When word leaked out just after New Year’s Day that a development team led by the venerable Fisher Brothers Company had won the bidding for nine acres on the East River shoreline, it marked the end of a feverish real estate bidding war and the dawn of a new era in Manhattan.
For several weeks, Fisher Brothers and their partners, the famously irascible developer Sheldon Solow, along with Morgan Stanley Dean Witter & Company, competed with a team made up of Mortimer Zuckerman, the chairman of Boston Properties Inc., and residential builders Leonard Litwin and Donald Zucker to buy four sites from the Consolidated Edison Company near the smoker’s windpipe that is the mouth of the Queens-Midtown Tunnel. The properties are nearly worthless in their present state. A gargantuan, soon-to-be-abandoned steam generating plant occupies nearly 4.5 acres, a ghostly vestige of the East Side’s industrial past.
Fisher Brothers and its partners envision the first new neighborhood of the 21st century springing from the rubble, a project on the scale of Battery Park City or Donald Trump’s Riverside South that would rise over the East River and beckon to motorists headed for Manhattan on the Long Island Expressway.
It sounds an awful lot like a top-of-the-market mirage. But the fact is the Manhattan real estate market has never been stronger. Morgan Stanley, Bear Stearns & Company and Time Warner Inc. are building new headquarters in midtown. Once-forsaken neighborhoods like Little Italy, the meatpacking district and lower Manhattan are being re-created as affluent enclaves. And developers like the Zeckendorf brothers and Mr. Trump brag of squeezing astronomical payments out of eternally grateful investment bankers for superluxury apartments that are years away from completion.
Fisher Brothers, Mr. Solow and Morgan Stanley are placing an opening $600 million bet (that’s the price they are reportedly paying for the land) that the good times will roll for another four or five years as they scramble to get the land rezoned for residential and office use, finalize their architectural plans, and begin to build. In the meantime, they will be making interest payments on the huge amounts of money they will almost certainly have to borrow to close the deal and finance construction.
These are risks that would disturb the sleep of most people. But not those who have the cast-iron stomach required in the development game. “It’s going to be very long, very tough,” Mr. Trump told The Observer . “I’m very proud of myself for not bidding.”
Neither the developers nor Con Edison would discuss the bidding process. “We do not have a final deal,” said Joseph Petta, spokesman for the utility company.
It may take an especially strong constitution to swing the deal. Hoping to avoid a backlash similar to that which greeted Mr. Trump’s 90-story tower near the United Nations, City Planning Chairman Joseph Rose already is talking about holding the developers to some strict limits. He said the new buildings should be no taller than 500 feet, the height of the other residential towers in the immediate vicinity. He is also interested in restricting the overall development on the nine acres to five million square feet, roughly five Chrysler Buildings. “And there should be significant amounts of waterfront access to nurture a sense of community and street life,” Mr. Rose told The Observer .
The city will have a great deal of sway over the project. All but one of the four sites are zoned for manufacturing. So they must be rezoned for commercial and residential development before the Fisher Brothers team can pursue their bull market dreams.
Nevertheless, residents of surrounding neighborhoods like Turtle Bay and Murray Hill appear to girding themselves for war. More than 10,000 apartment dwellers have banded together as the East Midtown Coalition for Sensible Development to prevent large-scale building on the Con Edison land. Local Democratic leaders such as Representative Carolyn Maloney and Assembly memer Steve Sanders have lent their names to the group’s cause. So have civic groups like the Municipal Art Society and the Natural Resources Defense Council. “It can’t overwhelm the waterfront,” Mr. Sanders said. “It ought to make the waterfront more open and more available to the public.”
Richard Kahan, an urban planner representing the coalition, said the city and the winning bidders would have to make a stark choice about how to proceed. He said they could face the lawsuits and demonstrations that Metropolitan Transportation Authority encountered in the 1980′s when it tried to sell the New York Coliseum to Mr. Zuckerman, who planned to build an office tower on the land. Or Mr. Kahan said they could spare themselves the throbbing headache and embrace the community as Mr. Trump did when he sought approvals for Riverside South in the early 1990′s.
Lessons From the Past
“There are a lot of lessons to be learned from large projects in the past,” Mr. Kahan said. “This project can either follow the path of the Coliseum or look at the lessons of Riverside South. The former has yet to break ground after 15 years and the latter has four buildings going up only a few years after Trump joined forces with the civic community.”
The coalition thinks it has already come up with a novel way of tying up the sale. It is considering opposing the power company’s efforts to increase steam and electric output at its East River Generating Station at 14th Street and Avenue C so it can close down and sell its Waterside Generating Station at First Avenue and 39th Street, a sizable piece of the nine acres that the Fisher Brothers team is hoping to develop.
The possibility of litigation is not entirely surprising. Any real estate mogul who looked at the Con Edison sites had to consider the inevitability of a fairly protracted legal battle with residents whose views would be imperiled or community activists alleging that the project would foment some ecological disaster.
Yet the promise of creating Manhattan’s first new neighborhood in the new millennium clearly outweighed the inevitable court battle. The sale attracted Jerry Speyer, Aby Rosen and the usual crowd of moguls whose empire building drove much of the recent boom. Then there were some real estate barons like the Fishers and Mr. Solow, who had sat on the sidelines through much of the 1990s and probably felt they had some major catching up to do.
Most of the bidders were interested in only one or two sites. But a source familiar with the process said that Con Edison decided it wanted to dispose of all the sites in one fell swoop and advised rival developers to team up with each other if they still wanted to stay in the game. Mr. Zuckerman, primarily interested in constructing an office building on the power plant, joined forces with Mr. Litwin and Mr. Zucker, both of whom coveted the remaining sites for residential buildings. Members of the Zuckerman team declined to comment.
An Odd Union
The Fishers, an old New York real estate family known for its high-end office buildings, linked arms with Mr. Solow, a developer more active in the residential market although he is probably best known for building 9 West 57 Street, one of the city’s most-prestigious office buildings. It’s an odd union. The founding Fisher brothers, Larry, Martin (who died in 1976) and Zachary, were famous for their philanthropy and political connections: Zachary, who died last June, is responsible for transforming the U.S.S. Intrepid into a floating military museum. Mr. Solow, meanwhile, is renowned for his extensive art collection and his feuds with tenants.
With Morgan Stanley backing them, however, the Fishers and Mr. Solow should be in good shape even if the project is delayed by lawsuits. A source familiar with the bidding said the United Nations may be interested in leasing convention space in the project. That could make the entire project move a little faster. A United Nations spokesman could not be reached for comment.
And if the real estate market tanks? “These are good sites even in bad times,” said another person close to the bidding. “It’s going to take five or 10 years to do this so you have to be in it for the long haul. But everybody is gambling things will stay [as they are].”