Zeckendorf: Revisiting the legacy of a master builder

Nov.November 04, 2007 09:34 PM
William Zeckendorf in his signature hat

William Zeckendorf in his signature hat

Looking back: A new feature takes a look at some of the real estate titans who have shaped New York City.

As New York City ushers in an era of vast development projects — whether the Freedom Tower, Hudson Yards or massive plans for Manhattan’s East Side — a glance back at the life of developer William Zeckendorf Sr. is proof that there are no new ideas under the sun.

Zeckendorf “was absolutely unusual,” said I. M. Pei, an architect whom Zeckendorf hand-picked to work with, who subsequently became a leading architect of the 20th century. “It wasn’t the cut-and-dried method of making money in real estate that interested him. I have a feeling, and this is just my opinion, that he wanted to do something unusual. He always delighted in talking about ideas.”

Zeckendorf, who was born in 1905 in Paris, Ill., to a hardware store manager, dominated the nation’s real estate industry from the 1940s through the early 1960s, along with his company, Webb & Knapp Inc. His legacy is felt coast to coast, from Century City in Los Angeles to Roosevelt Field on Long Island.

“In a climate like today, he’d have been worth a trillion dollars,” said his former son-in-law Ronald Nicholson, who worked with him at Webb & Knapp.

One of Zeckendorf’s biggest achievements was assembling some 75 parcels of land on the East Side — formerly home to smelly slaughterhouses — into a bundle that eventually became the United Nations.

Now, today’s developers have similarly grandiose plans for the East Side. Developer Sheldon Solow is bringing to fruition plans for a mixed-use project, including six residential towers and one office tower, on the former Con Edison site between 35th and 41st streets along the East River. And Zeckendorf Sr.’s grandsons, William Lie Zeckendorf and Arthur W. Zeckendorf, co-chairmen at Zeckendorf Development, reportedly have visions of a 250,000-square-foot luxury condominium on a site on First Avenue between 46th and 47th streets that they, along with Eyal Ofer’s Global Holdings, purchased from developer Harry Macklowe in July.

With development in the area picking up where Zeckendorf left off, it’s worth revisiting the master builder’s career — both his achievements and his overreaching.

Eager early in life

Zeckendorf was brought to New York at age 3. As a young man, he dropped out of New York University because he was so eager to get into the business world, and found his first job in the 1920s at the real estate company of his uncle, Sam Borchard.

Early on, Zeckendorf’s uncle challenged him to fill a half-empty building at 32 Broadway, which the firm had just purchased, by the time the uncle returned from a European trip. Zeckendorf filled all but two small offices, but instead of praise, his uncle demanded to know when he would rent the remaining spaces.

“Zeckendorf quit the next day,” wrote Cary Reich in the book “Financier: The Biography of Andre Meyer,” about a close associate of Zeckendorf’s, with a chapter on the developer. “If he was going to make any real money in real estate, he decided, he would have to do it on his own.”

And do it he did. After clinching a few small deals independently during the Great Depression, he was quickly enlisted by Webb & Knapp, a small New York building manager and brokerage.

According to popular legend, Zeckendorf took advantage of his position while the partners were away during the war and purchased a large parcel of land along the East River that housed two slaughterhouses. He then worked swiftly and silently to assemble 8 acres between 42nd and 49th streets on the East Side.

That deal, one of the earliest of his career, was typical in the scope of his vision — he planned to build a development he dubbed “X City” on a seven-block platform over the site — and his failure to ultimately realize it. Since he was unable to meet the short-term debt obligations of carrying so much land, Zeckendorf made payment on the loans (which, according to Real Estate Weekly, came due the same day the United Nations was to choose a locale for its headquarters) by selling the entire swath. He made a huge profit of about $2.5 million. Yet, according to the New York Times, “he gave up the opportunity to make many millions more had he gone ahead with his plans for the property.”

Vision and bankruptcy

It was a pattern that would be repeated throughout his career, as he built Century City in Los Angeles, one of his biggest land deals, and developed an old airfield at Roosevelt Field on Long Island into what he claimed was the nation’s largest shopping center. Yet ultimately Webb & Knapp collapsed in a dramatic bankruptcy in the mid-1960s.

“No question, he was the greatest real estate guy New York’s ever seen,” said Charles J. Urstadt, who also worked for Zeckendorf, and is now chairman of Urstadt Biddle Properties, a real estate investment trust based in Greenwich, Conn. “He had courage to think outside the box, and to think of ideas of property development and property use that nobody else did. He was a tireless worker. He put together a huge empire. In 1959, I think we had 20,000 apartments spread around the country.”

But this was a time, Nicholson noted, when Zeckendorf’s employees were having to sneak him down a back elevator to avoid the growing number of creditors banging on the front doors.

