An innocuous-looking government report sits on a shelf in
John Zuccotti’s office on the sixth floor of One Liberty Plaza. Published in
1981, The Future of the World Trade
Center represents the findings of a blue-ribbon panel chaired by Mr.
Zuccotti, a former deputy mayor who was then settling into life as a
high-powered private attorney. The trade center, Mr. Zuccotti’s report said,
ought to be sold to a private developer.
Nearly 20 years later, it appears that the man who wrote the
book on the Twin Towers may end up owning them, too.
The company Mr. Zuccotti now heads, Brookfield Financial
Properties, has emerged as the favorite among four finalists in the Port
Authority of New York and New Jersey’s competition to win a 99-year lease on
the Trade Center, according to numerous real estate executives, brokers and
financial analysts. “Brookfield is a no-brainer as the logical buyer,” said
Michael Cohen, the president and chief executive of the brokerage GVA Williams,
summing up the conventional wisdom.
The lease, expected to cost the winner as much as $3
billion, would add New York’s two tallest buildings to Brookfield’s downtown
portfolio, which already includes three of the four World Financial Center
buildings and One Liberty Plaza, just across a wind-swept square. Buying it would
allow the company to take advantage of economies of scale and would create, in
the words of one broker, “a city within a city.” And that’s just the beginning
of Brookfield’s recent flurry of development activity: In the last few months,
the company has broken ground on a new office tower at 300 Madison Avenue, at
42nd Street, for the Canadian Imperial Bank of Commerce; it has leased the top
floors of One Liberty to the Nasdaq stock exchange, which plans to make the
building its new headquarters; it has begun negotiating a deal to build a new
Battery Park City office tower for Brown Brothers Harriman; and it has sought
city approvals to build a 2.5-million-square-foot office building on top of the
rail yards at 31st Street and Ninth Avenue, hoping to capitalize on plans for a
new Penn Station and the westward expansion of midtown.
Leading this charge, at least strategically, has been Mr.
Zuccotti, 63. Part Zelig and part Talleyrand (the French foreign minister who
served the king, the Jacobins and
Napoleon), Mr. Zuccotti has an uncanny knack for being where the action is and
emerging without a scratch. He survived two harrowing years as Abraham D.
Beame’s first deputy mayor, weathering the city’s fiscal crisis so well that
some wanted him to run for Mayor himself. At Brookfield, Mr. Zuccotti steadied
a company that had come on hard times and made it into a contender again.
Brookfield was formed out of the remnants of the American
subsidiary of Olympia & York, the legendary real estate company owned by
Toronto’s Reichmann family. The company became Manhattan’s largest private
landlord in the early 1990’s, but it couldn’t escape the weight of bad debt.
Mr. Zuccotti, once a trusted confidant of the Reichmanns, took over Olympia
& York’s U.S. branch in 1990 and hung on as it buckled beneath $5 billion
in debts, fell out of the Reichmanns’ hands and came under the control of a
Canadian conglomerate.
“John pretty much single-handedly kept them out of
bankruptcy,” said Carl Weisbrod, who was the president of the city’s Economic
Development Corporation at the time Olympia & York went belly up and is now
the head of the Alliance for Downtown New York. The company now owns 10 million
square feet of Manhattan office space, making it one of the city’s biggest
landlords. Its stock price, trading at more than $16 a share on the New York
Stock Exchange, is up 55 percent over the course of this year.
So it’s no wonder that Mr. Zuccotti is bullish about his
Twin Towers.
“We believe we will win. We will take it over,” he told the
Toronto Globe and Mail in July.
Citing a confidentiality agreement the company signed with the Port Authority,
neither Mr. Zuccotti nor any Brookfield executives would comment for this
story. But in a conference call with analysts earlier this month, Brookfield
executives disclosed that they had lined up two financial partners as
co-investors in the project. They say they plan to refinance their Manhattan
office buildings, or sell part-ownership stakes in them, as a way to raise
money for their expansion drive.
