with comments accompanied by a bid. On May 17, 2004, their deadline, Will personally delivered the marked-up contract to Avlon’s lawyer. Their instruction to their own lawyers had been to “make as few changes as you humanly can, but don’t let us make any big mistakes,” Will says. “So we sent back a very clean contract.” The partners had also decided to bid high, very high, even higher than the number beginning with a 3 that Avlon had long said he was seeking.
“Some credit is due to Goldman Sachs on this one,” Will says. “Whitehall had lost a deal a month earlier, betting there would be a second round. Arthur and I were pushing like hell on ’em to get as high as possible. We’d also lost a lot of deals recently.” They all understood that an auction conducted by a principal without brokers was unusual, as was John Avlon. So the Zeckendorfs were also sure he wouldn’t shop their bid, seeking a better one from another developer, even though that was something they might do under similar circumstances. With Eyal Ofer’s enthusiastic approval, they’d convinced the ever-skeptical Whitehall team that the block was worth $400 million.
“I was so bullish on this deal, you have no idea,” says Will.
“We knew the market had popped by five hundred dollars a square foot,” Arthur adds, thanks to their Brown Harris Stevens data. “And everybody else was six months behind.”
“Eyal was bullish, too, like a cheerleader,” says Will. “He completely got it and loved it. The other partner had more nerves going on.” And that party, the Goldman group, would remain nervous. Goldman worried that the Zeckendorfs were being messianic, seeking to put their mark on the skyline and change New York forever. “We weren’t perfectly aligned,” admits a member of the Whitehall team.
Ofer and Kellner noticed the disconnect. Goldman was “involved with everything,” says Kellner. “Their lawyers did all the contracts. They did the bulk of the finance with the banks. They were present at every meeting. But consensus needed to be arrived at, and we were the peacemakers between the Zeckendorfs and Goldman. It was not necessarily that Goldman was wrong, but sometimes they were too abrasive in the way they dealt with the Zeckendorfs.”
But for the moment, the Goldman men agreed that they should put a bullish bid on the table and not hold money back for a second round. They added an extra million dollars at Ofer’s suggestion. The Zeckendorfs were all for it; they like odd numbers. They bid $401 million “and some change,” Will says, actually $401,050,000, which would later be characterized as more than twice the going rate for Manhattan land. Why the extra $50,000? “We make numbers up for good luck,” Will says. That kind of joking wasn’t funny to the Goldman Sachs team. “The Zeckendorfs would have paid any number,” says the Whitehall source. “It wasn’t their money.” Their backers were putting up about 90 percent of the initial outlay, even though the three partners would share equally in the profits.
Their basic bet was that they could sell apartments for an average $2,450 per square foot. “It was a winner, a perfect storm, the top of the market,” says Ralph Rosenberg, who’d left Goldman but kept his eye on the deal. “And the beauty of the deal was, they had a high degree of conviction in their strategy.” Or at least, so it now
seems in hindsight. At the time, though, the bid took their breath away. “We all looked at each other and said, ‘Omigosh,’ ” one participant recalls. “Nobody ever paid $400 million for an acre before.”
Will and Arthur quickly learned that the other bidders were Related (run by Stephen Ross); Vornado, which was primarily an office developer, but had lately made forays into the residential arena; Edward J. Minskoff, who’d been one of the losing bidders for the New York Coliseum site in a consortium with Richard LeFrak and Donaldson, Lufkin & Jenrette; and Elad Holdings, a subsidiary of an Israeli conglomerate controlled by the gruff, self-made Isaac Tshuva. Like Eyal Ofer, Tshuva had a wide range of business interests with investments in energy, real estate development and construction, property rentals, tourism projects, insurance and finance, automotive, biochemical, and telecommunications. The Zeckendorfs knew Elad was bidding because Will had run into its president, Miki Naftali, when he dropped off his bid with Avlon’s lawyer.
The Zeckendorfs worked their sources, trying to learn who else had bid and how much—and heard that they’d come in about $35 million above the next-highest bidder. Avlon isn’t saying, but he allows that two of the underbidders made substantial offers, two did not, and a sixth party “tried to come in at the last minute and was advised the bidding was closed. They got rather upset. I found that behavior uncomfortable.” That sixth party was SJP Properties, a New Jersey development outfit that had not been invited to the auction. Instead, SJP tried to crash the party at the last minute, and Allen Goldman, president of its residential-property division, is convinced that his arrival inspired the Zeckendorfs’ winning bid. He even claims that Will later told him, “You cost me about fifty million dollars.”
SJP’s Goldman says he’d learned that the Zeckendorfs were going to bid just $350 million and increased their number only after SJP offered Avlon an even $400 million and named Costas Kondylis as its choice of architect. “We had people interceding on our behalf with the family,” Goldman adds, admitting that might have backfired. “You never know. We did not have the prominence and the name, and the Zeckendorfs had sufficient leverage and they were determined to get it.” Years later, Goldman is still angry. “I did not believe we got a fair shake.” He suspects that his bid was leaked to the Zeckendorfs. “How do you think they came up with $401 million? We wouldn’t have spent the time if we knew the Zeckendorfs would get the last look.” John Avlon is blunt in response: “The Zeckendorfs did not receive special treatment.” As a man of his word, he simply wouldn’t countenance SJP’s uninvited eleventh-hour appearance.
House of Outrageous Fortune: Fifteen Central Park West, the World’s Most Powerful Address Page 17