When Chris Whittle, the charter-school mogul at the helm of Edison Schools Inc., put his legendary East Hampton estate on Georgica Pond on the market for $46 million on Sept. 3, he was gunning for a Hamptons record.
But he may have to make every penny of that if he plans to come out of Edison’s current crisis with his personal fortune in tact. The announcement of the sale comes less than a week after Nasdaq threatened to delist Edison Schools’ stock-a threat which, if made good upon, would be the worst in a series of disappointments for the company Mr. Whittle began in 1992 with a controversial vision of revolutionizing the American educational system.
Mr. Whittle told The Observer that there were no inferences to be drawn about the state of affairs at Edison from the planned sale of his house, or vice versa.
“The company and the house are totally unrelated,” said Mr. Whittle. But he has a history of mixing his personal and business assets, sometimes to bail out a business that’s in trouble, and sometimes to fund his famously luxurious personal aspirations-like the Hamptons house that has been the subject of a profile in W magazine as well as a book by his wife, Priscilla Rattazzi, neice of Fiat’s Gianni Agnelli.
Now, with Mr. Whittle tethered to what increasingly appears to be a sinking ship, the sale of his Hamptons estate looks more and more like a life-preserver.
In November 1999 and April 2000, Mr. Whittle took out personal loans from Edison totaling nearly $8 million, parlaying that money into shares in the company. The stock was then at $3 a share-and with those shares now about one-sixth of their original value, millions of Mr. Whittle’s personal fortune are spoken for by Edison. The loans come due in November 2004 and April 2005, respectively. As of December, 2001, Mr. Whittle owned Edison $9.2 million from that loan (including accrued interest).
It’s worked in reverse as well: Bailouts of Mr. Whittle’s beloved Edison have been known to stretch the family purse strings in the past.
“If you go all the way back to the very beginning of Edison, back to 1989, and add up what I’ve invested directly or indirectly, it would be about $30 million. I’ve bailed the company out a number of times-particularly in the early days, between ’92 and ’95,” Mr. Whittle admitted.
It’s hard to tell who needs the money more right now-Edison or Mr. Whittle. Edison Schools has lost contracts this year in Dallas, Minneapolis, Boston, San Antonio and Trenton, as well as in Macon, Ga., and Mt. Clemens, Mich.
“We lose a customer from time to time,” Mr. Whittle said cheerfully when asked about the lost contracts.
Some customers are happier than others. Class-action lawsuits continue to pile up, spurred by reports in February that the company had booked profits it hadn’t earned, and by a May 14 cease-and-desist order from the Securities and Exchange Commission, which found that the company’s public filings understated Edison’s debt load. The day after the Feb. 13, 2002, report, which disclosed that Edison recorded as revenue teachers’ salaries, student transportation and utility bills that had been remitted directly by his clients, stocks dropped to $12.75 a share. By the time Edison reached an agreement in May to restate its earnings, shares were trading as low as $2.50 per share. Shares closed on Sept. 3 at 57 cents apiece.
And more trouble is brewing. In Philadelphia, where Edison only won control of 20 schools (they had wanted 45), the papers are reporting that Edison had to return orders of school supplies because they couldn’t afford to pay the invoices. The move so angered Philadelphia schools chief Paul Vallas that on Friday, Aug. 30, he announced a Sept. 3 deadline for Edison Schools to provide more documentation on its financial condition or risk losing its contract with the city.
Even a recent $30 million investment from Morgan Guaranty Trust Company has failed to kick Edison stocks into rebound. It’s time for brass tacks, analysts said.
“The stock is so cheap right now that there’s nobody here making money,” said Trace Urdan of Think Equity Partners, an analyst who tracks Edison.
Mr. Whittle admits that the stocks are low, though he blames it on a temporary setback-the loss of those other 25 schools in the contract with Philadelphia. But he admitted that a major face-saving campaign would be needed to bring Edison back from the brink.
“You basically have to rebuild investor confidence. You get back out there and deliver,” he said. “I think it was a complete overreaction.”
