50 East 57th (Drake site)

[TonyO]

FINANCE | NYC 09 18 07

HARRY'S DRAKE HEADACHE

Peter Slatin

The Macklowe Organization hopes to develop a major office building on the site of the former Drake Hotel at 56th St. and Park Ave.
First, Harry Macklowe had to deal with the French chocolatier. That was an expensive enough sugar headache – more than $4 million to buy Fauchon out of its lease at the Drake Hotel, at the northwest corner of 56th Street and Madison Avenue. The point was to enable Macklowe to empty the building for demolition. It took months of wrangling and a court decision.

The Federal Reserve seems poised to cut interest rates to bail out investors – at least psychologically – and bring comfort to the discomfited markets. But the move may not be in time for Harry Macklowe, for whom the fight over the sweets spot could turn out to have been a cakewalk: With lending virtually at a standstill as repricing continues, a source tells The Slatin Report that Macklowe is about to run up against a September 30 deadline on his $343 million short-term loan from Deutsche Bank on the property, which he bought in early 2006 for $418 million.

Could he get more time? Deutsche, like most lenders these days, is not likely to be in much of a forgiving (or extending) mood. And neither are those who provide equity financing, who are basically playing a waiting game as deals they may or may not have intended as loan-to-own turn in that direction. Multiple market sources have suggested that the bank has not exactly had an easy time selling off its roughly $2.5 billion bridge loan on the developer’s $7 billion portfolio of ex-EOP assets. Another $900 million of that debt is held by Fortress Investment, with some $500 million of that also on a short leash.

The Drake site, on which the Macklowe Organization intends to anchor an L-shaped, 70-story office development to be known as 50 East 57th Street, is not part of the cross-collateralized EOP portfolio loan. That loan is backed, published reports say, by the developer’s other properties, including the General Motors Building – on which Deutsche Bank has also been an important lender. Still, an alteration in Macklowe’s equity stake at the Drake would not affect his larger Manhattan holdings.

Meanwhile, Macklowe faces steep short-term payments and may have neither the cash flow to cover those nor, in the current environment, the means to obtain additional financing – the kind that got him up against this wall to begin with.

Billy Macklowe said he had no comment on the possible troubles facing the company. And whatever challenges it faces, it is by no means time to write down Harry Macklowe like just another subprime mortgage. The developer has faced his troubles before, including losing what was the Hotel Macklowe (now the Millennium) on West 44th Street. That’s the hotel he built after notoriously demolishing two S.R.O. hotels on the site without the proper permit. But his tenacity is indisputable: he came back to put together (and then lose) the development site that became 300 Madison Avenue, at the southwest corner of 42nd Street, and then went on to his $1.4 billion acquisition of the GM Building in 2003. If that was the deal that signaled the start of pole-vaulting New York office building values, what happens next to the empire he has amassed since then will be just as important to watch.

You can have your World Series or Super Bowl pools. At least one major property owner in Midtown has an office pool betting that Macklowe’s hold on the GM Building will be gone within six months.

[JohnFlint1985]

By that, do you mean that this site will remain empty? If so, that's awesome news!

I'd rather have an empty site than the cheap box that Creeplowe planned to build. Due to his financial problems, this site may very well be sold to someone that will build the masterpiece that belongs there.

What an irony. First they destroyed a beautiful building. Then proposed 70 floors was changed to 30. Now he has financial troubles in general. so there is a chance it will remain open. This is mind bugling. The level of BS I heard from proponents of this "another cool tower", all the cheering once the building was getting demolished and now nothing. I don't know people, but we have to have much more love and sense if we want to see this city standing a capital of the world. Otherwise we will have a lot of empty space instead of masterpieces.
And honestly I am not so sure anymore if anything relatively good will be build there. But I am willing to be surprised on that.

[londonlawyer]

I agree.

[czsz]

I wish there were a court that could force him to rebuild the Drake.

[londonlawyer]

I wish there were a court that could force him to rebuild the Drake.

He has a lot of atoning to do this weekend for demolishing that structure. I hope that he loses the site before he starts demolition on the 57th St. townhouses.

[macreator]

It's all about karma ;)

I can't say I feel sorry for Macklowe as much as I like a comeback kid. Let's hope indeed that things start to fall apart before demolition starts on the 57th street townhouses and we are left with midblock empty lots once the economy begins to tank.

[londonlawyer]

NY Post

"LESS EDGY, MORE HEDGE-Y:PAUL TUDOR JONES IS SET ON THE MEATPACKING DISTRICT"

September 25, 2007


Manhattan's sexiest development site is the former Drake Hotel, now being demolished by Harry Macklowe.

But the mystery of what Macklowe is up to deepens by the week. The latest puzzle is the disappearance of a floor-stacking image posted on Macklowe Properties' Web site that was recently replaced with a blank gray box labeled "office building under construction."

The schematic showed an L-shaped project wrapping around 450 Park Ave. at the southwest corner of Park Avenue and 57th Street. The larger portion ran along 56th Street, and also included frontage on 57th Street, now home to a row of retail townhouses.

But Macklowe doesn't own all the buildings he would need on 57th Street to have uninterrupted sidewalk frontage - such as 42 E. 57th St., home to Turnbull & Asser.

Nor have any tenants been signed for the new project. It's unclear how Macklowe could undertake a large speculative office building in the midst of the credit crunch, which has him scrambling to cover $5 billion in short-term debt.

Reports recently surfaced that Nordstrom was in talks to open a store in the new tower. "A combination of Nordstrom and a user for some of the office space would get it built," said Dan Fasulo of research firm Real Capital Analytics.

But a Nordstrom lease seems like a distant dream - the retailer has kicked tires all over town without making a deal.

"At the end of the day, if the market turns [down], Macklowe could turn it into residential or a hotel," Fasulo said. Another possibility, of course, would be to sell it.

Macklowe's representatives say he remains "fully committed" to the site, but he has avoided direct comment.

Who's the truly bad man?

http://www.therealdeal.net//breaking_news/2007/09/25/images/11843.jpg
http://graphics8.nytimes.com/images/2007/09/26/world/26nations.600.jpg

[TREPYE]

Another possibility, of course, would be to sell it.

Macklowe's representatives say he remains "fully committed" to the site, but he has avoided direct comment.


How do you just demolish old historical buildings without having any defenite plans for the site??

If this piece of garbage ends up just selling the site and not doing anything with even though he went out of his way to demolish the Drake it he should be prosecuted and sued to pay to rebuild it over again EXACTLY as it was.

[londonlawyer]

I agree with you amigo.

I hope the creep sells the site before he starts demolishing the adjacent townhouses on 57th St.

[MidtownGuy]

Destruction of the beautiful Drake was a heinous crime! This guy should be hung by his balls with piano wire.

[DarrylStrawberry]

^ Yikes.

[lesterp4]

I just heard on the abc news Wall street report that Nordstrom has just signed a tentative agreement with Macklowe to locate in this new building.

[londonlawyer]

I don't see how Macklowe can proceed with an ugly office tower that will seek astronomical rents in this market.

[investordude]

I'm not nearly metrosexual enough to read this publication, but thankfully there is Google news. Sounds like your radio report is right.

http://www.wwd.com/financial/article/119975?page=0

[antinimby]

I don't see how Macklowe can proceed with an ugly office tower that will seek astronomical rents in this market.This is NY, you'd be surprised how expensive ugly can still be. I don't think I need to tell you that.

[londonlawyer]

http://www.therealdeal.net//issues/November_2007/images/1194213512.jpg

[ramvid01]

Salma Hayek he isn't :p:D

[antinimby]

So london, are you telling us that is something you'd like? ;)

[londonlawyer]

Salma Hayek he isn't :p:D

You are correct, sir.

[MidtownGuy]

Like something from Pan's Labyrinth or LOTR.
Seems to hate beautiful things.

[londonlawyer]

Has Macklowe the Horrible started tearing down the 57th Street townhouses? I hope that he's forced to sell the site before he does and that the new buyer preserves them.

[alonzo-ny]

I hope someone pours holy water on him so he melts.

[londonlawyer]

Good one, man!

[londonlawyer]

I walked by on 11/19 and noted that, thankfully, the small buildings on 57th St. remain. Sadly, however, only about the first two floors of The Drake remain standing.

What a horrible person.
http://www.therealdeal.net//issues/November_2007/images/1194213512.jpg

[alonzo-ny]

Darth Macklowe

[NYguy]

Shocking! He should get the electric chair.

[kz1000ps]

That saddens me to hear the Drake is almost completely gone by now. I'll be in the city this weekend, and I'll have to make a final pilgrimage to the area before it's completely replaced by another blank glass wall.

(PS. I'll be playing at the Parkside Lounge on East Houston this Saturday night)

[JohnFlint1985]

And still no real plans for what should be built just speculations about another boring box

[londonlawyer]

I speculate the Skanklowe will sell this site to a competent developer like Hines or Zeckendorf who will build a stellar hotel/condo.

I don't see how he could possibly secure a financial tenant for the proposed office -- at astronomical rates -- in the current market. By contrast, due to the cheap dollar, extremely high-end residential projects are still in great demand.

[alonzo-ny]

I pray for that!

[investordude]

If they build a Nordstrom in the building's base as planned, they'll find a tenant. Demand for law firms goes up when things go badly, and this type fo building seems ideal for them.

[TREPYE]

I speculate the Skanklowe will sell this site to a competent developer like Hines or Zeckendorf who will build a stellar hotel/condo.


I wish I's stop hearing this because this contiues to be a perturbing development. The fact that the Drake was demolished can be made worse by the fact that it could have been sold to some developer who wouldn't have torn it down. I cant believe that this bullcrap of demolishing historic structures still goes on in this city.

[londonlawyer]

If they build a Nordstrom in the building's base as planned, they'll find a tenant. Demand for law firms goes up when things go badly, and this type fo building seems ideal for them.

I truly doubt that Nordstroms will be enough. Also, he was looking for $175 s/f. Firstly, no law firm would pay that when they could get equally nice space for $100 s/f. Secondly, corporate transactions are an enormous source of law firm revenue, as and the markets drop, so do law firms' revenues.

[investordude]

I confess I really don't understand the issue with his debt and how tied it is to interest rates. If the feds cut half a point again (as expected) does Macklowe survive unscathed most likely?