Sources with knowledge of
the bidding confirmed that the company was one of four finalists, along with
Mortimer Zuckerman’s Boston Properties Inc., Steve Roth’s Vornado Realty Trust
and Larry Silverstein. The eventual winner will have to have the patience and
tact to first strike an agreement with the Port Authority, then negotiate a
settlement with the city on the real estate taxes owed by the building, all
while carefully balancing the competing egos and agendas of New Jersey Governor
Christine Todd Whitman, Governor George Pataki and Mayor Rudolph Giuliani.
To complete such a deal, you need an operator. Someone like
Mr. Zuccotti.
“John, I think, has a very shrewd understanding of how to
work with government,” Mr. Weisbrod said. “He’s always maintained good
relations, but the important thing is he knows how to use those relations. He
knows when to go to the commissioner, when to go to the deputy mayor, when to
go to the line operative on issues.”
A Rumpled Genius?
Friends describe Mr. Zuccotti as capable and gregarious, if
a bit schlumpy and scatterbrained. He’s heavyset and has a big, meaty
handshake. “He looks like a rumpled professor,” said Leonard Stern, for whom
Mr. Zuccotti did legal work back in his private practice days. “He’s a softy in
the sense that he doesn’t yell and scream, and he has a bit of a Columbo thing
to him,” said Tom Falus, a former Olympia & York executive who is now at
the brokerage Cushman & Wakefield Inc.
Mr. Zuccotti grew up in the Village and attended Princeton
University and Yale Law. He and his wife Susan, a historian, still live in a
brownstone in Carroll Gardens, Brooklyn, which they bought in the 1970’s, when
Mr. Zuccotti was in city government.
Mr. Zuccotti has always had an instinct for survival.
Appointed chairman of the Planning Commission by Republican Mayor John Lindsay
in the late 1960’s, Mr. Zuccotti managed to stay on even after the Democrats
took back City Hall in 1973 under Mr. Beame. Mr. Beame tapped Mr. Zuccotti as
his first deputy mayor in 1975, as the city struggled to avoid bankruptcy. The
acrimony was thick, but Mr. Zuccotti earned high marks from all parties, mostly
by telling the hard numerical truth.
“Even during the financial crisis, he was the one guy
everyone felt they could trust,” said civic activist Richard Kahan, then an
official at the state’s Urban Development Corporation.
In 1977, as he prepared to leave city government, Mr.
Zuccotti was asked to consider a run for Mayor. But Mr. Beame was running
again, and Mr. Zuccotti said he thought it would be disloyal to challenge him.
Mr. Zuccotti went to England for the summer and read Trollope. Mr. Beame was
defeated in the Democratic primary by Ed Koch.
When he returned, Mr.
Zuccotti traded on his brains, expertise and connections to get very rich. He
went into private practice with his law school roommate, Peter Tufo (now
ambassador to Hungary). He represented developers like Mr. Stern, Mr. Zuckerman
and Paul Milstein, who called Mr. Zuccotti “my cardinal.” He also represented
In 1990, Mr. Zuccotti left his firm behind to go to Olympia
& York. Mr. Reichmann was spending more and more time on Canary Wharf in
London and wanted someone to keep on eye on New York operations. An old
acquaintance and company executive, Meyer (Sandy) Frucher, recommended Mr.
Zuccotti.
“Clearly, in hindsight, he stepped onto the bridge of the Titanic ,” Mr. Falus said.
When he took the job, Mr. Zuccotti thought he was going to
be masterminding large-scale developments in New York and San Francisco. By
Christmastime, 1991, he was flying from New York to Japan on Paul Reichmann’s
jet, along with his boss and Richard Holbrooke, then of Lehman Brothers, to try
to renegotiate repayment of a large debt to Nomura Securities.
“I remember how stressed out he was,” said Alan Wiener, a
friend and former colleague of Mr. Zuccotti in the Beame administration, now a
mortgage lender. “You could just see it was the same as when we were at the
depths of the fiscal crisis.”