In fact, investors have whispered to analysts that the interpenetration of Mr. Whittle’s and the company’s finances runs even deeper. According to Mr. Urdan, short-sellers hostile to the company continue to claim that Mr. Whittle used his property in the Hamptons-the same one he’s just put on the market-to back up his loan from Edison.
Mr. Whittle denies the reports.
“That is 100 percent-no, 1,000 percent untrue,” he said.
Mr. Whittle’s friends think Edison’s difficulties have more to do with politics and an impatient market that doesn’t recognize the potential for the company’s success-but admit at the same time that things are not going well.
“There’s a concerted attack,” said Daniel Biederman, chairman of the 34th Street Partnership in New York and a former board member of Edison Schools. “It could’ve been given time to work.”
Edison does seem to be running against the clock. Mr. Whittle’s company has 90 days to get the stock price above $1 or else it will no longer be listed on the Nasdaq.
But Edison’s future looked bright when Mr. Whittle bought the Georgica estate 13 years ago for $7 million and paid renowned interior designer Peter Marino around $10 million to renovate the house according to his ideal.
“It’s an unbelievable property,” said Tim Davis of Alan M. Schneider and Associates, one of Mr. Whittle’s two brokers, adding that “it has the best view on Georgica Pond.”
Mr. Whittle’s estate is two properties combined, a total of 11 acres at the end of Briar Patch Road, with a 1920′s-style main house, a guest house, a pool, tennis courts and a boat house hidden in the lush foliage. Through the front door of the main house is a large center hallway that goes all the way through the house and opens onto the property out back by the pond. The house’s 15 rooms include a huge living room leading onto a balcony and multiple verandas facing the pond.
Ms. Rattazzi published a book of photographs of the property, including many shots of the pond. “I have watched the seasons come and go on Georgica Pond for ten years now,” she wrote in the preface of the book. “Whether it is spring, summer, fall, or winter, we are blessed with a view that has brought enormous happiness to our family and that has clearly inspired me.”
-with Karina Lahni
Gisele Sells Tribeca Loft
By Blair Golson
Brazilian supermodel Gisele Bundchen has signed a contract to sell her duplex loft in Tribeca’s American Thread Building. The two-bedroom apartment, which listed for $849,000, has been Ms. Bundchen’s New York residence since she bought the place in March of 2000 for $470,000, city records show.
The American Thread Building, located at 260 West Broadway near Beach Street, has long been one of Tribeca’s most desirable addresses. Supermodel Naomi Campbell and actress Isabella Rossellini once lived there, and current inhabitants include Fatal Attraction and Unfaithful director Adrian Lyne, as well as Saturday Night Live producer Marci (daughter of Calvin) Klein. In the early 1990′s, Italian fashion scion Ippolito Etro ran a showroom out of a 7,000-square-foot loft in the building.
The 22-year-old Ms. Bundchen is the IMG modeling agency’s top superstar, and the curvaceous bombshell is a seemingly permanent fixture on magazine covers and at high-profile runway shows. She has also had a long-running relationship with on-again, off-again boyfriend Leonardo DiCaprio. (The two reportedly broke up for good this July.)
Ms. Bundchen told the New York Post in June of 2000 that she never goes to the gym, preferring to get her exercise by running up and down the stairs of her apartment at the Thread Building. Her 1,380-square-foot loft has a kitchen and living room on the first floor, and two bedrooms on the second level. The larger of the one and a half bathrooms has an oversized Jacuzzi. Ms. Bundchen’s broker had no comment on the sale.
In his 2001 play Very Special Needs , the playwright and screenwriter Paul Rudnick penned a character so enamored with downtown society that she endeavored to rename herself Tribeca. Mr. Rudnick himself is fairly enamored with the “triangle below,” now that he’s spending most nights at a new condo in the heart of the neighborhood. Mr. Rudnick’s longtime partner, semi-retired physician John Raftis, recently closed on a $1.2 million, two-bedroom condo in Tower 270, a newly converted condominium building located at 270 Broadway, between Chambers and Warren streets across from City Hall.
Mr. Rudnick isn’t giving up his Greenwich Village digs, though “he spends just about every evening here,” Mr. Raftis told The Observer . “But he does all his work at home, so it really works out well. I don’t have to worry about walling up in a room when he’s hard at work on his projects.”