Also, how did we he get the loan in the first place if he can't possibly pay it off? It's not like there's a subprime office loan market where people don't need to prove their income to get collateral. I just don't understand the whole situation.

[londonlawyer]

Because financial institutions world-wide have sustained massive losses due to the sub-prime debacle, the available credit world-wide to businesses and individuals has dried up dramatically. The loans that Skanklowe secured before the sub-prime crisis would never be extended today. In my view, he will not get further financing unless he secures a tenant for a substantial portion of the proposed building. In this market, I doubt that anyone will agree to prelease several hundred thousand square feet at the astronomical rates that this creep seeks. I therefore hope that this skank is forced to sell this building to a real developer will will construct a world-class residential tower which this site warrants.

[MidtownGuy]

I cant believe that this bullcrap of demolishing historic structures still goes on in this city.

especially when the deal for the replacement isn't even secure!! There ought to be laws against this. Everyday I walk by the Drake site and I just still can't believe it was destroyed so senselessly. So sad, and infuriating:mad:

[londonlawyer]

While the creepy skank already razed the Drake, there's still hope for the 57th St. buildings.

[MidtownGuy]

thanks for reminding me there is always a silver lining.

[GreenwichBoy]

Which townhouse on 57th street is going to be razed?

[londonlawyer]

All of them on the south side of 57th between Madison and Park.

[Chackett]

I'm not sure about anyone else, but the namecalling around here is getting pretty annoying. Can we just cut it out and focus on the issues?

[ZippyTheChimp]

^
Where?

[Stern]

I'm with you Chackett.

[Scraperfannyc]

MOST PRICIEST HOME SALE IN 2007:

1. $60 million
New York City

When the Plaza Hotel declared it would convert to private residences, everyone expected high prices, but developer HARRY MACKLOWE set a record. Forgoing the penthouse, Macklowe decided to purchase an entire floor of the hotel to turn it into one sprawling residence. The only problem? Someone beat him to the punch and bought one unit on the floor, meaning Macklowe may have to pay two or three times the value of the rogue $4 million apartment if he wants to be the floor's sole resident.

Looks like Macklowe's strategy of destroying what is great NYC and building cheap s--t in its place really works for him, and him alone.

[pianoman11686]

There's hope yet for the townhouses, and overall, for this project not getting underway. In today's WSJ, there was an article about how an Egyptian billionaire who owns Turnbull & Asser (one of the townhouses) has basically made up his mind not to sell. Since he's a billionaire, he's got no incentive, no matter how much money Macklowe offers. So I think it's safe to say the row of townhouses will survive, and perhaps Macklowe will only build a tower on the footprint of the former Drake.

Here's a link to the online article, but it's only a preview. Anyone have an online subscription?

http://online.wsj.com/article/SB119768058407330785.html?mod=hpp_us_whats_news

[londonlawyer]

That's great news!

[pianoman11686]

Sorry, there was something unclear in my post. The billionaire doesn't "own" the townhouse. He owns the company that is leasing the space in it. The lease stipulates, though, that he has first right to buy the property if someone else puts a bid on it. And he's indicated that he would do so if Macklowe offered a bid. It seems that is what's creating the impasse right now.

Other tidbits from the article: Nordstrom is indeed serious about setting up a store there, but is waiting for Macklowe to get its act together. Related is reportedly close to becoming a development partner to help get financing for it (since Macklowe is in so much debt right now and can't get an anchor tenant). And...Macklowe basically needs this project to get underway as soon as possible in order to avoid being suspected of defaulting on his debt. So you can be sure he's going to try to come out of this with something.

[londonlawyer]

They should build a hotel/condo. Although there are a lot of hotel projects underway, there are very few megaluxurious ones planned for Midtown other than the Shangri-La and the Oriental Express. There is a big demand for such projects and for ultra high-end apartments.

A hotel/condo would result in a tall, very nice building.

[macreator]

Anyone have an online subscription?

I've luckily got online access via my Wall Street Journal subscription.

http://www.gpsmagazine.com/assets/wsj_logo.gif

Billionaire May Obstruct Macklowe Tower Project
By JENNIFER S. FORSYTH
December 15, 2007; Page B3

NEW YORK -- Harry Macklowe, the closely watched New York real-estate investor who has come under pressure from the credit crunch, is facing a new headache at the hands of Egyptian billionaire Ali al Fayed.


The highly leveraged Mr. Macklowe is developing an office-and-retail tower on the former location of the Swissotel's Drake Hotel on Park Avenue in midtown Manhattan, which he bought last year for $418 million. If he can get the $2 billion project under way -- especially with a big-name anchor tenant under lease -- it could create some breathing room on his balance sheet while he deals with other debt-laden projects.

To pull that off, though, Mr. Macklowe needs to enlarge the development site by also buying a row of small retail buildings that face East 57th Street. However, so far he has been unable to secure all of those buildings, and people familiar with the situation say the glitch lies at least with one building: 42 E. 57th St., home to Turnbull & Asser, a high-end men's clothier owned by Mr. al Fayed.

Mr. Macklowe has been thwarted because Turnbull & Asser has a long-term lease, and the owner doesn't want to relocate. "We are here to stay," said Paul Collins, chief financial officer for Turnbull & Asser, who declined to comment further.

Further complicating the matter, Mr. al Fayed has an option to buy the building if someone else makes a bid on it, according to several people close to the negotiations. That could upset Mr. Macklowe's efforts to buy the building. And it could force him to pay more than he planned at a time when the credit crunch has made it difficult to finance transactions. A spokeswoman said Mr. al Fayed wasn't available to comment.

Meanwhile, people close to the situation said Mr. Macklowe had fallen delinquent on the Drake mortgage loan. However, Howard Rubenstein, a Macklowe spokesman, said Friday: "The financing has been extended and the assemblage is moving forward." He declined to comment further. Deutsche Bank AG, the mortgage lender, declined to comment.

The battle over the Drake is just one of Mr. Macklowe's problems. He is under pressure to pay $5.1 billion in debt due in February on his purchase of seven Manhattan properties formerly owned by Equity Office Properties Trust or risk losing much of his real-estate empire.

However, Mr. Macklowe may find relief on one front if he can bring in a financial partner on the Drake. Mr. Macklowe is in discussions with the Related Cos., a development company based in New York, to be a partner, though the agreement is still being hashed out. In turn, Mr. Macklowe and Related are negotiating with Nordstrom Inc., the Seattle-based high-end department-store chain, which has been searching for a site to make its first foray into Manhattan's retail market, according to several people.

The Macklowes and Related Cos. are hoping to have a deal done with Nordstrom for a 200,000-square-foot lease in the lower floors of the new Drake tower before Christmas, said a person familiar with the matter. A Related spokeswoman declined to comment.

"We're interested in the Drake site, but we don't have a deal," said Michael Boyd, a spokesman for Nordstrom. He added that the retailer is looking at other Manhattan locations as well.

--Alex Frangos and Vanessa O'Connell contributed to this article.

Write to Jennifer S. Forsyth at jennifer.forsyth@wsj.com

[alonzo-ny]

Reap what you sow Mr. Macklowe.

[ASchwarz]

If he can't buy out that one retail site, he's just build around. It's from ideal, but it won't stop the project.

I bet you they're just playing hardball. Happens all the time.

And a $2 billion project? That's great news. I knew this tower was going to be significantly larger than the Madison tower, but I never thought it would be this major.

At $2 billion, this will be a major building on the skyline. The site isn't huge, so it will be tall.

[investordude]

I don't really understand why this project would cost 2 billion dollars. The Bofa Tower is 2 billion dollars and its 3 times the square footage. If it costs 2 billion to construct, I'd say the project is economically unrealistic for 700K square feet (even if they get the billionaire to sell the footprint of the project is much smaller than Bofa and couldn't accomodate trading floors).

Maybe they mean Macklowe thinks the rent in the building would come to 2 billion dollars. That might be plausible, in which case its worth doing.

[ASchwarz]

I heard this bldg. was to be 850,000 square feet. Maybe all the different sizes are based on different potential assemblages and air rights calculations.

[Scraperfannyc]

I would be relieved if a better developer takes over this site. Only then would I have hope that something good will turn out at this site. I have seen nothing good that Macklowe has done to NYC. I wish he was not a developer.

[DarrylStrawberry]

Article in the Times about the Macklowe's financing issues...Harry Macklowe's $6.4 Billion Bill...
http://www.nytimes.com/2008/01/06/business/06harry.html


from the article...

The Macklowes are in default on a $510 million loan connected with a project planned for the Drake site. Although the Macklowes have a nonbinding agreement with an anchor tenant, a Nordstrom (http://topics.nytimes.com/top/news/business/companies/nordstrom_inc/index.html?inline=nyt-org) department store, they have not acquired all the land for the project. A spokesman for Nordstrom said the company was also talking to other developers.

[pianoman11686]

Harry Macklowe’s $6.4 Billion Bill

http://graphics8.nytimes.com/images/2008/01/06/business/06harry.xlarge1.jpg

By CHARLES V. BAGLI and TERRY PRISTIN
Published: January 6, 2008

IN August 2003, Harry B. Macklowe raced from lender to lender to round up a record-breaking $1.4 billion to buy the General Motors Building, the 50-story commercial skyscraper in Midtown Manhattan that is one of New York’s trophy properties.

Then 66, he gambled mightily to outmaneuver rival bidders and to vault back into the top ranks of New York developers. He went so far as to put down a nonrefundable $50 million deposit and sell many of his residential buildings to raise cash. Some bankers and real estate executives scoffed at the deal, privately suggesting that Mr. Macklowe had overpaid and would drown in an undertow of debt.

Not for the first time, Mr. Macklowe, an acknowledged master of winner-take-all real estate poker, proved his skeptics wrong. He expanded and enhanced the valuable retail space of the G.M. Building — on Fifth Avenue at 59th Street — by creating a glass cube for an Apple store that has become a popular tourist destination. As the market soared, Macklowe Properties refinanced the tower twice, most recently in a deal that values it at about $2.7 billion.

But these days Mr. Macklowe is scrambling for financing yet again. He has a $6.4 billion debt payment coming due next month in connection with his purchase of seven other Midtown Manhattan office buildings a year ago. When he bought those buildings from Equity Office Properties, he more than doubled the size of his real estate portfolio and used only $50 million of his own money to do so; he borrowed $7 billion to finance the rest of the purchase.

