The Real Deal New York

How GFI’s Allen Gross resurrected Temple Court

Developer faced series of unforeseen challenges at 5 Beekman Street

July 06, 2016 01:40PM
By Katherine Clarke

The Temple Court building at 5 Beekman Street in the Financial District (inset: Allen Gross)

The Temple Court building at 5 Beekman Street in the Financial District (inset: Allen Gross)

“How do you get Tom Colicchio and Keith McNally to be in the same building? Tell them to look up!” a chirpy Allen Gross quipped while walking his latest project on a recent sunny afternoon. The celebrity chefs are set to open competing eateries on the ground floor of the property at 5 Beekman Street, the Lower Manhattan skyscraper formerly known as Temple Court.

unspecified-4Gross, the CEO of GFI Capital Resources, pointed up at the hulking rows of iron railings and the large pyramidal skylight topping off the building, which is being restored to its original 1881 splendor, complete with a nine-level Victorian atrium, turret terraces and vintage elevators. The hotel portion of the project will open later this month, and about two-thirds of the condo portion’s 68 units, priced at a blended average of $2,500 a foot, are in contract.

But while Gross may be feeling good now, getting here was a long slog. The building, known for a century as Temple Court, sat vacant for more than two decades prior to the renovation. It fell victim to a series of false starts at the hands of major developers such as Ruby Schron, Jacob Chetrit and André Balazs, and faced hurdles that make refereeing tiffs between Colicchio and McNally seem easy.

So, how did Gross, the developer of boutique hotels such as the Ace and the Nomad, finally make the deal work? His answer: ingenuity, some bad luck for his competitors and a few slick business maneuvers.

Gross said he knew the economics of the deal wouldn’t work without wresting control of both the Temple Court building itself and the adjacent parcel of land at 115-117 Nassau Street controlled by the Shulsky family. The Shulskys had also controlled the Temple Court building from the 1940s until 2003, when they sold it to Schron of Cammeby’s International.

unspecified-3“They could never pull it off because they didn’t know about this piece,” he said.

Indeed, a series of developers nearly lost their shirts trying to convert the property. After buying Temple Court for $61 million from Schron in 2008, Chetrit and partner Charles Dayan nearly lost it to foreclosure in 2009 for failing to make payments on their $45.75 million loan. Chetrit, then of the Chetrit Group and now of the Chetrit Organization later sued Dayan, of Bonjour Capital, alleging he had failed to pay his share of the settlement in the foreclosure case. The two investors had planned to convert the building into a 200-key luxury hotel.

As part of the settlement, Chetrit and Dayan agreed that neither one would develop Temple Court, and would instead have to sell it to a third party.

Gross came close to buying the building in 2011 but not before Balazs attempted to scoop the deal up from under him. Gross says the sellers looked to extract more money from the deal by shopping around his contract, which they had not yet countersigned, to a handful of other parties, including Balazs. He alleges that Balazs, owner of the famous Beverly Hills hotel the Chateau Marmont and the Standard Hotel chain, knew of his contract but proceeded to move forward with the deal anyway, outpaying him by $5 million.

“They call me up Sept. 7, 2011 and tell me, ‘Allen, the deal’s not yours, we sold it,” Gross said.  “I remember because it was my birthday. I had a surprise party and sat there depressed.”

Of Balazs, he says: “He’s a rat. He knew I had a contract.’’

But three months later, Balazs was out. After struggling to land financing for the project in what was then a tough environment, he pulled out, losing his $5 million deposit.

The deal finally belonged to Gross, who agreed to match Balazs’ $64 million offer. He closed on the property in March 2012, and deliberately did not tell the sellers of his relationship with the Shulskys or his intention to build the adjacent tower, for fear they would backtrack on the deal.

unspecified-2But there were more headaches coming up: The vintage landmark had a myriad of construction challenges. For one, the building was not up to fire code and, because of its open layout and great age, it wouldn’t be easy to bring it into the modern era. Indeed, a long line of fire-safety violations had led to the building being boarded up for several decades, and an 1893 fire scorched a segment of the building’s annex. Frank Leslie, a janitor at the property, woke in the night to find his room filled with smoke and had to seek refuge on the roof, according to a New York Times report from that period.

Gross eventually hired consultants to devise a system whereby in the event of smoke, a series of flame-resistant sheets would fall from the terrace balconies and slot into bespoke glass cases. The city’s fire department eventually gave its blessing to the system.

Gross also discovered that the building’s ceiling heights were irregular, complicating his plan to line the property up exactly with the neighboring condo. While one ceiling would be 11 feet high, the one above could be half a foot lower and the one above could be a full foot higher.

“Do you know how they measured ceiling height in the 1880s? The foreman looked up and said, ‘That looks about right’’” Gross said, only half-joking. “Now, I have to do new molds for every single floor. It slowed down the job and created all sorts of hardships for us.”

unspecifiedHe plans to charge a whopping $10,000 a night for the hotel’s penthouse suite, at a time when the city’s hotel market is experiencing a blip. Last year marked Manhattan’s first down year since 2009, as RevPAR dropped 1.5 percent from 2014 to an average of about $288, according to data from STR. That was driven by declines in both occupancy and room rates. Still, Gross feels optimistic: The Ace is posting occupancy rates of 97 percent.

“Hey, I wouldn’t spend it,” he said in reference to the price of the suite. “But someone out there will, right?”

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