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No-sell hotel on 42nd street- Steve Cuozzo

1466 Broadway and an adjacent empty lot sit unfinished because of the developer's money woes. THE office building at 1466 Broadway, the landmarked former Knickerbocker Hotel stands half-dark at the "Crossroads of the World." Next door on 42nd Street, a low plywood fence fronts an unsightly empty lot and an adjacent, vacant four-story structure. That's the southeast corner of 42nd Street at Broadway -- an eyesore amid the sparkling likes of the Durst Organization's One Bryant Park and Blackstone's newly re-clad 1095 Sixth Ave. Both 1466 Broadway and the adjacent lot and empty building are owned by Dubai's Istithmar World. In fact, most of the south side of 42nd Street between Sixth Avenue and Broadway is unsightly, but some of that is temporary.

Blackstone is creating a new public plaza next to 1195 Sixth and American Properties, owner of Bush Tower at 130 W. 42nd St., will soon take down a sidewalk bridge after it completes facade work. But the Istithmar mess isn't likely to go away soon, and the owners of nearby properties are baffled and annoyed. Douglas Durst, who developed One Bryant Park and now has his office there, said "It doesn't make me very happy. I certainly wish we could do something to make it look better." Dubai World, a government-owned conglomerate of which Istithmar is a part, is being "restructured."

Marwan Dalloul, principal of American Properties, which owns Bush Tower, said of the blighted site next door: "I haven't followed it as much as I'd like -- there's no one [at Istithmar] to talk to." How the prime site became what it is today is the story of a bubble that burst with last year's Wall Street meltdown. SL Green bought 1466 Broadway -- a 16-story structure with 298,000 square feet, opened by John Jacob Astor as the Knickerbocker in 1906 -- for $65 million in 1998, and spent $14 million more on restoration. In 2005, Green sold it for $156 million to Sitt Asset Management, which flipped it to Istithmar for $300 million a year later. Soon after, in 2006, Dalloul sold the empty lot and a vacant small building (140 W. 42nd) between 130 W. 42nd and 1466 Broadway to Istithmar for $76 million. Mortgages on the Istithmar properties total about $227 million, according to public records. Istithmar, riding high three years ago, said it would put up a new building on the empty lot and combine it with 1466 Broadway to create a five-star hotel. But it dropped that idea after it bought stakes in two other Manhattan hotels, the W Union Square and the Mandarin Oriental.

My colleague Lois Weiss reported last year that Jones Lang LaSalle had brokered a prospective sale of Istithmar's parcel to an unidentified entity. No deal was ever completed, however. Meanwhile, old office leases at 1466 Broadway weren't being renewed. (The building remains bustling at street level, thanks to a big Gap store.) Co-star now lists 235,000 square feet of the building as "available." Dalloul said Istithmar's aborted hotel plan "once made sense if you had all the money in the world. At one point, everything made sense on paper -- sure, you can get $1,000 a room per night. Then the world changed." Istithmar plunked $27 billion, most of it borrowed, into various worldwide investments over the past few years, including Barn eys. It sold off 280 Park Ave. in late 2007 for $128 million, slightly more than it had bought it for -- but that was before the investment-sale collapse. There's recent buzz that Istithmar might soon try to sell the 42nd Street parcel. Real Capital Analytics Research Chief Dan Fasulo said, "I believe the highest and best use of that site is as a hotel -- but a price any investor would pay today is much lower than what Istithmar paid." Calls to Istithmar's New York office and to Sitt Asset were not returned.


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