As often happens in real estate, a once-frothy national cycle is losing steam and the market has turned against many buyers. Mr. Macklowe, with his empire of 15 prime office towers and two development sites in one of the world’s best business districts, is awash in expensive, short-term debt at the very moment that financial backing for megadeals has all but shut down. One of his loans is backed by a $1 billion personal guarantee, and he is already in default on $510 million in development loans for a Park Avenue project.

Mr. Macklowe’s predicament marks the denouement of an unprecedented four-year period in which developers threw gobs of money at real estate as prices for office towers, especially in Manhattan, doubled and tripled almost as fast as sales could be recorded. Investment banks avidly underwrote the binge, often basing loans not on existing rents but on projections of rental income well into the future.

All of this worked swimmingly so long as the economy hummed along and banks could pool the loans and sell them to investors. Now, the economy is showing signs of stress, and Wall Street’s repackaging machine is sputtering.

“In hindsight, everybody should have been more cautious,” said Robert Bach, the chief economist at Grubb & Ellis, the national real estate brokerage firm. “We all knew this wasn’t going to last, but we hoped it would end with a whimper, not a bang.”

Analysts, bankers and developers are not predicting the imminent collapse of the commercial real estate market, a reprise of the early 1990s, when property values dropped by half, vacancies soared and banks were crushed under the weight of soured real estate loans. But developers who jumped in at the top of this market are likely to feel some pain because purchases were built on the assumption that rents would keep escalating and that the value of buildings would keep appreciating.

With building owners no longer able to refinance their properties and pull out cash, Mr. Macklowe and his son, William S. Macklowe, have only a month to repay $7 billion, work out a new deal with their bankers or risk the breakup of their empire. There is widespread speculation in the real estate industry that the Macklowes may be forced to unload some of their properties at a discount to creditors — including a sizable stake in the G.M. Building. At worst, they could be forced to shed much of their portfolio.

“This is very high-stakes poker,” said Scott A. Singer, the executive vice president of the Singer & Bassuk Organization, a real estate finance and brokerage company in New York. “To owe more than $5 billion in this environment is tremendously risky. There are a very, very limited number of lenders who can make multibillion-dollar loans now.”

For his part, Mr. Macklowe — a fierce competitor who still races his custom 112-foot yacht in regattas off the coast of Sardinia — coolly plays down the crisis. He went sailing in the Caribbean three days before Christmas while his son stayed home negotiating with the family’s bankers.

“Our lenders have supported us in the past to an extraordinary degree,” Mr. Macklowe said in an interview in his stark white offices on the 21st floor of the G.M. Building, the evening before he flew south. “We’re pretty confident that, going forward, we’ll be able to achieve accommodations and extensions from our group of lenders.”

THE Macklowes aren’t the only real estate barons in a tight spot. The Kushner Companies, also family owned, plunged into the Manhattan real estate market in 2006, paying $1.8 billion for 666 Fifth Avenue, at 53rd Street. The cash flow from 666 Fifth represents only about two-thirds of the amount needed to service the debt on the building — a shortfall of about $5 million a month — according to Real Capital Analytics, a research company in New York.

In Los Angeles, the developer Robert F. Maguire III may be forced to sell his publicly traded company, Maguire Properties, after buying a portfolio of buildings from the Blackstone Group just before the subprime credit crisis sent many of his tenants into bankruptcy. An Australian company, the Centro Properties Group, is putting itself up for sale after failing to refinance billions of dollars of short-term debt stemming in part from its acquisition of an American shopping center company.

To be sure, some bright spots remain. Though vacancy rates are up nationally, the Manhattan market remains healthy, with the vacancy rate in Midtown, the most desirable business district, just 5.5 percent. Because relatively little new space is coming on line in Manhattan in the next few years, the New York market appears to be relatively solid.

But fewer deals are being made and rent increases have slowed, if not stopped. If financial institutions continue cutting payrolls, much vacant space could come back on the market and drag down rents, even in Manhattan.

Despite the problems hanging over Mr. Macklowe’s holdings, some analysts say that it would be a mistake to count him out. This is the third time Mr. Macklowe has stumbled since he started in the real estate business about 48 years ago, and each time he has come roaring back. He has a knack for enhancing the look and cash flow of his buildings, and he is regarded as a shrewd, brass-knuckled negotiator in a rough-and-tumble industry.

A senior member at a major real estate investment firm, who described Mr. Macklowe as a friend and asked not to be identified so as not to jeopardize their relationship, said the developer has “assets with enough value to pay off his bridge loans.” But, this person asked, can Mr. Macklowe “do it with everybody smelling blood in the water and looking to buy a bargain?”

Some of the wiliest players in the real estate business have already been circling Mr. Macklowe.

This past fall, Vornado Realty Trust, of which Steven Roth is chairman, bought a stake in loans collateralized by four of Mr. Macklowe’s buildings on an apparent bet it might snare some great real estate on the cheap, bankers and real estate executives said.

For the last month, Stephen M. Ross, the chairman of the real estate company Related, has been talking to Mr. Macklowe about a deal for Macklowe Properties’ coveted Drake Hotel site, at Park Avenue and 56th Street, an executive involved in the talks said. Real estate executives say another rival developer, Sheldon H. Solow, may buy some of Mr. Macklowe’s debt in a bid to gain control of the G.M. Building, although a spokesman for Mr. Solow said Mr. Solow was not trying to acquire any of the debt.

THE Macklowes readily acknowledge that they are looking for equity partners. Mr. Macklowe’s son, William, emphasizes the quality of the buildings in his family’s Manhattan portfolio, which includes 2 Grand Central Tower, Park Avenue Tower and Worldwide Plaza. He points out that the buildings are also largely full.

“It’s not a real estate crisis but a capital markets crisis,” the younger Mr. Macklowe said. “Our legacy and acquired portfolios are renting at market rates or better. In August, when the world took a 180-degree turn, we and others got caught up in it.”

As it now stands, the Macklowes say they owe Deutsche Bank a $5.2 billion payment in February, in connection with the Equity Office transaction. They owe the Fortress Investment Group, a leading private equity and hedge fund firm, $1.2 billion for a bridge loan backed by a limited partnership interest in the G.M. Building, stakes in 11 other Macklowe buildings and a personal guarantee from the Macklowes for $1 billion.

The Macklowes are in default on a $510 million loan connected with a project planned for the Drake site. Although the Macklowes have a nonbinding agreement with an anchor tenant, a Nordstrom department store, they have not acquired all the land for the project. A spokesman for Nordstrom said the company was also talking to other developers.

At the same time, the family is trying to obtain a new construction loan for a 30-story office building being built at 510 Madison Avenue, at 53rd Street.

Even during this tense period, Mr. Macklowe often interrupts an interview with jokes. And those who know him say that he can be both endearing and notoriously tough. He has tangled with lenders, regulators, city officials, tenants and even his former East Hampton neighbor, Martha Stewart.

“Dealing with Harry can be a charming experience, and it can be like a trip to the dentist without anesthesia,” said Peter Hauspurg, chairman of the real estate investment services firm Eastern Consolidated. “At the end of the day, Harry’s operative phrase is: It’s just business.”

DESPITE Mr. Macklowe’s hard-edged business reputation, friends say he also devotes considerable time to his grandchildren, his collection of modern art, golf at the Atlantic Golf Club in Bridgehampton and, of course, sailing.

The son of a Westchester County garment executive, Mr. Macklowe was a college dropout when he started as a low-level real estate broker in 1960. Three years later, he and his supervisor formed their own company, Wolf & Macklowe. By the 1980s, he was building a succession of towers, including the angular black-glass Metropolitan Tower, on 57th Street between Sixth and Seventh Avenues; 2 Grand Central Tower; and the residential building RiverTower, on the East Side, where he and his wife, Linda, have a duplex.

Mr. Macklowe would like to be known for his building designs, or his art collection. But what many New Yorkers recall is that in 1985, Mr. Macklowe’s company was involved in the illegal, nocturnal demolition of two single-room-occupancy hotels near Times Square, only hours before a law went into effect protecting the buildings. He was not indicted in the incident, but one of his executives pleaded guilty to a misdemeanor charge of reckless endangerment. Five years later, he opened the Hotel Macklowe on the site.

As his purchase of the G.M. Building demonstrated, Mr. Macklowe often gets the timing right. On the day the stock market crashed in October 1987, he sold a package of 15 buildings to Joseph Neumann for $350 million, or $120 million more than Mr. Macklowe and his partners paid for them 10 months earlier. Mr. Neumann’s empire subsequently collapsed.

Like many other developers in the early 1990s, Mr. Macklowe took a beating during a severe real estate recession, ultimately returning both the Riverbank West tower on 42nd Street and the Hotel Macklowe, now known as the Millennium Broadway Hotel, to the lenders.

Rather than disappear, Mr. Macklowe did a series of smaller projects in the mid- to late 1990s, building less-glamorous apartment houses or renovating office buildings on Madison Avenue. In 2003, he bought the G.M. Building, a move that left many of his peers describing him as a real estate genius. The building was built for General Motors in 1968 and now houses tenants like hedge funds, the investor Carl C. Icahn and the law firm Weil, Gotshal & Manges. Mr. Macklowe suggests that the building is worth $3.5 billion or even $4 billion, though it may be hard to find a lender or investor who agrees.

By the fall of 2006, Mr. Macklowe was sitting pretty, primarily because the value of the G.M. Building had jumped so handsomely. He was putting together a premier development centered on what was once the site of the Drake Hotel, which he bought in 2006 for $418.3 million. He and his son were also building a hotel and apartment house at Madison and 53rd Street. After the residential market appeared to slow, they nimbly converted it into an office building for hedge funds, complete with a swimming pool and a luxurious health club.

Earlier this year, Mr. Macklowe decided to try his luck again. After the Blackstone Group, a private equity powerhouse, beat back Vornado to take over Equity Office with a $39 billion bid, Blackstone quickly decided to sell most of Equity Office’s Midtown Manhattan buildings without taking possession of all of them. During 10 days of whirlwind deal-making, Mr. Macklowe secured financing and stepped in to buy seven of the buildings for $7 billion.

The timing looked propitious. Credit was so readily available that Mr. Macklowe needed to put down only $50 million. He borrowed the rest in short-term loans from Deutsche Bank and Fortress. But that left him in the dicey position of having to find new sources of permanent financing or equity to pay off the short-term debt.

