NEW YORK—With its unparalleled views of Central Park and striking black-glass façade wrapped in travertine marble, the swooping tower at 9 West 57th St. in Manhattan is among the world's most prestigious business addresses.
Today, it sits half empty.
Roughly 24 of the building's 50 floors are vacant, including the top three, according to people familiar with the building. Even in today's dismal real-estate market, the amount of empty space in 9 West, as the building is known, is unique among high-end New York office towers.
Nine West has rich connections to American finance. Much of the action surrounding the legendary takeover of RJR Nabisco, chronicled in the book "Barbarians at the Gate," took place on the 42nd floor at the offices of private-equity firm Kohlberg Kravis Roberts & Co. A popular women's shoe brand, Nine West, is named after the address where it was founded. The building was recently touched by the crimes committed by imprisoned fraud figures Bernard Madoff and Marc Dreier.
Brokers and tenants trace the mass vacancies to Sheldon Solow, 9 West's billionaire owner. Mr. Solow has declined to reduce rents in the building, where the highest floors go for roughly $200 a square foot. The average asking rent of 9 West's neighborhood, the so-called Plaza district: $79 per square foot, down 18% from a year ago, according to Reis, a commercial-real-estate data provider.
Mr. Solow also is known for his lawsuits, which have become legion over the years.
Nine West's largest tenant, Bank of America Corp., left the building two years ago for its own new office tower, but not before Mr. Solow tried to evict the bank with a lawsuit alleging that it was using the space for criminal activity. Mr. Solow lost the case.
The health of the 81-year-old Mr. Solow, who has a history of heart troubles, recently took a turn for the worse, according to people close to Mr. Solow. He has for now turned over the business to his son Stefan and an outside consultant. They have hired broker CB Richard Ellis Group Inc. to lease the building.
Sheldon Solow and Stefan Solow didn't return telephone calls seeking comment.
Despite the vacancies, the Solows aren't in danger of defaulting on the property's $400 million mortgage. In 2007, the building was appraised at $2.2 billion, according to loan-data provider Trepp LLC. Even at an occupancy rate of 53% as of October, the building generated $35 million in net operating income during the first nine months of 2009, according to Trepp, more than enough to cover debt service. But in 2008 the building earned nearly double that.
"Nine West 57th Street is one of the premier pieces of real estate in the world and should be at the highest price of any office space in the city," said Peter Riguardi, president of New York operations for real-estate brokerage Jones Lang LaSalle. But "I think that there's been a perception in the marketplace that doing business with the Solows is difficult."
Mr. Riguardi said there's an effort to change that perception. He says he recently met with Jay Fischoff, the outside adviser hired to help manage the building. "They're trying to be a little bit more tenant-friendly and broker-friendly," Mr. Riguardi said.
Despite 13 football fields of empty space, 9 West retains an exclusive aura. Cellphone use is banned in the hushed, sparse, marble-clad lobby. Tenants are denied access to the elder Mr. Solow's private art gallery, which occupies what would be prime retail space on the ground floor. Through glass windows, pedestrians can view the prodigious collection, which includes a Miro, a Matisse, and a Henry Moore sculpture.
For now, private-equity and hedge-fund executives, whose money-management empires can afford the steep rent, occupy much of the building. Hedge fund Och-Ziff Capital Management Group occupies three floors. Apollo Global Management, run by billionaire Leon Black, occupies 2½ floors. Among the building's newest tenants is private-equity firm Providence Equity Partners, which late last year took over the entire 47th Floor at about $200 a square foot.
Bank of America's departure from the 9 West space has had a big effect on the building's overall vacancy rate. The bank once occupied 14 floors in the building, but has since consolidated most of its New York employees inside an office tower on Sixth Avenue.
In a lawsuit, Mr. Solow alleged that Bank of America made structural changes to the building's floors without his permission, according to people familiar with the situation. He sued the bank, seeking to evict it on the grounds that it engaged in illegal conduct. He cited a 2003 case in which state prosecutors charged one bank employee with improper trading practices. The court rejected Mr. Solow's lawsuit, ruling that the alleged improprieties "were largely carried out by a single member of the tenant's substantial on-site work force."
Last week, Citigroup Inc. won a court ruling allowing it to collect $85.7 million from Mr. Solow. The bank sued Mr. Solow in 2008, accusing him of failing to make payments on a roughly $500 million line of credit it had provided Mr. Solow for the development of a large plot of land in Manhattan along the East River.
Mr. Solow has had other difficulties. In 2008 his longtime lawyer Marc Dreier admitted to a scheme to sell to hedge funds $380 million in bogus promissory notes issued by Mr. Solow's company, Solow Realty & Development Co. Mr. Dreier, who is serving 20 years in federal prison, defrauded at least one hedge fund by holding a meeting with it in Mr. Solow's conference room on the 45th floor
Mr. Solow grew up in Brooklyn, the son of a bricklayer. He dropped out of New York University to try his hand at real-estate development. In the late 1960s Mr. Solow snapped up 17 parcels on 57th Street and eventually commissioned architect Gordon Bunshaft to design the tower.
An early tenant was a shoe company whose founders, after being unable to agree on a name for a new brand, settled on their address—Nine West. They even used an outline of the iconic, red "9" sculpture perched on the sidewalk as their logo. As the brand expanded, Mr. Solow tried to stop them, recalls Jerome Fisher, one of the company's founders, but it turned out that Mr. Solow hadn't secured the copyright.
"We were young and stupid and it didn't bother us," Mr. Fisher says.
In 1992, cable network Home Box Office Inc. filmed the movie adaptation of "Barbarians at the Gate," the best-selling book about the RJR Nabisco takeover. HBO executives asked Mr. Solow permission to film the building's facade and "9" sculpture. He demanded a $150,000 fee. HBO balked and instead built its own red "9," plopped it in front of a similar-looking building on West 42nd Street and used that for the exterior shot instead.
"Sheldon treated the building like it was a movie star," said Michael Fuchs, who was HBO's chief at the time.
Three years later, when Mr. Fuchs was ousted from Time Warner Inc. in a boardroom battle, he negotiated a legendary exit package. Among its perks: his own office suite, paid for by Time Warner, on the 42nd floor of 9 West 57th.
No comments:
Post a Comment