In the last week of January, shortly before Blackstone acquired Equity Office Properties for $39 billion, the developer Harry Macklowe decided to make a play for E.O.P.’s New York buildings.
He wanted to speak with Blackstone’s managing director, Jonathan Gray.
“I called Jon Gray and told him what I had in mind,” Mr. Macklowe recalled in a rare interview. “I said, ‘I’d like to join you.’”
“Harry, it’s really nice to speak to you,” said the person who answered the phone, “but you called the wrong John Gray.”
“This is John Gray, the broker at Cushman & Wakefield,” the leasing agent said.
That small error—dialing the wrong number—was the first and only mishap in sealing one of the largest real-estate deals in New York City history: an eight-building buy for $7 billion.
When Mr. Macklowe got in touch with Blackstone, he made an offer “within 2 percent” of $7 billion. Two days later, there was a handshake agreement.
A week later, the reborn 69-year-old Mr. Macklowe closed the deal and doubled his portfolio to more than 10 million square feet of New York commercial property—giving him control of more office space than famed real-estate names like Durst and Rudin.
“He’s owned a considerable amount of real estate, but this moves him into the top tier of larger owners,” said Doug Durst, the longtime landlord. “It’s a big jump for him.”
But above all, it may help rewrite the legacy of a family whose reputation has been damaged several times over, a family name the Daily News once described as a “watchword for everything furtive and underhanded in the real-estate business.”
“We have wonderful buildings and a very bright future,” Mr. Macklowe said last week. “These are assets that you never find together in a lifetime.”
ON FEB. 13, BILLY MACKLOWE, HARRY’S SON and the president of Macklowe Properties, spoke at the Young Men’s and Women’s Real Estate Association luncheon in midtown.
He spoke proudly of the family’s latest acquisition.
“It really gives us the chance to create the ultimate, dominant class-A midtown portfolio,” he said before the more than 200 brokers in attendance.
He ran through a list of the buildings the Macklowes had just purchased, including the Worldwide Plaza, a 1.7-million-square-foot building on Eighth Avenue. (After their financier, Deutsche Bank, sorted out the math, it meant the Macklowes paid $1.73 billion for Worldwide Plaza, the second-largest sale for an office building in U.S. history.)
Harry Macklowe showed up late to the lunch, nearly an hour after the doors opened. The seat closest to the dais was reserved for him, along with a dish of salmon, caviar and crème fraiche. Beef, mashed potatoes and string beans were then served for lunch.
Harry Macklowe spent most of his son’s speech sitting sideways in his chair, looking straight at the floor. One of the few times Mr. Macklowe looked up was when Billy Macklowe described their eight-building purchase as a “five-generation portfolio.”
To be sure, the Macklowes have a fixed and careful eye toward the future—perhaps because their past has been so mixed.
The one moment Harry Macklowe will never seem to live down is the “midnight demolition” in 1985. That was the night a company that Mr. Macklowe had hired knocked down two S.R.O.’s and two other buildings on West 44th Street, where he was planning to build a high-end hotel, the Hotel Macklowe. The company didn’t have the permits to raze the buildings, nor did it bother to notify the city.
Even though a district attorney exonerated Mr. Macklowe from having knowledge of the demolition, he paid the city $2 million after public officials and editorials in The New York Times denounced him.
For Mr. Macklowe, it was a damaging public hit. For years, it was impossible to find a newspaper article about him that didn’t mention it. It didn’t take long after that for Mr. Macklowe to stop talking to the press altogether.
IT WAS ALSO THE FIRST PUBLIC BEATING for a man who started his career in 1960, while working for the brokerage firm Julien Studley Inc. Even after the midnight demolition, things continued to unravel for Mr. Macklowe. With the real-estate recession in the 1990’s, he fell into debt, lost buildings, filed Chapter 11 for one apartment building, and gave away the Hotel Macklowe to Chemical Bank in order to avoid foreclosure.
His empire was crumbling.