“He went from utter comfort to being on the precipice again,” said one real estate executive who has worked with Mr. Macklowe and asked not to be identified to retain a relationship with the developer.

The annual rent for the seven Midtown buildings was generally $55 to $59 a square foot, according to William Macklowe, but Deutsche Bank and Fortress underwrote the deal on the assumption that rents would soon rise to $100 a square foot.

After all, the commercial real estate market was higher than ever. The vacancy rate had fallen to record lows, while high construction costs made new buildings prohibitive. Landlords at prime office buildings were getting more than $100 a square foot annually, while the average rents for first-class Midtown buildings rose to $73.31 by the first quarter of 2007 from $55.21 in the first quarter of 2005, according to Reis Inc., a New York office research company.

At the same time, average prices for large office buildings in Midtown more than doubled, to $745 a square foot from $357, according to Real Capital Analytics. Investment banks and foreign companies began pouring capital into real estate. Lenders, in turn, took more risks, often providing financing for 90 to even 100 percent of a building’s price. Investors became ever more willing to accept a lower initial rate of return, known as the capitalization rate.

As with the residential market, the money flowed easily because lenders did not keep these risky loans on their balance sheets — as the commercial banks and savings-and-loan associations did to their peril in the early 1990s. Instead, Wall Street repackaged hundreds of billions of dollars of loans as commercial-mortgage-backed securities and sold them to investors.

“Loans with more aggressive terms that weren’t available in ’03 and ’04 became the norm in ’06, when suddenly lenders became very accommodating,” said Mike Kirby, a principal of Green Street Advisors, a research company in Newport Beach, Calif., that specializes in real estate investment trusts. “The attitude was, ‘Gee, we’re not going to own this stuff; we get terrific fees for underwriting these loans, and we can blow it out in a C.M.B.S. deal in three months.’”

EARLIER this year, however, the real estate winds shifted. In April, just two months after Mr. Macklowe bought the Equity Office properties, Moody’s Investors Services, the bond rating agency, said it planned to readjust how it rated commercial-mortgage-backed bonds to better reflect their risk. The agency complained that lenders were making overly optimistic projections about rent growth.

By last summer, as the subprime mortgage crisis hit residential lending and credit markets tightened, opportunities evaporated for developers like Mr. Macklowe to refinance expensive short-term debt.

Perhaps slow to realize the severity of the credit problem, Mr. Macklowe paid nearly $60 million in June for virtually the entire seventh floor of the Plaza Hotel, the Manhattan landmark that has been converted into condominiums. He hired the architect Charles Gwathmey to design a 13,000-square-foot apartment, which offers a view across Fifth Avenue to the G.M. Building.

But in September, the Macklowes hired the investment banking guru Joseph R. Perella to help them find new equity partners. They flew to the Middle East to visit what cash-starved developers call “the Big Four” — Kuwait, Qatar, Abu Dhabi and Dubai — in an unsuccessful hunt for fresh capital.

“We knew we could get higher value” for the Equity Office buildings, “but it wasn’t going to come in years two, three or four,” William Macklowe says. “We had a plan for a permanent capital solution. The events of the late summer slowed that down.”

The Macklowes say they also spent more than $150 million paying off short-term lenders at the Drake Hotel site and received an extension on their senior debt, which has since expired. But the Macklowes still have to contend with a $510 million note backed by the site.

“There are people out there who are very eager to acquire it if Macklowe decides not to build, or something untoward happens,” Harry Macklowe said. “We’re talking to several of our peers who’ve asked to join us in that development. We’re evaluating.”

There is increasing pressure, meanwhile, to persuade Deutsche Bank and Fortress to extend their deadline beyond Feb. 8 for at least $6.4 billion in debt, allowing the Macklowes more time to find new equity partners.

Bankers and real estate executives are divided over whether the Macklowes will be forced to sell some properties — maybe even some of the most valuable assets. Some also argue that layoffs in the financial industry this year will almost certainly depress the market and the value of commercial property.

Others, like Scott Latham, a broker at Cushman & Wakefield, contend that the vacancy rate is so low that it would take tens of thousands of layoffs to turn Midtown into a tenants’ market. Rents will not go up as fast as they have in the past 12 months, he said, but almost no one is predicting that rents will fall.

Mr. Macklowe “may shed some assets, just because it allows him to control whatever he holds onto,” Mr. Latham said. But there are still enough foreign investors interested in the Manhattan market, he said, “that Mr. Macklowe may not have to sell his core properties.”

A friend of Mr. Macklowe, who asked not to be identified to preserve a business relationship with him, put it another way. “Somehow he always manages to pull it off,” the friend said. “But he won’t do anything until the bitter end. He will play it out all the way.”

http://graphics8.nytimes.com/images/2008/01/06/business/06harry.large2.jpg
As owner of the General Motors building, Harry Macklowe improved the retail space, creating an underground Apple store.

http://graphics8.nytimes.com/images/2008/01/06/business/06harry.large3.jpg
William Macklowe, who runs Macklowe Properties with his father, attributed the company’s ills to a “capital markets crisis.”

Copyright 2008 The New York Times Company (http://www.nytimes.com/2008/01/06/business/06harry.html?pagewanted=all)

[londonlawyer]

Those two creeps make me sick. I hope that Related acquires the site and builds a magnificent, tall residential structure.

[MidtownGuy]

Greed like theirs should be punished with absolute financial ruin.
Tearing down the Drake was unforgiveable. People like the Macklowes aren't developing the city, they are destroying it.

[lofter1]

And these guys acknowledge it ...

Playing poker is their focus -- not a fantastic city.

[negromarquina835]

Look at what a fabulous job they did with the GM Building Plaza! It's always crowded, the Apple Store is great, total tourist hot spot. I have worked in the GM Building for years and the plaza is a great achievement. Peering down from the top floors of the building and seeing the plaza filled with people really is quite a site. Its really a pleasure walking across it in the morning to the office. Plans haven't even been released for this fabulous site, surely Macklowe would honor the site and really put himself on the map with a fabulously tall tower that he has air rights for. I think the Metropolitan Tower was quite amazing for the time, and still a gorgeous site on 57th street. The Drake was not anything to special to begin with, the townhouses are another story, but a small price to pay for an amazing tower. It will be nice to have a Nordstrom's there also will bring some of the congestion from Bloomingdale's. You should celebrate our changing city, not have distaste for it. It is true tragedies like Pennsylvania Station have happened, but I would hardly compare these buildings.

The building at 53rd and Madison is not such a great site. This site is spectacular and i'm sure a very worthy building would be built. We have no idea what he will create, but i'm sure it'll be worth it!

However, if you wish them financial ruin, you will get a no frills box.

[Stern]

Harry, is that you?

[lofter1]

... if you wish them financial ruin, you will get a no frills box.

Intersting the power you seem to indicate that we here at WNY hold over Harry et al

[negromarquina835]

I've been reading for sometime now, and have seen how you guys really seem to have it out for Macklowe. It just seemed like you really hate this guy. I do admire the changing skyline and think we have a good chance of this coming out nicely. I could be an optimist though. :)

[londonlawyer]

I walked by this site on Jan. 11, 2008 and sadly noted that every last inch of The Drake is gone. I hope that Related (or whoever buys this site from the creep) preserves the townhouses on 57th.

[londonlawyer]

I am hopefully optimistic that this will not be built and that creepLowe will sell the site. How can he build a spec tower in the current market? Many spec towers are rising at the moment incl:

1. creepLowe's own 510 Madison;
2. The new spec tower across the street on Madison;
3. SJP's tower;
4. 1095 6th; and
5. 2 spec towers by Extell (i.e., Diamond and Medical).

BP is smart enough not to proceed without a tenant commitment. Could Macklowe be dumb enough to do so?

This was a prescient comment that I made before the credit crunch struck. Nonetheless, Macklowe was as dumb as predicted.

[macreator]

I walked by the townhouses on the south side of 57th street near the Drake site yesterday evening and noticed that half of the stores that used to occupy their retail spaces are now gone. Asser & Turnbull, and a few others are still there, but I'm getting worried that we might still lose every townhouse besides the one with A & T on the ground floor.

[investordude]

It sounds like he ceded control of many properties from the news. Does anyone know if Mackowe still owns this site and/or plans to continue building here?

[antinimby]

Perhaps this will answer your questions...


Tentative Deal to Salvage Real Estate Empire


By CHARLES V. BAGLI
Published: February 1, 2008 (http://www.nytimes.com/2008/02/01/business/01real.html)

Harry and William Macklowe, the father-and-son team of real estate developers who doubled the size of their holdings in a $7 billion deal last year, have reached a tentative agreement to give their lender control of all seven Manhattan skyscrapers purchased in the deal, according to real estate executives.

If the agreement is concluded, the Macklowes would continue to manage the Midtown Manhattan buildings, which include Worldwide Plaza on Eighth Avenue, while their lender, Deutsche Bank, puts the towers up for sale.

Howard J. Rubenstein, a spokesman for the Macklowes, declined to comment, as did Deutsche Bank.

The Macklowes have come under intense financial pressure with the near collapse of the credit markets, rattling their empire of 15 office towers, 2 development sites and a handful of residential buildings. Real estate brokers and executives who know the Macklowes say they are urgently seeking extensions on more than $7 billion in debt that comes due on Feb. 8.

“There’s still so many moving parts right now and so many discussions going on,” said one executive involved in the discussions, who asked not to be identified because the agreement was still in flux.

Real estate executives are watching the Macklowes’ travails closely, not only because of the seriousness of the situation but also out of fear that it could be a harbinger for the industry.

In a whirlwind 10 days at the top of the market a year ago, the Macklowes paid more than $7 billion to buy the seven towers from Equity Office Properties, putting down just $50 million in cash. They borrowed $5.8 billion — all of it high-interest short-term debt — from Deutsche Bank and $1.2 billion from the Fortress Investment Group, a leading private equity and hedge fund firm.

Since then, the credit crisis in the residential markets has spilled into the commercial sector. Lenders are far less willing today to finance big deals, at least not without sizable equity. Unable to refinance or to find new investors in the Middle East, the Macklowes have been trying to buy time and work out their problems with Deutsche Bank.

The arrangement with Deutsche Bank could still unravel, real estate executives say. Seemingly unfazed, the Macklowes have told friends that they could end up buying back the buildings from Deutsche Bank at a discount, but several real estate executives scoffed at the idea.

