The Son Also High-Rises
Dana Rubinstein Sept. 28, 2010, 5:12 p.m.
William Macklowe rubbed the bridge of his nose and said he was suffering from a sinus headache. It was the first sign of human frailty he’d allowed during the interview, and the interview was almost over.
The nose where he pressed his fingers was aquiline, like the beak of a barn owl. Below, his thin line of a mouth seemed hard-pressed to exhibit anything but irritation. For a man as fastidious as Mr. Macklowe, the ordeal of the past few years–an ordeal that laid low his and his father’s business, an ordeal that made his family the poster child of the New York real estate bubble, an ordeal that still elicits invasive questions from intrusive reporters–must seem like medieval torture. Every negative blog post a turn of the rack.
You’re just really seeking to move past all of that?
But all of that is over.
That’s true. But it still informs our activities. …
And that will show itself as I move forward.
William (Billy) Macklowe, 42, was born to a father whose immersion in New York real estate would come to dominate his life.
“My dad was less the throw-the-football-around kind of guy and more the let’s-walk-building-sites-together,” he told Men’s Vogue in 2008.
An N.Y.U. grad with a degree in humanities, Mr. Macklowe joined the family firm in 1992. By then, his father, Harry, was an outsize figure in New York City, known as a mercurial, bare-knuckled genius. He started his career as a broker in the ’60s, ultimately turning to development and amassing a fortune. He gained notoriety in 1985 when, under cover of night, his development team illegally tore down two Times Square SROs to make way for a new hotel. He was later fined $2 million. Then, like so many others, Harry Macklowe was felled by the real estate recession of the late ’80s-early ’90s.
With Billy at his side, Harry quickly rebuilt his fortune. By 2003, he had won the industry’s most prized trophy–the General Motors Building at the southeast corner of Central Park.
He solidified his reputation as a real estate virtuoso, the man who built Riverbank West and remade 340 Madison Avenue; the man who would go on to reopen the GM Building plaza to the street and help Apple build the now famous glass cube at the tower’s base.
“It’s not like Billy can easily replace his development savvy,” said Michael Fascitelli, the president and CEO of Vornado, a real estate investment trust, and a longtime business associate of both men. “Harry was really one of a kind.”
Yet if Harry was the creative genius, Billy seemed to pride himself on serving as his more practical foil.
“I’ve spent a considerable amount of time institutionalizing our business,” he told Men’s Vogue.
“I always thought he brought some stability to Harry’s wildness,” said a real estate executive who asked to remain anonymous so as not to endanger his relationship with the father and son.
Billy Macklowe also focused his energies on leasing and became a respected negotiator and dealmaker. Thomas Fuerth, an attorney who represented a Christian Scientist church in negotiations with Mr. Macklowe over the redevelopment of 340 Madison Avenue, remembers him as “very knowledgeable.”
“He’s a good negotiator,” Mr. Fuerth said. “Sophisticated, understood the issues. I found it very enjoyable dealing with Billy.”
Mitchell Konsker, a broker at Cushman & Wakefield who has helped Mr. Macklowe lease 140 East 45th Street and 340 Madison Avenue, among others, has been similarly impressed. “He is a dealmaker,” Mr. Konsker said. “He makes the tenant feel at home. He gives the level of service you would expect from a first-class property. He treats the brokerage community fairly, but he is a very tough negotiator.”
Nevertheless, there is an impressive amount of grousing about Mr. Macklowe in the clubby world of Big Real Estate, all of it off the record, lest brokers damage their standing with a family still regarded as powerful. If they’re to be believed, Mr. Macklowe has the unfortunate habit of talking down to those he considers beneath him.
“Billy Macklowe is a guy who woke up on third base and thinks he hit a triple,” said one broker.
“He started on third base and he thinks he hit a home run,” said another broker separately.
Said a third, “He was always a very arrogant young guy.”
“He was really mean to people when they were on the top of the world, and unfortunately that’s what people are remembering right now,” said yet another leasing broker. “But at the end of the day, he’s a really talented guy with a high aesthetic. He’s got great taste.”
When asked about his reputation for meanness, Mr. Macklowe said, “I’ve never heard that.”
So tell me about cooking.
I don’t know. I’m just trying to get you to open up a little bit. You’re so tightly coiled.
No, I’m not tightly coiled at all. So much has been written about the past and all that, it’s just not an area that I really wish to comment on.
The past that he was referring to began in 2007, when Mr. Macklowe and his father embarked on one of the most ill-fated real estate ventures of the modern era.
In 2007, Stephen Schwarzman’s Blackstone Group bested Vornado Realty Trust and bought Sam Zell’s Equity Office Properties Trust for $39 billion. The portfolio included some of Manhattan’s finest cloudbusters, from the 39-story Plaza district tower at 540 Madison Avenue, catering to high-end boutique firms, to Worldwide Plaza at 825 Eighth Avenue, which housed high-powered tenants like Cravath, Swaine & Moore.
Blackstone, attuned to the roaring market, proceeded to sell off some of its new acquisitions. In a rapid-fire transaction that took place over 10 business days, Blackstone flipped seven midtown skyscrapers to the Macklowes for $7 billion. The family’s footprint doubled to more than 10 million square feet. This being the era of overleverage, the family put only $50 million down, using the GM Building and personal assets as collateral, and financing the transaction with short-term loans from Deutsche Bank and Fortress Investment Group.