“He was trying to build a General Motors out of what is basically a cyclical business, and at the time, we had huge overhead,” Nicholson said of the period right before Zeckendorf was forced into bankruptcy in the early 1960s. “If we were to take the assets that Webb & Knapp had in 1961 and value them at today’s values, in my opinion, they’d be worth between $25 billion and $30 billion, which would make it by far the biggest real estate firm in the world.

“So all we had to do was sit still, so to speak, instead of which, he had to do every deal that came down the pike.

“Whatever the deal was, he wanted to do it.”

Chrysler and the Freedom Tower

Zeckendorf Sr. owned an impressive roster of buildings, including the Chrysler and Graybar buildings in New York City; one of the largest collections of hotels in the nation; and a notable property in Cuba. He also developed Park West Village and Lincoln Towers in New York City.

Yet those grand achievements are shadowed by his lesser-known, and often unrealized, plans for New York developments, such as the “Freedom Tower” on the Hudson rail yards site. It would have been the world’s tallest building constructed during the Cold War.

He had an option to purchase the Hudson Yards site, also known as the West Side rail yards, said Nicholson. But in the old days, financing was different. “Back then, you couldn’t get money out of Wall Street. Real estate wasn’t like the stock market. ”

In fact, some of Zeckendorf’s financial maneuvers anticipated some of the highly aggressive financing of the recent real estate market. For example, there was his “Hawaiian technique,” which he claimed in his autobiography to have discovered while fishing on a Hawaiian beach.

That theory had to do with breaking up a property into various components — its ground leasehold, fee position, operating leasehold and a residual position — and seeking out various investors for each.

“He went to Hawaii, and that’s where he thought about the idea of diversifying investors — finding investors who are not just bankers or insurance companies, but actually going out to the public to find local investments,” said Pei, a founder of Pei Cobb Freed & Partners Architects, who joined Webb & Knapp in 1948 and worked there through 1960. “He wanted to broaden the possibilities of getting diverse investments. Those kinds of ideas interested him.”

Pei, 90, spent his youth working on urban renewal developments, among other projects, with Zeckendorf. Working for a property developer was an unusual position for an architect, but Pei viewed it as an opportunity to gain valuable experience in real estate.

Among other landmark buildings, Pei designed the Mile High Center in Denver, Place Ville-Marie in Montreal, and Kips Bay Plaza, a 1,160-unit apartment complex in New York City. Kips Bay Plaza was built of reinforced concrete at Pei’s request, which at the time was considered an insupportable expense by every builder except Zeckendorf.

Zeckendorf seemed to have a knack for finding New York’s next thriving market. For instance, he predicted that Sixth Avenue would become the city’s next new office building corridor.

While development of that avenue began in the late 1950s, a wholesale revival of the Financial District in Manhattan took a bit longer; it is arguably just being realized today with the creation of more housing and retail. Yet in another of Zeckendorf’s lesser-known schemes, which he called “the Wall Street maneuver,” he managed, in the 1950s, to keep banks in the Financial District when it seemed that a large-scale exodus to Midtown was imminent.

Chase Bank was one of the first to express ambivalence about the neighborhood, but it ultimately agreed to stay. “When the gentlemen from Chase said that they would like to preserve their $37 million investment in the area, I replied that while the savings was important, the real question was, ‘Could the Wall Street community be saved?'” wrote Zeckendorf in his memoir, “The Autobiography of William Zeckendorf,” co-written with Edward McCreary.

Zeckendorf wrote in his book that he played a game of musical banks: He found Chase a site to consolidate its scattered offices and then moved Chemical Bank into a former Chase site. He then found buyers for other vacant Chase buildings.

“We were in business for profit, so why did we do this?” Zeckendorf asked in his autobiography, where he surmised that the Wall Street maneuver was second in importance only to his deal with the United Nations. “We did it because it had to be done, and nobody else could do it.”

The younger Zeckendorfs, who have narrowed their focus more than their grandfather (who died in 1976), agreed that the Wall Street maneuver was a largely unsung deal accomplished by Zeckendorf Sr.

“His whole Wall Street maneuver was an extraordinary accomplishment,” William Lie Zeckendorf said. “It’s such a complicated deal, but basically, he just had a chessboard out, and he moved many institutions single-handedly, each trading up. The ultimate prize was moving Chase Bank to One Chase Plaza, which he did with David Rockefeller.”

Still, Zeckendorf’s grandsons said they believe he has left his mark less with his financial wizardry and more with the unique buildings he constructed as a property developer. “As a developer, he probably had the most successful track record,” Arthur Zeckendorf said. “Developers by definition want to build and create great things. They’re not by definition financial or money-manager types. As a developer, you want to leave your legacy. He certainly did that throughout the country.”

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