The Macklowes are also struggling to deal with the Fortress loan, which is backed by a limited partnership in the General Motors Building, stakes in 11 other Macklowe buildings and a personal guarantee.

Harry Macklowe has put the G.M. Building, his most prized asset, up for sale, hoping to raise the cash to pay the Fortress debt. The first bids are due Feb. 15, real estate executives say, and it appears that Fortress is willing to let the process play out.

Mr. Macklowe has insisted that the G.M. Building is worth as much as $3.5 billion. He would prefer to take on a financial partner and retain control of the property, which has improved under his management. Fortress could ultimately foreclose on the loan, but it would almost certainly result in a legal brawl with the Macklowes.

The Macklowes are also in default on a $510 million loan connected to a proposed development on the site of the former Drake Hotel, at Park Avenue and 56th Street. Like many of the Macklowes’ properties, it is highly regarded and a rare find in Midtown. The Macklowes are in negotiations with their lender on a loan extension.

They have a nonbinding agreement with an anchor tenant, a Nordstrom department store, for the base of a proposed office tower. But they have not acquired all the land needed to build the tower they have in mind. The Macklowes have talked to the real estate company Related and other developers about a joint venture or a sale, so far without results.

The Macklowes are also hoping to complete a 30-story office building under construction at 510 Madison Avenue, at 53rd Street.

Copyright 2008 The New York Times Company

[lofter1]

A nail biter ^

How many other NYC Developers / Landlords are now finding themselves to be way over-leveraged?

And how will this all play out :confused:

[kz1000ps]

$3.5 billion for the GM Building? It was $1.4 billion four years ago! Even taking into account the rise in value the Apple cube gives it, I still don't see how Macklowe could pull that number. Is he being unrealistic, or has the past couple years' run-up in prices really gone this far?

[Stern]

Well, Macklowe refinanced the tower at $2.7 billion. He claims its worth $4 billion. In reality the market hasn't been rising like it was so its fair to say its worth $2.7 million, maybe a little more.

[investordude]

We'd probably get nicer architecture if he sold to somebody else.

My only concern is a company like related will build residential. I'd like to see Manhattan build some office space. I think the inability to build office buildings is becoming a competitive disadvantage for New York.

[antinimby]

It would be even better if Macklowe died a horrible death.

A possible scenario: while walking past one of the sites of a beautiful building he is demolishing, the whole side of the building collapses on him and cracks his skull wide open with brains spilling out onto the sidewalk.

Now that would be justice.

[londonlawyer]

I agree with you, man.

I am opposed to Guantanomo, but as long as it's open, I propose sending Macklowe, Solow, Zuckerman, Moinian and Chang there.

[Stroika]

how about their architects? is there a place for costas & co. at gitmo?

[londonlawyer]

$3.5 billion for the GM Building? It was $1.4 billion four years ago! Even taking into account the rise in value the Apple cube gives it, I still don't see how Macklowe could pull that number.....

Especially since all potential buyers know that he's over a barrel and therefore, can extract a good deal. It couldn't have happened to a better person!

[londonlawyer]

This was a prescient comment that I made before the credit crunch struck. Nonetheless, Macklowe was as dumb as predicted.

x

[pianoman11686]

My only concern is a company like related will build residential. I'd like to see Manhattan build some office space. I think the inability to build office buildings is becoming a competitive disadvantage for New York.

Why do you say that? Related is just as much an office developer as it is residential. Time Warner Center, anyone? Hudson Yards?

I still do not understand the periodic bashing of Macklowe. He's developing 2 buildings right now, and hasn't built anything new before those in years. Hardly prolific. He's much more a landlord than a developer.

And if he's forced to go bankrupt, that doesn't bode well for commercial development in general, in the city. Expect a major slowdown if that happens.

[investordude]

I forgot about TWC. If they build office I'm fine. I disagree Macklowe's bankruptcy would mean a slowdown in building. His financing plan was stupid, and he got burned. You're right some people will hesistate to build office during an anticipated recession though - both housing and office will temporarily contract. But given these projects take years, I think its rational to assume this recession will be over by the time the dust settles.

[Jasonik]

Done:
In recent days, Harry Macklowe, the New York developer, has failed to refinance $5.8bn in short-term loans he used to buy seven Manhattan office towers from Equity Office Properties last February. Deutsche Bank, which provided the loan, has taken control of the buildings and will put them up for sale, a person familiar with the matter said.
http://www.ft.com/cms/s/0/ad13b090-d419-11dc-a8c6-0000779fd2ac.html?nclick_check=1

[antinimby]

Good.

The curse of the Drake?

[Scraperfannyc]

So much for playing Poker with Manhattan realestate Makclowe. Macklowe's poor judgement is not only seen in his dealing with bank loans, but also from his disgusting development, or should I more properly say, destruction habits. Hopefully, he will not rise again to destroy another block.

[ASchwarz]

This is old news, and the Equity office buildings have nothing to do with the Drake site.

[avngingandbright]

Any word on what happened to those gorgeous townhouses on 57th street? Those are so classy. If New York wants to be able to compete with Paris and London we need to preserve things like that. Otherwise we're no better than Houston, a cheap American city.

[avngingandbright]

Hello? Anyone?

[Stroika]

I doubt anybody knows. What'll happen with Macklowe or his properties is pretty unclear. If you want to help the situation, try to learn about the townhouses' history and put together an appeal to the Landmarks Preservation Committee.

I'm sure any sensible person agrees with you those townhouses are great -- a little touch of Amelie in Midtown -- and that whatever replaces them will be garbage and will go one step farther to making Manhattan a less varied, layered, beautiful, interesting place. That's thanks to the unfortunate economics, and to a lesser degree the aesthetics, of our time.

But unless people like you can put together a compelling case for them to be landmarked, Midtown is an unforgiving place for old buildings.

[kliq6]

This project, atleast developed by Harry is dead. The site probally will be sold off to help repay these loans

[JohnFlint1985]

It looks like I was right back in summer on SSP when i said that - nothing will be build on that site - they just going to brake the hotel and at best will come up with another glass box. Guess what - even that was too much. Congratulations....:mad:

[detigiwa]

Unfortunately , this does not seem the case. I am a tenant in one of the Buildings that Macklowe owns. He has bought 38, 40, 44, 46, 50 East 57 Street. It is rumored that Jacob has just sold and the only one that has not sold yet is Turnbull and Asser. Macklowe ( 440 Park Associates ) received
NYC Buildings Permit for interior Demolition on 44 and 50 East 57 Street and they started knocking floors down. Some of the Leaseholders in the Buildings that macklowe bought have hinted at possible defaults on their lease payments ( Probably for a nice payday ) and then have Macklowe kick everyone out, even though most of us have 4-5 year leases left.

Any suggestions ???

[Stroika]

GOOD GOD. and this is under CB5's jurisdiction, right? so macklowe can destroy some of the best looking townhouses in the entire city for some POS 35-story box, but the only truly impressive building planned over the last decade (calatrava's counts too, if they ever get money for it) is not allowed to build on an EMPTY LOT?

fall on your swords, CB5.

i don't know what to say, detigiwa... don't pull out of your lease, for starters... does anyone have an emergency number for anyone involved in the city council, bloomberg's office, etc? this is very depressing. it's like this city has a sinister plan to throw out anything worthwhile, and keep anything that could be worthwhile from getting built.

[londonlawyer]

Sadly, the townhouses might be razed, but Macklowe is not building anything there. If anything, he will be forced to sell the site.

[Stroika]

LL, is your info good on both counts (1. that he's razing the townhouses and 2. that he himself isn't building anything), or are you speculating? If the former, I'm going to be on the phone with Scott Stringer's office all morning long.

[londonlawyer]

I based my point re: razing the townhouses on what the prior poster said.

Nonetheless, he owes billions of dollars. No one is going to lend him money to build anything. I speculate with near certainty that he will be forced to sell the site.

[Optimus Prime]

Well, this land will be incredibly valuable if he clears it. Much easier to assemble the tax lots that way, not to mention to build on it. So yes, I would guess he is going to demo it and then sell it.

[MikeW]

IIRC the community board can only do something (or try to do something) if the developer needs a varience. My guess is that whatever he would build there would be as of right. And if he's demoing before he comes up with his building plans, they're essentially powerless.

GOOD GOD. and this is under CB5's jurisdiction, right? so macklowe can destroy some of the best looking townhouses in the entire city for some POS 35-story box, but the only truly impressive building planned over the last decade (calatrava's counts too, if they ever get money for it) is not allowed to build on an EMPTY LOT?

fall on your swords, CB5.

i don't know what to say, detigiwa... don't pull out of your lease, for starters... does anyone have an emergency number for anyone involved in the city council, bloomberg's office, etc? this is very depressing. it's like this city has a sinister plan to throw out anything worthwhile, and keep anything that could be worthwhile from getting built.

[Stroika]

Still, any system that allows these townhouses to be ripped apart but prevents Nouvel's tower from rising on the grounds that it's "inappropriate" is fundamentally broken.

There are huge checks and balances missing from the system, and we need to keep organizing and hollering to put pressure on the city to fix itself. Otherwise, we'll all be living in a much crappier, less interesting place.

[detigiwa]

He is taking the townhomes down and building himself.

[londonlawyer]

What's the source of your info?

What bank would finance a spec office tower in this market?

[alonzo-ny]

A spec tower with a dodgy developer.

[detigiwa]

I just logged in to the Acris system and one can read EVERYTHING that is going on with East 57 Street. Basically, through the office of the city register, one can pull up each parcel and lot and see who owns what. What a great system !!

I noticed that on 38 and 40 East 57 Street , there are work permits issued, latest being on April 02, 2008 for modification to the existing walls and installation of new curtain walls. Why would one do that to buildings that will be demolished ?? Is this a ploy to suffocate tenants in those buildings to force them out ??? And is that legal ??? If there is too much disruption, can one complain and get a restraining order ??

[MidtownGuy]

I walked by these today and one of the stores has a "moving" sign in the windows.:(

[kliq6]

They may demo those buildings but I doubt anything will be built with no tenant. Chances are this site may be sold to capital and eventually a hotel or office tower be built.

