Real Estate War Over the G.M. Building
NEW YORK TIMES February 20, 2002
Heavenly Match Becomes Real Estate War Over the G.M. Building
By CHARLES V. BAGLI
Three years ago, it looked like a marriage made in real estate heaven.
Donald J. Trump, the flashy developer from New York, and Stephen Hilbert, the flamboyant executive who headed the Conseco insurance company in Indiana, teamed up to buy the General Motors Building on Fifth Avenue.
It was a 50-story marble trophy with an $878 million price tag.
But the deal started to go sour after Mr. Hilbert got tossed out of Conseco in 2000 when the company nearly collapsed under a mountain of debt. The new management team wanted cash, lots of it. Conseco negotiated for more than a year to sell its stake to Mr. Trump for $295 million before the deal finally fell apart.
Now there is nothing left between them but ugly recriminations, a lawsuit and the trophy.
If Mr. Trump wins his legal challenge to Conseco, he figures he will get the trophy at a discount, as well as hundreds of millions of dollars in damages. If Conseco wins, its chairman, Gary Wendt, and the insurance company say they will shed their partner, now unwanted, and gain even more money to put into a company that is still in desperate need of cash to pay off debts.
The contretemps shows both the hubris and the bare-knuckle tactics behind the scenes and the relatively paltry amount of cash, or equity, at the root of real estate deals most people can only imagine. Mr. Trump, after all, got a 50 percent stake in a billion-dollar building for a mere $11 million.
Conseco notified Mr. Trump in January that he had until the Ides of March to buy out the company for $500 million (and take over, or refinance, a $700 million mortgage), or they would purchase his stake for $15.6 million.
Unable to get the financing he needed and fearing that Mr. Wendt would sell the building out from under him, Mr. Trump sued Conseco on Feb. 7 for $1 billion, claiming that Conseco had greedily reneged on a sales contract when it became convinced that the building was worth even more after the attack on the World Trade Center.
Nonsense, fired back Conseco, where one executive suggested that the company would strip Mr. Trump's name from the sides of the G.M. Building and auction off the three-foot-high gold letters on eBay.
"I think we gave him more than a reasonable amount of time to close the transaction," said Andrew W. Hubregsen, senior vice president of Conseco Private Capital Group, a division of the company with offices in the G.M. Building. "He couldn't. Now that we decided to cash out, he doesn't like the agreement we both signed more than three years ago. The lawsuit is a clear attempt to delay the buy-sell process. It's not worth the paper it's printed on."
Mr. Trump scoffed, saying he has a sales contract. His hard work made the building more valuable, he said. He lamented the departure of Mr. Hilbert, Conseco's founder. "Had Steve still been there," Mr. Trump said, "we would've been partners for a long time."
In many respects, Mr. Hilbert was the stodgy insurance industry's version of Mr. Trump.
A hard-charging man, Mr. Hilbert pushed his company into a dominant position in the insurance field by making a rapid series of acquisitions, 19 in the 15 years ending in 1997. The company's stock soared 9,000 percent in that period.
Mr. Hilbert also had a penchant for putting his name, or at least the name of his company, on everything from racecars to the home of the Indiana Pacers. He met his sixth wife when she jumped out of a cake at a party he threw for his son's 21st birthday. His other New York venture, the theme restaurant Copperfield's Magic Underground, gobbled up $34 million and never opened.
The bidding for the General Motors Building was well under way in May 1998 when Mr. Trump called Mr. Hilbert asking if he knew David Simon, chairman of the company selling the tower and an Indianapolis neighbor of Mr. Hilbert's. When the answer was yes, Mr. Trump suggested they buy it together.
The two men made a successful 11th-hour offer of more than $800 million, outbidding real estate tycoons Steven Roth, Samuel Zell and Marvin Davis, who were unwilling to pay more than $750 million. The partners brushed aside criticisms that they had overpaid, expecting that rents would continue to skyrocket.
It certainly was a sweet deal for Mr. Trump. He put up $11 million for a half-stake in the property, while Mr. Hilbert and Conseco had to guarantee $700 million in financing from Lehman Brothers and ante up $11 million in cash and a $200 million loan.
"Steve Hilbert was putting his name on stadiums and buying Indy racecars," said Andrew Kligerman, an analyst who follows the company at Bear Stearns. "He was doing some wild and funky stuff at the time."
Mr. Trump quickly signed a couple of money-making deals. He got millions of dollars a year to rent much of the lobby to CBS, which built a studio for Bryant Gumbel's morning program. And he tacked his name on the building's exterior columns, annoying tenants who preferred more dignified and understated environs.