“But by maintaining separate residences, it stops us from strangling each other,” Mr. Rudnick added.
Their apartment sprawls over 2,000 square feet on the building’s 18th floor. Mr. Rudnick said he enjoys the rides up and down the tower. “One thing I particularly like about the building: The elevators talk. They will announce what floor you’re headed for in a kind of gracious female voice,” Mr. Rudnick said. “I think that’s refreshing.”
Tower 270′s conversion into 39 condo units was completed in early 2002, and Messrs. Raftis and Rudnick are among the building’s first new inhabitants.
“It feels very much like a prewar building,” said Mr. Rudnick. “It feels incredibly solid, with very thick walls. It’s very quiet and peaceful.”
The apartments have 10-foot-high ceilings, and the higher units have panoramic views of lower Manhattan. Each unit has top-of-the-line Bulthaup cabinetry and Miele and Sub-Zero appliances, and the bathrooms have glass-paneled shower stalls.
“It’s sort of got the amenities of a loft in a luxury high-rise building,” said Mr. Raftis.
The openly gay Mr. Rudnick is best known for his satirical takes on mainstream gay culture. He wrote the “Is he or isn’t he?” Kevin Kline movie In & Out , and his hit play Jeffrey follows a gay man who tries to swear off sex. Mr. Rudnick also wrote the screenplay for Addams Family Values . He’s currently working on a play called Valhalla , which he describes as “a comedy-God willing-that takes place in two separate yet intertwined historical periods,” and he recently finished writing a remake of the movie The Stepford Wives . Filming starts in February, and though no stars have been cast, Frank Oz is directing, and Mr. Rudnick’s longtime friend Scott Rudin is the producer. All of which makes him a very lucky boy.
UPPER EAST SIDE
3 East 80th Street
Four-bedroom, six-bathroom condo.
Asking: $8.4 million. Selling: $8 million.
Charges: $3,000. Taxes: $2,500.
Time on the market: four months.
WE’RE FLEXIBLE An investment banker and his wife were keen to move out of their townhouse, but they were having trouble finding an apartment building that would allow them to do the kind of year-long renovations they had in mind. (Most buildings limit renovations to the summer months, when many tenants light out on vacation.) Two years of searching in vain ended when they found this triplex apartment on the lower three floors of a six-story townhouse condominium. “This was the perfect transition, to go from a townhouse to a condo that’s half a townhouse,” said broker Roberta Benzilio, the executive vice president at William B. May, who repped the buyers with help from her company’s vice president, Stacey Gero. The building’s only other tenant-its owner-had no problem with the year-long renovation. He did, however, have to amend the condo’s bylaws to accommodate the new buyers’ pets, among other things. “How often do you amend plans based on one buyer’s wishes?” asked Ms. Benzilio rhetorically. The buyers’ new home includes a 17-foot-high dining room and 14-foot-high living room. The master bedroom on the second floor is 40 feet wide-the entire width of the townhouse-and the building has three balconies.
25 Tudor City Place
Two-bedroom, two-bathroom co-op.
Asking: $425,000. Selling: $415,000.
Maintenance: $1,267; 50 percent tax-deductible.
Time on the market: three weeks.
TUDOR CITY LIMITS Just two long blocks east of Grand Central Terminal sits the quiet enclave of Tudor City, developed in the late 1920′s, with its 12 Gothic buildings (and two parks) nestled into the three-block lot between 40th and 44th streets and First and Second avenues. It’s a far cry from the white-brick Upper East Side high-rise this couple was originally looking for, but Corcoran sales agent Michael O’Reilly managed to get them into this 850-square-foot co-op, and to sell them on the neighborhood’s tranquillity and Gothamesque charms. “They were enchanted with the … neighborhood and parks, and the serenity of the area,” said Mr. O’Reilly. The apartment suffered from a bit of Grandma’s-cupboard-styleprewar dinginess, but “the husband saw the possibility right away,” Mr. O’Reilly said. “The wife took a little convincing.” He said the two will update the design-they’re knocking downwalls and putting in a high-end kitchen and bathroom-but found themselves so keen on the architecture that they’re actually keeping the prewar feel.