[MidtownGuy]

So, another empty lot where elegant and historic strucures now stand. Hardly reason to smile.:confused:

[kliq6]

must have hit wrong button, error fixed

[londonlawyer]

Axis of Evil

Moinian

http://cache.viewimages.com/xc/75440011.jpg?v=1&c=ViewImages&k=2&d=17A4AD9FDB9CF19309EBFDFE8F65174D09F5EEFCFE2C4673 284831B75F48EF45

Macklowe
http://www.nypost.com/seven/07032007/photos/business028.jpg

Chang
http://s3.amazonaws.com/trd_three/images/3236/samChang.gif

[TREPYE]

Look at those fecal eating grins....:cool:

[Stroika]

Good Christ, look at all the work Moinian's had done on himself. He's like the scumbag old man developer equivalent of Pamela Anderson. I guess his lack of shame in ruining classic New York buildings stems from his lack of any personal shame.

Check it out:
Hairline: looks like hairplugs
Teeth: Chernobyl white
Chin: something seems out of whack, like there's not enough chin. Probably a pinch-job
Tan: My money says this picture was taken after a mid-January trip to the tanning booth

Sleeeeaaaazzzzzyyyyy.

[londonlawyer]

While I'm against torture, I'd make an exception for these creeps. In fact, Dick Cheney should be allowed to test new torture methods on these three schmucks.

[detigiwa]

It is my understanding that Audemars Piguet just signed a deal with Macklowe for a " 8 figure amount " for the remaining 10 years on their lease to move out within a few months. As there is a Work order to work on the facade, I am sure that Macklowe will board up this building and bring it down soon. What a shame !!!

Also, please note that all the GROUND FLOORS at 450 PARK AVENUE are without tenants and they are not being leased out to anyone. I think that what has happened is that Macklowe may possibly have a deal with Somerset partners to keep them empty and lease the whole ground corner
together with the Building that he will put up eventually once he clears the Townhomes. This way, he can lease ALL THE WAY FROM 57 STREET TO 56 STREET to a MAJOR TENANT such as possibly NORDSTROM or whomever.

Based on my observations , I think that Macklowe will hold on to this property AT ANY COST and build something major, otherwise he would not be buying out Audemars Piguet.

[MidtownGuy]

^more foreboding news.
Even a glance at this thread gives me agita.
It represents everything that is wrong with development in this city.

[londonlawyer]

From therealdeal.net on May 5, 2008:

East 57th St. building sells for $31.5M

42 East 57th Street

A five-story commercial building at 42 East 57th Street has sold for $31.5 million, according to city records posted today. The 23,100-square foot building has four commercial units and houses Turnbull & Asser, a British menswear shop. The seller was the East-Man Trading Company, while the buyer was listed on the deed as T&A Holdings, L.L.C.

(Emphasis added.)

At least the scum has a sense of humor since he calls his company T&A Holdings.

Nevertheless, razing these buildings secures his place in the axis of evil.

http://s3.amazonaws.com:/trd_three/images/34293/42_East_57th_Street_articlebox.jpg

[antinimby]

This thread is so depressing, saddening and anger-inducing, all at the same time.

[Stroika]

Rather than watching this slow-moving train wreck with a mix of horror and indignation, isn't there anything we can do?

1. Many of us have been in close personal contact with Howard Mendes, whose CB5 has jurisdiction over this area. We can at least guilt-trip him if a number of us write him and call him out on being a preservation fraud if he lets some soul-sucking, city-killing 35-story glass office building with a Nordstrom's go up on these 19th-century townhouses yet fights against Tower Verre on an EMPTY LOT.

2. How about some applications to the LPC? I'd send one in, but I don't have any knowledge (and am getting my ass kicked at work these days so won't have time to gain any) about the history of the buildings.

3. Finally, how about some good old human action? We've all watched with dismay as NIMBYs destroy good proposed developments on empty plots; how about we take a page out of their playbook to prevent a wretched development on top of beautiful townhouses? I walked around this area 2 weeks back and took a number of photos -- it really is something of an oasis in a sea of Modernist train-wreck buildings and at least 3 or 4 identical half-assed, cheap-o Macklowe new-rises. (No joke, all of the buildings going up in the area are his -- which means the area will be a POS.)

We can protest on site or at City Hall to gain attention. Sadly, many of us are "real" people with jobs, not some geriatrics who can NIMBY it up. Still, I say we f*%&ing organize ASAP.

Let's put an end to everything that's wrong with cheapskate, turdville development in New York.

[antinimby]

1. Yes, definitely get in contact with Mendes and hear what he and CB5 has to say about this.

2. You should send in the petition forms anyway. It couldn't hurt and you never know. We did the same thing last year for the Lord & Taylor building and it worked. It got landmarked a few months after we sent in our petitions.

Don't worry about knowing the history, do the best you can. Include photos if you have them to make your a stronger case.

3. Maybe others here will be interested in helping. What ideas do you (or anyone else) have in mind?

Me, I've always advocated in writing letters to Macklowe and enlightening him that he need not tear these gems down but instead transfer their air rights over to the Drake site. Tell him how much better it would be to his properties nearby to have this block be as elegant as possible. Removing them would only turn the block sterile, ultimately bringing down the block.

[Scraperfannyc]

I wouldn't be surprised if Macklowe and the like pay off the CB5 to keep their mouths shut. Dirty people like to do dirty business. And maybe this kind of payoff is what funds the CB5. End result, the creeps are winning with their dirty tricks, and the starchitects with the greatest intentions get screwed.

I guess this thread just gets my thoughts going in this direction.

[Stroika]

I think we need to try a multi-pronged approach: Talk to the city, write Macklowe, and be prepared to take to the streets.

It's really in the man's interests as a developer to build over/around the townhouses. Look at the old Hearst Building, the first few floors of the high-rise. That beautiful Art Deco pedestal makes not only the Hearst Building but the entire area, especially now that we have a white remote control to house the Museum of Arts and Design and (soon) a glass car dealership in place of the Newsweek Building.

My thought is that as many of us as possible should write to the LPC, CB5 and Macklowe; and if we get rebuffed, be prepared to fight to save the city's dignity.

[detigiwa]

I am a tenant in one of the Buildings being pushed out. Count me in !!! Tell me what I need to do.

[detigiwa]

I have sent an Email to LPC about 30-45 dyas ago but have not heard anything back. Please give me an address and/or tel no to CB5 so that I can call them and try to meet or send a letter to these guys there.

[antinimby]

Right here (http://wirednewyork.com/forum/showpost.php?p=220599&postcount=10), detiwiga.

[Scraperfannyc]

Not sure if this may help, but maybe this can be a story for NY1 or Bloomberg. Perhaps we should expose Macklowe here who is detroying midtown gems. If nothing is done, Macklowe will win.

Look at Moses who was about to destroy all of SOHO to make a highway. Back then, SOHO was decaying and empty, but people saw the value of keeping SOHO and they all complained, and I believe the mayor did not let it happen or something like that. Today, we have soho and not a highway.

Make this as public a possible. Make it a news story. Expose the ugly truth as much as possible to the public, and only then, the higher forces might start moving to prevent this.

[MidtownGuy]

I agree. Publicity can only help here. Count me in for whatever can be organized. I want to go over and take some more photos at different times of the day, I live close enough. This row of buildings adds so much to the area, I just can't bear to see them go!

[londonlawyer]

It's amazing to me that the GV Landmarks Comm. fights to save O'Toole and yet, in our crazy city, Federalist era structures are razed, Beaux Artes structures are razed, etc. It's absurd.

[Optimus Prime]

Where are the Park Avenue and Sutton Place nimbies on this one anyway? I know it's not exactly in their backyard but a lot of them shop in these little stores and take in the ambiance nearby.

[avngingandbright]

We should try to go to AMNY (AM New York). They are generally more open minded (i.e., liberal) than the Post, who thinks any kind of glass monstrosity is instantaneously a "masterpiece." They're all about the paper.

[ASchwarz]

^
AM New York is "liberal"?

What does "liberalism" have to do with NIMBYism? How do reactionary views make you a progressive?

[Fabrizio]

What does "liberalism" have to do with NIMBYism? How do reactionary views make you a progressive?




Are you still beating your wife?

[The Benniest]

I would hate to see these buildings go, like a lot of the forumers here. I have a passion for old, classical buildings and seeing these torn down would break my heart.:(

If there is anything I can do here from Iowa, I'm all for it.

-Ben

[MidtownGuy]

A letter could never hurt, something to the effect of "I recently visited New York and was charmed by a row of beautiful townhouses on East 57th,...
...add content...
I learned that a developer...blah blah...I urge you to save these buildings from their imminent destruction...blah blah blah. Thank You, blah."

Personally, I'd like to chain mysef to the ironwork. That would get on the news. Am I getting too old for something like that? Anyone want to join me:D?

[The Benniest]

If the buildings are still there during the Mid-July area, I'd be there in a second.

Leave with a souvenir again: Headlines on New York papers. :cool: Haha!

...and I will get on that letter. Thanks.

[antinimby]

A letter from some guy in Iowa holds very little weight in the eyes of whomever you're sending that out to, I'm sorry to say.

Benniest, ask someone here with a Manhattan address to send the letter for you.

[londonlawyer]

A letter could never hurt, something to the effect of "I recently visited New York and was charmed by a row of beautiful townhouses on East 57th,...
...add content...
I learned that a developer...blah blah...I urge you to save these buildings from their imminent destruction...blah blah blah. Thank You, blah."

Personally, I'd like to chain mysef to the ironwork. That would get on the news. Am I getting too old for something like that? Anyone want to join me:D?

You should do it, man. This BS must be stopped!

[detigiwa]

I think ( I am not 100% sure ) that it was not Macklowe who bought 42 East 57 Street from East Man trading ( Previous Owner ). It is my understanding that T & A Holdings USA LLC is TURNBULL & ASSER. As you all may recall, they had 1st right of refusal on the purchase of the Building
in case someone wants to buy it. I spoke to the store manager today at Turnbull & Asser. Although he was not aware of the purchase he confirmed that T & A Holdings is them. He also confirmed again that " WE ARE HERE TO STAY "

If that is the case, then let's see if the FAYEDS will now succumb to Macklowe and turn around and sell the Building for 60 Million or so !!!

[antinimby]

That's reassuring to hear but aren't the adjacent townhouses still owned by Macklowe?