The turning point, as Olympia & York veterans now
remember it, came in the spring of 1992. Mr. Zuccotti called 100 or so of the
company’s creditors to a meeting in a recently emptied office suite on the top
floor of One Liberty Plaza. Mr. Zuccotti took the podium and went through a
statement of principles-among them, a commitment that the American company
would operate separately from the Canadian company, its creditors and the
Reichmanns. “You will all get your money back,” one participant remembers Mr.
Zuccotti declaring.
“I think we all almost fell out of our chairs,” Mr. Falus
said. “The facts and the numbers made it very, very difficult to understand how
that was possible. But he was saying ‘I’m going to take care of you,’ and
everyone knew [him] as the person who saved New York.”
Political Skills Help
He would need all his political skills to do it. With the
city, Mr. Zuccotti negotiated a deal in which Olympia & York paid its real
estate taxes on a month-to-month basis, as rents came in. Later, when it seemed
that huge real estate transfer taxes might keep the company from reorganizing
under American control, he and Mr. Frucher lobbied the city to forgo the tax.
They convinced the state legislature to repeal a similar state tax, and got
Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno to
write letters to the bankruptcy court judge saying the law would be changed
soon and the tax shouldn’t hold up the reorganization.
At the same time, Mr. Zuccotti had to negotiate a thicket of
boardroom intrigue. At one point just prior to the crucial 1992 creditors’
meeting, Paul Reichmann had flown to New York to ask Mr. Zuccotti to pay back
what was essentially a $330 million loan from a Bronfman family company, taken
out against the World Financial Center. Mr. Zuccotti refused, saying that he
had American banks which were owed money first, and they might force the
company into bankruptcy if he seemed to be favoring Mr. Reichmann’s friends.
Mr. Reichmann took the refusal as an act of betrayal. But Mr. Zuccotti had
wrested the company from his boss’ control.
For the next three years, the nearly insolvent American
branch of Olympia & York would resemble a Roman court with plots and
counterplots. Robert Lowe, an accountant who took over the Canadian company on
behalf of the banks, tried to seize the American buildings to pay off Mr.
Reichmann’s debts. Vulture investor Leon Black, along with developer Jerry
Speyer, bought a large chunk of the company’s debt on the bond market in a
takeover bid.
Mr. Zuccotti sided with a group of debtors who included,
ironically enough, the onetime Bronfman conglomerate Edper-Brascan (it’s now
owned by its Canadian management), which Mr. Zuccotti had refused to repay a
few years before. When the company was carved up, Mr. Zuccotti’s group ended up
with the sweetest plums: 245 Park Avenue, three of the four towers of the World
Financial Center and One Liberty Plaza.
The buildings were added
to Edper-Brascan’s publicly traded real estate portfolio, which includes
buildings in Toronto, Boston and other cities, and rechristened as Brookfield.
As the real estate market
roared back, so did Brookfield. Now, a decade later, Mr. Zuccotti finally has
the chance to oversee the expansion Paul Reichmann hired him to lead-but
carefully this time. “If there is one word to appropriately describe
Brookfield, it is ‘discipline,'” said Frank Mayer, a senior real estate analyst
with HSBC Securities [Canada] Inc. in Toronto.
Mr. Zuccotti’s role in the company has decreased with the
good times. He seems content to leave the day-to-day decisions to his second in
command, chief executive Rick Clark. He’s gone back to practicing law a bit at
Weil, Gotshal and Manges, where he’s of counsel. And he is spending more time
traveling and in the outdoors. He is an avid fisherman. “I think it may have
something to do with how he does business,” said Paul Selver, a former law
partner who considers Mr. Zuccotti his mentor. “In fishing, what is required is
a lot of patience, a willingness to think through how an unpredictable fish is
going to react so you can get the catch.”
And Mr. Selver won’t be surprised if his mentor reels in the
tallest buildings in New York.