Mr. Trump poured more than $20 million into decorating the lobby with Vermont Verdi marble and brass trim and rebuilding the outdoor plaza, where he created an underground retail space that sits vacant today.
Although Mr. Trump and Conseco deny it now, there was talk early on about converting the top of the building into luxury condominiums or a hotel. The problem was that Estée Lauder and the law firm Weil, Gotshal & Manges had much of the space at the top of the tower under a long- term lease. So Mr. Trump filed plans with the state attorney general to turn the building into an office condominium. But no buyers emerged.
With the real estate market booming and office space scarce, Mr. Trump did get some of the highest rents in the city, as much as $135 a square foot for closet-size spaces.
But by late 2000, Mr. Hilbert had been replaced by Mr. Wendt, and Conseco was looking for cash. At a meeting in New York, according to both sides, Mr. Trump began discussions about buying out Conseco. In a tentative agreement last July, Mr. Trump agreed to pay Mr. Wendt the $295 million he wanted: $50 million in cash, a $200 million guaranteed loan and a $45 million note. He had lined up Deutsche Bank AG for the financing.
Mr. Trump's lawsuit contends that Conseco delayed closing the deal for months. After the Sept. 11 attack on the trade center, it became nearly impossible to secure financing from Deutsche Bank or others. The suit claims that Conseco was undermining the agreement to get more money for its stake.
But it is clear from a July agreement between Mr. Trump and Conseco that the insurance company was unwilling to accept the guarantee offered by Mr. Trump and Deutsche Bank. Conseco sought a higher level of obligation, a letter of credit.
Conseco notified Mr. Trump in January that it was invoking the buy- sell provision of their partnership, in which he had 60 days to pay them $500 million cash, or the insurance company would buy him out for $15.8 million. Conseco executives contend that Mr. Trump filed the lawsuit after failing to raise new financing.
In any case, both sides may have overestimated the value of their trophy in the first place.
Mr. Trump and Conseco put the value of the G.M. Building at about $1.2 billion, far more than most executives believe it is worth today. It is a valuable property, they say, but rents are down, not up, and the Midtown vacancy rate is near double- digits., and more than 40 percent of the tower is under long-term lease at below-market rents.
"The math doesn't work out," said a financier who had considered providing financing. "It's just too much money for too big a gamble.
Wollman Rink in Central Park and the General Motors Building on Fifth Avenue in the background.
Real Estate War Over the G.M. Building
Steve Hilbert met Tomisue Spring Tomlinson as she jumped out of a cake at his step son's bachlor party in the mid 90's. *
Tomisue was a stripper, unwed mother, who never graduated from high school in Indianapolis. *
Steve left his fifth wife Louann for Tomisue (25 years younger) after she became pregnant. Mansions in St. Maarten, Carmel, Indiana, BearCreek, *and Tomisue Hilbert averaging 10k a month on clothing at Escada. *
Real Estate War Over the G.M. Building
Concerning the GM building, it's often derided as a huge monster (1.9 million sq. ft. of office space) imposing and impressive although a bit bland. Then again, the beautiful art-deco GE Building is also a monster (2.2 million sq. ft). Where would this city's economy be without these structural monsters?
gbaku
1967
As much as I despise the GM Building, that's an incredible shot. The shot is pre-Solow Building at 9 West 57th Street allowing for a beautiful view of the south side of The Plaza.
http://www.crainsnewyork.com/apps/pb...8/newsletter01
Macklowe's GM building may sell for record price
Harry Macklowe is looking to raise cash quickly to pay back about $7 billion in loans related to his purchase of seven midtown office towers last year.
January 18. 2008 3:40PMBy: Theresa Agovino
Even though Harry Macklowe is trying to unload the General Motors building under pressure, experts say the trophy property is likely to fetch a record amount if it is sold.
Mr. Macklowe put the building up for sale as he seeks to raise cash quickly to pay back about $7 billion in loans due next month stemming from his purchase of seven midtown office towers last year.
Earlier this week, Mr. Macklowe tapped CB Richard Ellis Inc. to market the prestigious property, located on Fifth Avenue and E. 59th street, which he purchased in 2003 for $1.4 billion. Experts say of a combination of rising real estate prices since then and improvements Mr. Macklowe made to the building, such as adding the Apple store out front, should help him command a high price.
The fact that the GM building is fully leased and commands some of Manhattan’s highest rents, ranging from $150 a square foot to $200 a square foot, should also help the sale.