[negromarquina835]

Probably and all he has to do is go through with the "facade renovation" and put up scaffolding which has to extend 20 feet each way off of his buildings and cover the T&A building and they will loose business. The scaffolding could be up indefinitely till they give in and sell. Classic Macklowe technique. LOL You could also be sure it won’t be as nice of a scaffolding like the current ones at his other sites.

[detigiwa]

To the best of my knowledge, he owns all the Townhouses, except T & A and Buccellati. I had heard that Jacob sold but it does not reflect on the tax records yet.

Regarding scaffolding, a few of us tenants in one of the Buildings that Macklowe bought have vowed to fight to the end and will not give in.

We have spoken to some prominent NYC tenant lawyers but would like to know if any of you veterans have any suggestions regarding COMMERCIAL
tenant lawyers in NYC.

[londonlawyer]

The three nicest are the three on the right hand side.

http://farm1.static.flickr.com/250/455781104_eb599e9d7e_b.jpg

[The Benniest]

I agree. The one on the very right is just beautiful and I would hate to see these buildings go. :(

[antinimby]

londonlawyer, do you have any suggestions for detigiwa?

We have spoken to some prominent NYC tenant lawyers but would like to know if any of you veterans have any suggestions regarding COMMERCIAL
tenant lawyers in NYC.

[londonlawyer]

Sadly, I don't. I'm only involved in litigation.

[STEAMWORKSNYC]

Correct me I'm wrong ,but there hasn't been a NIMBY in sight for this one?:eek:

[detigiwa]

What is a NIMBY ???

[londonlawyer]

That's because they're idiots.

They scream to ruin nice proposals (e.g., Hines' MoMA tower and Solow's Con Ed proposal), and they're vocal about garbage (e.g., the O'Toole and the filthy, run down tenements on 1st and 65th), but gems like the Drake, the 56th St. townhouses, etc. don't register on their radar.

[kliq6]

NIMBY's just care about height. They dont care about destruction of good buildings and what not.

[MidtownGuy]

I agree with the sentiment but leave O'Toole out, that building is certainly not garbage.

[londonlawyer]

Fair enough.

[londonlawyer]

Yeah, baby!

KIRK'S CRAVING ONE SUITE DEAL
MULLS BID FOR DRAKE HOTEL SITE
By LOIS WEISS
KIRK KERKORIAN
Park Avenue plans
May 16, 2008 -- A partnership of Kirk Kerkorian's MGM Mirage and investment company Dubai World has held discussions about buying the Drake Hotel site from developer Harry Macklowe, The Post has learned.

While it's unclear if the MGM group will beat competing offers, sources familiar with the situation said the partnership would take over the existing $580 million in defaulted debt and interest, making the payments for the 12 months to 18 months until a construction loan is obtained.

Macklowe was asking for an additional $200 million for the site, located at East 56th Street and Park Avenue.

Macklowe has most of the land cleared but is still negotiating with some hold-out commercial tenants in neighboring townhouses to create a large front door on 57th Street.

The deal makes sense for MGM, which has been under pressure from Kerkorian, who owns 53.4 percent of the company, to diversify away from the gaming business into hotels.

MGM spokesman Alan Fieldname said, "There may have been a discussion but it has not gone further than that."

A new luxury hotel in New York could become a flagship for MGM and also become a "feeder" to Las Vegas and Foxwoods for MGM's European and Middle Eastern high rollers.

MGM and the Mashantucket Pequot tribe have jointly developed a hotel near the Foxwoods casino in Connecticut, and are collaborating to develop other projects.

"A Park Avenue address is prestigious and well regarded from a global perspective, and a globally recognized brand would be a good combination," said Mark Gordon of Cushman Wakefield Sonnenblick Gordon, a hotel investment broker who is not involved in the Macklowe negotiations.

Dubai World last fall invested over $5.1 billion in MGM's 76-acre CityCenter development project in Las Vegas by buying shares in MGM at over $84 each. It has since upped its stake to 9.6 percent of the company.

Macklowe is facing financial pressure on many fronts since paying $7 billion for six skyscrapers a year ago with loans on other assets, including the trophy GM Building.

A Macklowe spokesperson had no comment.

[ablarc]

What is a NIMBY ???
What a NIMBY believes:


1. All change is for the worse.
Developers propose change.
Clearly therefore, a developer's mission is to harm the world.

This is done through environmental degradation, which is an integral part of every development project.

Therefore, THE BEST PROJECT IS NO PROJECT.


2. More people, anywhere, anytime, are a bad thing:
more people on Earth, more people in the City, more people in the Neighborhood.

How do you reduce the number of people?
Don't know about the Earth or the City, but in my nice Neighborhood, we just keep them out.

If you don't build it, they won't come.

Therefore, THE BEST DEVELOPMENT IS NO DEVELOPMENT.


3. All developers are unscrupulous and greedy.
That they propose to build anything at all is prima facie evidence of unscrupulousnes.
That they seek to earn a profit doing so is evidence of their greed.

Building is immoral and profit is dirty.
The fact that politicians often approve projects shows that they are crooked and in bed with developers.

THE ONLY REALLY MORAL THING TO BUILD IS NOTHING.


4. A building project's depravity is directly proportional to its size in general and its height in particular.
A shorter building is always a better building.
The best building is the shortest building.

THE SHORTEST AND BEST BUILDING IS NO BUILDING.


5. Environmentally, the world has been going to hell in a handbasket, perhaps since Adam.
He was the last person to live in a really decent environment.
Therefore, vegetation is always preferable to the works of man. A park is always better than a building.

The City, after all, is merely a failed suburb.
But if you drive wedges of vegetation into the city, it will eventually evolve into Suburbia.

THE BEST CITY IS NO CITY.


6. All good things have already been built.
This is a wicked world, and sometimes we cannot altogether prevent all new building.
In such cases, however, we can insist that what is built should copy its surroundings, only smaller.

If we must suffer new buildings, let them at least look like the ones we already have.

THE ONLY TOLERABLE NEW BUILDING IS ONE THAT LOOKS LIKE AN OLD BUILDING.

Like the one I live in.

[antinimby]

For all the newbies reading, that ^ is a classic from ablarc. :)

Every three or four years, he brings it back when someone comes along and asks what a NIMBY is.

An oldie but always a goodie.

[antinimby]

Macklowe has most of the land cleared but is still negotiating with some hold-out commercial tenants in neighboring townhouses to create a large front door on 57th Street.Ugh.

[londonlawyer]

Although no development on this site would have been ideal, this development likely would result in an iconic tower.

[detigiwa]

Macklowe Moves on Drake Site, Buys Out Sole Tenant in 40 East 57th


by Dana Rubinstein (http://www.observer.com/2008/author/dana-rubinstein) | July 1, 2008 | Tags:
<LI class="first taxonomy_term_29563">Real Estate (http://www.observer.com/realestate)
Harry Macklowe (http://www.observer.com/term/30359)

This article was published in the July 7, 2008, edition of The New York Observer.


http://www.observer.com/files/imagecache/vertical/files/breaksMacklowe.jpg Property Shark
40 East 57th Street.

MORE
Commercial Breaks


No Spin Zone! Brokers Brutal on Commercial Market's '08 Turn (http://www.observer.com/2008/real-estate/no-spin-zone-brokers-brutal-commercial-market-s-08-turn)

Cheers for the Little Guy in a Big Market: Smaller Investment Sales Sail On (http://www.observer.com/2008/real-estate/cheers-little-guy-big-market-smaller-investment-sales-sail)

Carlyle Group Buys Stake in 666 Fifth Retail for $525 M. (http://www.observer.com/2008/real-estate/carlyle-group-buys-stake-666-fifth-retail-525-m)





Under the new leadership of the dashing Billy Macklowe, Macklowe Properties appears to be lumbering ahead with its complicated and complication-ridden Drake Hotel development.
Either that, or Macklowe Properties is busy assembling a more lucrative parcel in the East 50s around Park Avenue to put on the market—Macklowe was reportedly considering selling the mega-site in May, before successfully selling the GM Building to Mort Zuckerman’s Boston Properties for a record-breaking $2.8 billion.
Either way, Audemars Piguet, the sole tenant in 40 East 57th Street, is out. Capping 14 months of negotiations, Macklowe has bought out the remaining 10 years on the Swiss watchmaker’s lease. According to city records, it cost Macklowe $16.6 million.
The watch company’s offices will move by Feb. 15 to 137 East 57th Street, where it will take 15,000 square feet.
“He wanted us to be out, because he wants to bring all the buildings down,” said Francois Bennahmias, CEO for the Americas of Audemars Piguet. “He wants to build either a 30-floor building or 50 floors.”
The deal with Macklowe allows the Swiss clockmaker to also relocate its retail space from the ground floor of 40 East 57th to the former Dana Buchman store across the street at No. 65, adjacent to the Four Seasons hotel. That move, to be completed by next July, will nearly double the store’s size, from 1,800 square feet to 3,000.
A spokesman for Macklowe Properties wouldn’t comment for this story. But earlier reports said Macklowe was planning a 70-story, mostly residential skyscraper. On Tuesday, an investment sales expert said he’d heard that the firm was now planning a tower with a retail base, a hotel in the middle and condos on top.
Macklowe also owns 44 and 50 East 57th, and has development rights for 42, 44, 48 and 50 East 57th Street, all of which border the larger Drake site at 434 Park, at 56th Street.
The elusive character of the planned building is no surprise—the Macklowes, father Harry and son Billy, typically shun the press. And the development has been overshadowed for months by the Macklowes’ other, better-publicized troubles (from which the family finally appears to have extricated itself).

[Scraperfannyc]

He shuns the press. Very dirty and ugly stuff being hidden here. He will build his utter garbage in secret and not disclose any of his dirty work. Obviously, he has much to hide, unlike developers who want to publicize their work and enjoy public approval and recognition.

The Macklowes should be completely banned from NYC.

[detigiwa]

As I had mentioned earlier in this Forum, Nordstrom has started to build
at 450 Park Avenue. They will occupy the retail space to be combined with the Drake space, as well as the 57 Street Townhomes space, when available. IT HAS STARTED FOLKS !!! Very unfortunate.

[kliq6]

Macklowe facing foreclosure on Drake site




By Adam Pincus

Deutsche Bank sued Harry Macklowe and others to foreclose on $482 million in principal loaned to develop the Drake Hotel site at Park Avenue and 56th Street, according to a complaint filed in New York State Supreme Court.