That wouldn’t have been a problem if the real estate market had continued to soar, untethered by any relation to reality. But it didn’t. The subprime mortgage crisis and subsequent collapse of Lehman Brothers spread fear in the New York real estate market. Transactions soon ground to a halt, property values fell off a cliff, credit markets withered. The Macklowes were unable to refinance that short-term debt, and they were forced to sell off the seven trophy towers and the GM Building at distressed prices. Billy Macklowe publicly spearheaded the dismantling of the empire. It was one of the most spectacular collapses the New York market had ever seen.
At the time, some people in the real estate community faulted Deutsche Bank for playing hardball with the Macklowes, rather than, like countless other banks, renegotiating and extending the loans until the economy improved.
“Yes, Deutsche Bank should have rolled with it,” Billy Macklowe said. “They should have held out for the market to return.”
But they didn’t, and the fire sale–and recriminations–began. On May 27, 2008, an article in The Wall Street Journal, clearly written with the cooperation of the younger Macklowe, detailed the personal impact of the family’s real estate woes, and seemed to place blame for the debacle squarely on his father’s shoulders.
“William Macklowe blames his father for making numerous mistakes that led the company to the brink,” read the article. “That deal proved to be fateful largely because the elder Mr. Macklowe, 70 years old, personally guaranteed a $1.2 billion loan from Fortress Investment Group.
“The elder Mr. Macklowe also resisted his son’s efforts to quickly reduce their risk. ‘The issue was my father seeing the victory of the deal as closing of the transaction. I saw victory as exiting the transaction,’ William Macklowe says.”
Two weeks later, Billy Macklowe was named chairman and CEO of his father’s firm. Harry was bumped to chairman emeritus.
Understandably, Billy doesn’t like to talk about that time. He doesn’t like to discuss his role in the purchase of the seven-building portfolio. Nor does he like to discuss the Journal piece.
You’ve certainly sought to draw a distinction between yourself and your father, be it in the infamous Wall Street Journal article …
You know what, just, I don’t know what you’re talking about.
I think the infamous Wall Street Journal article of which you are speaking is something that happened several years ago, in the past. And I kind of sit here today very optimistic and expectant about what the future holds. And I think that how we will invest going forward will show what lessons we learned in the past. Everything that happens, lessons are learned from positive experiences, lessons are learned from negative experiences. And it’s the ability to absorb that, and ultimately put that into your investment. … That’s how we seek to move forward.
Certainly, Mr. Macklowe, who was barely 40 when he began untangling his family empire, has endured something of a trial by fire. And he’s widely credited with doing so with aplomb. “He handled it with poise and grace,” Mr. Fascitelli of Vornado said. “He tried like hell to play that hand out the best he could.”
“He’s not a kid, Billy, he’s an adult, but he certainly added a number of years of experience [during that period],” Mr. Fascitelli added. “He grew up quick.”
On July 26, Billy Macklowe announced he was starting his own firm. It would be called William Macklowe Company.
To enter his new offices, on the 28th floor of Tower 56–the boutique skyscraper that his family sold in distress in the summer of 2008 for $158 million–is to emerge into a blindingly white space that bespeaks elegance and power.
Mr. Macklowe reigns over his new venture from a corner office in the rear, complete with panoramic views of the Upper East Side of Manhattan. On the bookshelf to the right of the door sits a dodo bird figurine. On the base of the figurine is the inscription, “Sam Zell 2009, Survival of the fittest.”
Earlier this year, Mr. Zell’s Equity Residential agreed to buy three Manhattan apartment towers from Macklowe Properties–the firm founded by Harry–for $475 million. Billy Macklowe, as chairman and CEO of that firm, negotiated the deal.
“I thought he was straight. I thought he was very pleasant. I thought he was very direct. I would like to think those are characteristic that would describe me,” Mr. Zell told The Observer. “It was a terrific experience and I would do it again.”
That morning, Mr. Macklowe, trim and compact, wore a gray suit, a lavender tie and a large, flat-faced IWC watch.
When asked about the relationship between his father’s firm–still in existence–and his own, Mr. Macklowe said, “We have our respective economic interests and shared assets, but the old company has their business and we have ours.”
Those shared properties include 400 Madison Avenue, 610 Broadway and other, smaller assets, which are “irrelevant.” Mr. Macklowe said the development of the Drake Hotel site, on Park Avenue, between 56th and 57th streets, falls firmly in his father’s court.
Now, Mr. Macklowe’s firm is focused on four areas: what he calls “pure-play real estate,” referring to the buying and selling and operating of properties; strategic lending opportunities; the trade in real estate securities; and real-estate-correlated investments. In contrast to his father, development does not seem a primary interest of Billy Macklowe’s. Presumably like his father, resuscitating the family name is. (Harry Macklowe, through a spokesman, declined to comment for this article.)
Mr. Zell says he would happily work with Mr. Macklowe again. Fortress, one of the Macklowes’ aforementioned short-term lenders, has expressed the same sentiment. Real estate insiders–even one of those grousing brokers–believe Billy Macklowe has the smarts, name recognition and real estate savvy to go far in the business. On his own.
“This situation wasn’t easy to go through, both from a real estate standpoint and from a family standpoint,” Mr. Fascitelli said. “The separation, breaking up and doing his own thing was probably invigorating for him.”
The next upswing in real estate–and surely there will be one at some point in the next decade–should prove that theory out.
As Mr. Zell put it, “All of us who are dealmakers live and die by the sword.”