Real estate experts say the amount could top the roughly $1,600 a square foot Sommerset Partners LLC paid for 450 Park Ave. last year, although that building was much smaller, selling for $510 million. If the GM building sells for between $1,500 and $2,000 a square foot, it would bring in anywhere from almost $3 billion to nearly $4 billion.
“I think it will set a record. It is an absolutely unique and spectacular property,” says Bruce Mosler, chief executive of Cushman & Wakefield.
But while most agree the building is exceptional, Steven Spinola, president of the Real Estate Board of New York, says a speedy sale “may put pressure on the price.”
Of course, Mr. Macklowe may not sell the building. Mary Ann Tighe, chief executive of the New York Tri-state region of CB Richard Ellis, says she thinks the most likely scenario is that he brings an investor into the building. That could raise enough money for him to pay off the $1.2 billion he owes to Fortress Investment Group.
Although he also owes $5.8 billion to Deutsche Bank, he has had a long-term relationship with the bank and may be able to negotiate an extension. Fortress probably won’t be as flexible in granting an extension or allowing him to adjust repayment terms.
from: crainsnewyork.com
Cayre, Silverstein drop bids for GM building
Real estate investor Joseph Cayre and developer Larry Silverstein have both dropped out of the bidding for the office tower.
March 07. 2008 9:03AMBy: Theresa Agovino
Landov
Larry Silverstein and Joseph Cayre have both dropped out of the bidding for the General Motors building. However, a source familiar with the process said there were still at least two bidders left, although they could not be identified.
The second round of bids for the white marble tower were due Thursday. But a source says that Mr. Silverstein dropped out because of a lawsuit filed in state court earlier this week by developer Sheldon Solow, which alleges that the GM building’s former owner, Conseco, never formally sold the tower to Mr. Macklowe in 2003. Mr. Solow also bid on the property that year but lost and previously filed a federal lawsuit challenging the transaction. That suit is pending. It was unclear what was in the latest suit that spooked Mr. Silverstein. A spokesman for developer had no comment.
Meanwhile, a different source says that Mr. Cayre dropped out after learning that the minimum bid for the building was $3 billion. Last month, Mr. Cayre told the The Wall Street Journal that his bid for the building “starts with a three.” However, the source says that Mr. Cayre wanted to lower his bid to about $2.8 billion.
Mr. Cayre met with Mr. Macklowe’s broker, CB Richard Ellis Inc.’s Darcy Stacom either Wednesday or Thursday, and she told him the minimum bid was $3 billion so he opted out, according to the source. However, the source says Mr. Cayre could re-enter the bidding later if the minimum price falls. Mr. Cayre didn’t return calls for comment. CB Richard Ellis and Mr. Macklowe declined comment about Mr. Cayre’s decision and couldn’t be reached about Mr. Silverstein’s decision.
There were reportedly three parties who bid $3 billion for the tower in the first round: Mr. Silverstein, Mr. Cayre and an unnamed third party.
Mr. Macklowe put the GM building up for sale two months ago because it was used as collateral for his short-term loan from Fortress Investment Corp., which he obtained to help finance a $7 billion purchase of seven office towers last year. He is now in default on the loan but Fortress has given him an extension. Mr. Macklowe also borrowed $5.8 billion from Deutsche Bank to buy the office towers and has received an extension on that loan, also currently in default. Mr. Macklowe had reached an agreement to give Deutsche Bank back the seven buildings he purchased to repay his loan.
Published reports say Mr. Macklowe must raise $3.4 billion from the GM building sale to have enough to pay back Fortress and the debt he owes on the building. Mr. Macklowe bought the building in 2003 for $1.4 billion.
GM Building May Drop 'GM' Moniker
by Dana Rubinstein | June 12, 2008
PropertyShark.
The GM Building, the tower that Mort Zuckerman's Boston Properties this week closed on for a record-breaking $2.8 billion, may no longer be known as the GM Building.
Just minutes ago, in a Boston Properties investors conference call to discuss the acquisition, president Douglas Linde said the GM Building's name may officially change, since General Motors -- which moved its headquarters there 40 years ago --is moving its remaining three floors, more than 100,000 square feet, from the marble tower to the Citigroup Center, another Boston Properties tower, also in Midtown.
"GM may no longer be the moniker of the building," Mr. Linde said, depending on what Boston Properties determines is the value of the existing name.
General Motors' lease at the Citigroup Center begins in 2009.
In February, The New York Times reported that the building's former owner, Macklowe Properties, was considering selling the naming rights of the building for as much as tens of millions of dollars.
http://www.observer.com/2008/gm-buil...rop-gm-moniker
© 2008 Observer Media Group,
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