The bank, acting as agent for the lender German American Capital Corporation, filed a 45-page complaint August 28 to force the sale of the Drake site and six buildings to be demolished for the development of a mixed-use hotel and condominium project.

This would not be the first time Macklowe lost control of properties to Deutsche Bank. The lender sold his prize possession, the General Motors Building, as part of a $3.95 billion package to a group led by Mortimer Zuckerman to repay the lender for the purchase of seven office buildings from Equity Office Properties.

Macklowe bought the Drake Hotel in 2006 for $418 million using money borrowed from Deutsche Bank. It was demolished last year.

In addition to Macklowe, the bank names his ownership company for the Drake site, 440 Park Avenue Owner Associates; two of his companies that own three buildings on 57th Street; as well as 12 unknown defendants.

Harry Macklowe's son William Macklowe, the chairman and CEO of Macklowe Properties, was unavailable for comment, a spokesman said.

A spokesman for Deutsche Bank declined to comment.

Sources said Macklowe was trying to find a buyer for the site but was unable.

The suit seeks to regain control not only of the 24,000 square foot development site at the corner of Park Avenue and 56th Street, but also six properties that were drawn into the development loan.

Harry Macklowe was widely believed to be trying to assemble seven buildings along 57th Street, to create a development site with frontage on 56th as well as 57th street, but had gained control of just four.

Macklowe controlled 38, 40, 44 and 50 East 57th Street, but not 42, 46 and 48 East 57th Street. The lawsuit contends his companies were in negotiations to buy 46 and 48 East 57th Street, and had signed a contract to buy 42 East 57th Street.

The initial $543 million development loan to Macklowe was made in March 2006, and secured by the Drake site, 50 East 57th Street and 44 East 57th Street. The loan was spread through three agreements in 2006 and 2007 to cover air rights to 42, 44 and 48 East 57th Street.

The lender seeks to foreclose on Macklowe's buildings at 38, 40, 44, and 50 East 57th Street. The suit asks for foreclosure on 42 and 46 East 57th Street, even though he does not control the properties, because they were in contract or being negotiated, the filing said.

The loan was restructured in October 2007 with a maximum principal amount of $559.6 million, due in full on November 30, 2007. That was not repaid, the suit alleges, leading to the foreclosure filing.

[Derek2k3]

Good news, hopefully a sensible developer will come along and leave the townhouses alone.

[Scraperfannyc]

Good news. Hopefully, some decent developer will come along and put in a nice replacement for the Drake without destroying more of NYC's great architecture.

[Stroika]

Nothing new here, but I'll post 'er for the record... This sounds morbid, but I hope Macklowe dies deeply in debt and serves as a cautionary tale for others hoping to rip up the city's most beautiful corners for highly leveraged spec garbatecture.

What a waste... the old bastard ripped up a wonderful building for absolutely nothing. Let's be vigilant about the townhouses now.

Macklowe May Lose $500 Million Site on Park Avenue (Update2)


By David M. Levitt


Sept. 11 (Bloomberg) -- New York developer Harry Macklowe may lose a building site on Manhattan's Park Avenue about a third the size of a city block after he defaulted on a $513 million loan and Deutsche Bank AG asked a court to force a sale of the property.
Macklowe, who lost control of seven Midtown skyscrapers to Deutsche Bank earlier this year, acquired the site in March 2006 when he purchased the Drake Hotel at Park and 56th Street, and adjoining lots. He leveled the hotel to build a tower that would include retail space, condominium apartments and a new hotel.
Macklowe has repaid none of the money he borrowed for the project, according to a complaint by Deutsche Bank filed in New York State Supreme Court. The lawsuit could delay the project --in a neighborhood where retailers pay among the highest rents in the world -- for years.
``Nothing is swift in foreclosureland, especially judicial foreclosure,'' said Joshua Stein (http://search.bloomberg.com/search?q=Joshua+Stein&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), the author of ``Stein on New York Commercial Mortgage Transactions'' and a partner in the law firm Latham & Watkins LLP (http://www.bloomberg.com/apps/quote?ticker=1115L%3AUS). ``Depending on how much of a fight the borrower puts up, it could take a year or well over two years.''
The filing could also force Macklowe to agree to hand the site to the lenders, who would sell it to recoup the debt, Stein said. Deutsche Bank, the Frankfurt-based company that's representing a syndicate of lenders, is asking the court to order the foreclosure and sale of the property.
Possible Record Price
Store rents along East 57th Street near the site are the fifth highest in world, according to Cushman & Wakefield's 2007 ``Main Streets Across the World'' report, averaging $900 a square foot annually. That could help the Drake property fetch a record price for a Manhattan development site, said Dan Fasulo (http://search.bloomberg.com/search?q=Dan+Fasulo&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), managing director at Real Capital Analytics, a New York-based property research firm.
``Because of the value of the retail space and the potential to get well north of $2,000 per square foot for the condo sales, I would put the value of the site at between $900 and $1,000 per buildable square foot,'' he said in an e-mail.
Houston-based Hines Interests agreed last year to pay the Museum of Modern Art $775 a buildable square foot for the right to construct a residential high-rise next to the West 53rd Street museum, a record for a ``sizable'' site, he said.
Macklowe, 71, has been buffeted by the U.S. credit crisis for more than a year, after using almost exclusively short-term debt to acquire $7 billion of Midtown office towers in February 2007 from Equity Office Properties Trust. He had planned to sell off some of the buildings and obtain long-term loans on the others.
Pressure on Macklowe
When Macklowe was unable to refinance, he defaulted in February and was forced to sell his most valuable possession, the General Motors Building on Fifth Avenue, and three other towers to Boston Properties for $3.95 billion.
Within days of the June 9 closing of the GM sale, Macklowe's family owned firm announced that 40-year-old William Macklowe (http://search.bloomberg.com/search?q=William+Macklowe&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) would replace his father as chairman and chief executive officer, and the company received expressions of interest for the Drake site from Related Cos., the developer of Manhattan's Time Warner Center, and MGM Mirage, the Las Vegas-based hotel and gaming company controlled by financier Kirk Kerkorian (http://search.bloomberg.com/search?q=Kirk+Kerkorian&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1).
Deutsche Bank served Macklowe with a notice of default on the Drake property last November, according to the complaint, which was filed on Aug. 28.
Lenders may simultaneously sue to protect their rights while continuing to negotiate a settlement, said Gary Eisenberg (http://search.bloomberg.com/search?q=Gary+Eisenberg&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), a partner in the financial restructuring practice of the law firm Herrick Feinstein LLP in New York.
Negotiating Tactic
``It doesn't necessarily mean the lender has totally run out of patience,'' he said. ``More likely it's a sign they don't want to allow the process to go on indefinitely. One cannot assume there are no further discussions going on.''
Jonathan Mechanic (http://search.bloomberg.com/search?q=Jonathan+Mechanic&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), a partner at the law firm Fried Frank Harris Shriver & Jacobson LLP, representing Macklowe, declined in an e-mail to comment. Jerome Hirsch (http://search.bloomberg.com/search?q=Jerome+Hirsch&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) of the law firm Skadden Arps Slate Meagher & Flom LLP, who drew up the complaint for Deutsche Bank, referred questions to the bank. Ted Meyer (http://search.bloomberg.com/search?q=Ted+Meyer&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), a Deutsche Bank spokesman, also refused to comment.
Macklowe acquired the hotel in March 2006 from Host Marriott Corp. for $418 million, and proceeded to tear down the 495-room building. The site is now a debris-strewn lot shielded by a black- painted wooden fence.
The L-shaped site -- including four low-rise buildings along East 57th Street the Macklowes were in the process of buying -- surrounds 450 Park Ave., a 37-story tower bought last October by Somerset Partners LLC for $1,566 a square foot, the most ever paid per square foot for a U.S. skyscraper.
To contact the reporter on this story: David M. Levitt (http://search.bloomberg.com/search?q=David+M.+Levitt&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) in New York at dlevitt@bloomberg.net.

[londonlawyer]

I am hopefully optimistic that this will not be built and that creepLowe will sell the site. How can he build a spec tower in the current market?....

I was on the ball!

Macklowe May Lose $500 Million Site on Park Avenue (Update2)

By David M. Levitt

Sept. 11 (Bloomberg) -- New York developer Harry Macklowe may lose a building site on Manhattan's Park Avenue about a third the size of a city block after he defaulted on a $513 million loan and Deutsche Bank AG asked a court to force a sale of the property....To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net.

Last Updated: September 11, 2008 11:28 EDT

[londonlawyer]

I speculate the Skanklowe will sell this site to a competent developer like Hines or Zeckendorf who will build a stellar hotel/condo.

I don't see how he could possibly secure a financial tenant for the proposed office -- at astronomical rates -- in the current market. By contrast, due to the cheap dollar, extremely high-end residential projects are still in great demand.

Another prescient comment!

[avngingandbright]

dated On 10/20/08 at 11:15AM Macklowe buys Drake site lease for $5.4M




http://s3.amazonaws.com/trd_three/images/53670/38e._57_articlebox.jpg (http://ny.therealdeal.com/assets/53670) 38 East 57th Street

By Adam Pincus

In the face of a foreclosure action, a company affiliated with Macklowe Properties paid $5.35 million to buy out a building lease from Sovereign Partners that is part of the Park Avenue Drake Hotel development site in Midtown, according to city records published Thursday.

The move puts Macklowe Properties a step closer to full control of the building at 38 East 57th Street, which the company bought in February 2007 for $60 million, in order to include it in the Drake project. But real estate investment firm Sovereign Partners, which is located in the building, held a lease for the entire building. Macklowe Properties Chairman and CEO William Macklowe only has to buy out or remove the remaining commercial sublease tenants in the building before he can demolish it. A current tenant said less than half the building was occupied.

The 13-story, 30,000-square-foot office tower is the largest of seven buildings along 57th Street that Macklowe has been trying to assemble and then tear down to make way for a hotel and residential condominium. He already owns four of the seven buildings, according to property records, in addition to the Drake Hotel site on 56th Street.

3857 Realty LLC, a company related to Macklowe Properties, closed on the $5.35 million lease transfer October 7, according to the city records. The signatory on the lease transfer was Macklowe Properties’ general counsel, Jason Grebin, identified as vice president of 3857 Realty.

The building tenant believed Sovereign had seven years left on the lease, but the company did not return calls to confirm that o