IT was the Hotel That Never Happened – not Steve Roth’s supposed intransigence – that turned the Vornado-Bloomberg lease talks into “the longest-running show in town since ‘Cats.'”
That, and the key role played by an unrelated Midtown sublease, are among the surprising truths to emerge about the deal for Vornado’s 54-story skyscraper on the old Alexander’s site, climax of an epic 31/2-year negotiation.
Vornado’s struggle to fill its full-block site at Lexington and 59th Street, across the street from Bloomingdale’s, has riveted cityscape-watchers ever since Roth’s mighty REIT first took control of Alexander’s in 1991.
Now that the deal is done, New Yorkers can look forward to seeing an impressive glass skyscraper designed by Cesar Pelli rise from the notorious crater.
Many assumptions made about the Vornado-Bloomberg saga were wrong. The delay was often blamed on Roth’s “fierce and unpredictable” negotiating style, or, less frequently, on media mogul Michael Bloomberg – no pushover, either.
But, according to Newmark & Co. CEO Barry Gosin, who led the Bloomberg negotiating team, Roth and Bloomberg came face-to-face only once.
And Gosin said the cost of Bloomberg’s 25-year lease for 700,000 square feet, estimated by other sources at around $73 a square foot, “had not [even] been an issue for a long time.”
In fact, the bugaboo was a building originally meant to have stores, offices, condos and a hotel – one component too many for a project faced with enough other challenges, including what Gosin called the “two larger-than-life personalities” of Roth and mayoral wannabe Bloomberg.
Architect Paul Darrah, Bloomberg’s head of real estate who played a crucial role in the deal, said, “The real issue was, we were trying to sign a lease while we were still designing a building.”
That design, by architect Cesar Pelli, was constantly in flux because of Roth’s determination to include a hotel. “Roth believed,” said a source who is neither Gosin nor Darrah, “that a luxury hotel adds immeasurably to the value of the condos.”
At the same time, Bloomberg had very specific requirements of his own about his new headquarters.
“The workplace is a crucial part of their environment and operation,” Gosin pointed out – “You know, with the fish tanks, the food and community concept, all of which required very large floors.
“When [Newmark partner] Laura Pomerantz and I first met with Michael, we discussed the economic advantages of large floor plates. Paul was convinced the economics worked and that Vornado could design something consistent with the Bloomberg culture.”
But lawyers, designers and bean-counters for the two sides – “up to 20 people at the table in laborious and tedious meetings,” Gosin recalled – had to grapple with assembling a structure unlike anything else in New York.
For one thing, Gosin said, “the hotel meant the tower would need three different lobbies.” Because no hotel ever actually committed itself to the scheme, though, the two teams were forever shadow-boxing around a piece that didn’t quite exist.
Darrah agreed: “When you eliminated the hotel, it made a lot of the design issues easier to resolve.”
But Roth was unwilling to go ahead without the hotel. One reason was that at first, Bloomberg was looking at a mere 400,000 square in the new tower.
Although that was later upped to 500,000, Vornado would still have been left with a gaping hole in a 1.1 million square-foot tower – too big a risk in a world where financing depends on pre-leasing.
The psychological breakthrough came last summer, when downsizing DLJ decided to sublease 1.1 million square feet at 277 Park Ave.
Bloomberg, frustrated with the Vornado talks, took a long, hard look at 277 Park, eventually snatched up by Chase. Although Bloomberg never seriously threatened to move there, the look-see “catalyzed a whole new line of thinking,” a source explained.
“Blocks of space that size simply didn’t exist. But there it was, and it opened Bloomberg’s eyes to taking more space than they’d been negotiating over.
“They were working out of 240,000 square feet when they first started talking to Vornado, and they had already gone up to 360,000 at three locations. They realized that if the building ever got done, they’d be out of space by the time they moved in.”
Bloomberg’s pitch for 200,000 more square feet was enough for Roth to finally chuck the hotel.
Even so, Gosin said, “There were too many wild cards for anyone to ever be comfortable it was going to get done.”
*
Store leasing is surging ahead for the Palladium Co.’s 360,000-square-foot restaurant-retail atrium at Time Warner AOL Center at Columbus Circle, the city’s most eye-popping construction site, with four giant tower cranes.
Palladium, a unit of the project’s development partner Related Cos., has nailed down deals with J. Crew (12,000 square feet), Armani A/X (5,000 square feet), and Eileen Fisher (3,500 square feet), Palladium CEO Kenneth Himmel said. Those come on top of deals for Hugo Boss and Joseph Abboud.
The five leases total about 50,000 square feet, which sounds like a drop in the bucket out of a total 360,000. But the building doesn’t open until August 2003. And, Himmel said: “There’s a lot more coming.” He said the restaurants, some 60,000 square feet, will be 100 percent “committed” within 60 days.
Retail brokers around town remain skeptical about the Palladium concourse, because interior retail – whether it’s called “atrium” or “vertical mall” – has usually flopped in Manhattan.
Garrick-Aug Vice-Chairman Faith Hope Consolo said, “They’re trying to create a new retail environment in a new neighborhood never known for great retail. And indoors, at the base of a monster, is not highly visible.”
But Himmel said, “So many who approach this business in New York, whether at Trump Tower or at Herald Square, with all due respect, don’t have a clue about developing a vertical interior mall.”
One “clue” that Palladium has is reasonable rents. Himmel wouldn’t talk numbers. Other sources said rents were in the $150 range – a Columbus Avenue benchmark, compared to $300 to $750 on Fifth or Madison.
* Please send e-mail to:
scuozzo@nypost.com