Not to mention that his name was dragged back into the press—this time for his feud with Martha Stewart over the size of the hedges at his East Hampton home on Georgica Pond.
It wasn’t until the late 1990’s, when the real-estate cycle began to circle back, that Harry Macklowe began to regain his foothold and his fortune.
His re-emergence was solidified when he purchased the G.M. Building on Fifth Avenue in 2003 for $1.4 billion, the most paid for a U.S. building at the time. He bought the building in a tense bidding war that everyone assumed went too high.
“I thought he was crazy at the time,” said Mr. Durst. “But I was wrong and he was right. He’s very good at recognizing where values are. In hindsight, we could have offered more than he did. We should have.”
Less than four years after he bought the G.M. Building, the tower is believed to have an estimated worth of about $3 billion.
“He’s shrewd and one of the most talented developers in New York,” said Scott Latham, the investment-sales broker at Cushman & Wakefield. “His attention to detail is awesome. He builds extremely high-quality real estate. G.M. is a perfect example: He takes a shithole building and makes it one of the best buildings in New York.”
It’s also the one that Steve Jobs chose as the midtown home for his Apple store. (It’s also the cause of two lawsuits against Mr. Macklowe, with each one alleging that the auction that brought him the G.M. Building was fixed.)
Even if leasing brokers complain privately and off the record that Mr. Macklowe is one of the toughest owners to deal with in the city—they say he’s grumpy and stingy—he has their respect.
Still, only a few brokers were brave enough to approach him after the Feb. 13 luncheon, a lunch which serves as a giant networking opportunity.
He isn’t nearly as popular with young brokers as Billy Macklowe, his son and the heir to the fortune. Billy is now a direct partner with his father, and he described himself as instrumental to the Blackstone deal.
THE 38-YEAR-OLD BILLY MACKLOWE, a graduate of New York University, was wearing a navy suit with a crisp blue oxford shirt and blue tie at the luncheon last week. After his speech, several brokers approached him, including Woody Heller, the investment sales broker at Studley, and Paul Amrich, the leasing broker at CB Richard Ellis.
When David Green, the leasing broker at Vornado, chatted with Billy, the conversation took a more serious tone. It was Vornado that lost the E.O.P. bidding war to Blackstone, and thereby lost big to Macklowe Properties. Just as they started talking, Billy ran to the podium to unplug a nearby microphone; he wanted to take every precaution that this conversation could not be overheard.
It was just six days earlier that Billy was celebrating Vornado’s announcement that they were dropping out of the bidding war with Blackstone. He was sitting in his office on the morning of Feb. 7, saw the news flash on his computer, then threw his arms in the air and screamed, “It’s over!”
He printed out the news on a sheet of paper, ran to his father’s office and handed it to him. Their calculation—that Blackstone would triumph and that a bidding war would force the firm to sell—was exactly right.
“If they didn’t win, we didn’t win,” Billy Macklowe said.
He was scheduled to be on vacation in western Canada that week, with “no cell-phone reception and no Internet.” Instead, he spent those 10 days working on a deal that was made on “handshakes and no terms sheets and no sleep,” and was less “difficult than buying my apartment,” he told The Observer.
“Dad and I like to move quickly,” he added. “Time kills all deals.”
When speaking of the eight new properties in the Macklowes’ portfolio, he said the buildings would be refitted in the family style—and that they definitely need it.
“There was no mark of an owner,” Billy said of the E.O.P. properties. “If you walk through any of our buildings with me, every tenant knows me. And a fair amount of them have nice things to say, too.”
Billy Macklowe was then asked if the family would make a play for 1095 Avenue of the Americas, the only ex-E.O.P. building in New York that Blackstone didn’t sell, but is expected to.
The building would be another impressive trophy to add to the portfolio that he and his father have rebuilt into one of the strongest in the city.
Billy Macklowe smiled, squinted his eyes, and looked to the future.
“Sure,” he replied. “What’s one more building?”