A STAR IS REBORN
Investors hustle to land parts in Times Square's transformation
Before Hollywood, there was Times Square, world famous as the nexus of American popular culture in its first Golden Age. Well into the 1930s, New York's Times Square flourished as the national center stage for plays, movies, and pop music. By the 1940s, it had settled into a gradual decline that accelerated in the 1960s as pornography and street crime took root. Sporadic attempts at cleaning up the district went nowhere. In 1992, officials scuttled an ambitious plan to redevelop 42nd Street, the epicenter of the district's blight. Times Square seemed more hopeless than ever, a symbol not only of the sleazy side of big-city America but also of the intractability of its decay.
Even so, today Times Square is on the verge of rebirth as a shiny new centerpiece of the Entertainment Economy and as one of New York's major retail centers. Some of the world's largest media and entertainment companies--Bertelsmann, Disney, Conde Nast--have made a commitment to Times Square, and many others are poking around, as are legions of brand-name retailers. Although the look of 42nd Street won't change radically for another two years, the investment infrastructure of the new Times Square is now in place. The bets are down--and they are huge: at least $4 billion. "It's like a snowball coming down the hill," says Andrew Tansley, executive director of Tussauds Group Ltd. "Now, the question is not, `Is it going to happen?' but rather, `Can you keep up as it happens?' Things are really motoring."
"THE DEUCE." At 42nd Street and Eighth Avenue, Tishman Realty & Construction Co. is pressing ahead with its first New York development in years--a $300 million hotel and entertainment-and-retail arcade. A bit farther east along "the Deuce," as this stretch of 42nd was known at the height of its infamy, Forest City Ratner Cos. is readying a $200 million complex to feature a Madame Tussaud's wax museum and an AMC Entertainment Inc. multiplex with at least 25 screens.
In July, one of Manhattan's richest real estate families, the Dursts, plans to begin clearing a huge site at Broadway between 42nd Street and 43rd Street for what will be the first new skyscraper groundbreaking in Manhattan in nearly a decade. And a half-block away, on 42nd Street, Walt Disney Co. has reached the halfway mark in its painstaking renovation of the New Amsterdam Theater, a Beaux Arts masterpiece that opened in 1903 and was the grandest of all the Times Square theaters. The Disney, Durst, Forest City Ratner, and Tishman ventures are just the most significant of a dozen development projects that are now under way.
Whether measured by acreage condemned, dollars invested, or sheer complexity, the 42nd Street makeover ranks as perhaps the most ambitious inner-city reclamation ever. Yet the direct government investment has been a pittance--$64 million. Along the way, the strategy was altered so radically that the project's biggest backer was left out in the cold, with little to show for a $300 million investment, while the developer who was its most obstinate foe was transformed into its champion. And it might all have gone for naught but for a puny $8 million investment by Disney, whose name is as synonymous with wholesome family fare as Times Square is with X-rated attractions.
Government officials across the country are finding inspiration in Times Square's comeback, for many older cities are hoping to revive depressed commercial districts by reinventing them as entertainment centers. But in the view of many of its central players, the revival of Times Square is a singular achievement--and nobody's prototype. "Times Square is Times Square, and even New York only has one," says Brendan Sexton, president of the Municipal Art Society of New York. "But there is the lesson that urban renewal solutions must be informed by what is distinctive about a place."
Times Square's revival is the product of two concentrated bursts of redevelopment activity, the second of which is now under way along 42nd Street. The first, triggered by new zoning rules enacted in 1982, put a dozen new office buildings and hotels on the drawing board in upper Times Square, from 45th to 50th Streets. Convinced that rezoning alone would not suffice for the Deuce, officials devised a plan to condemn 13 acres and lard them with tax incentives to attract private developers. The linchpin of the 42nd Street Development Project was a complex of four colossal office towers to be developed by Times Square Center Associates (TSCA), a partnership of Park Tower Realty and Prudential Insurance Co. The TSCA agreed to cover most of the costs of condemnation and of renovating a subway station and six theaters.
BEYOND HOPE. The combined effect of the 42nd Street plan and all the zoning-induced construction would have been to bulldoze the old Times Square and replace it with an office-tower canyon in the mold of neighboring Sixth Avenue. This was logical to the extent that it offered private capital the highest returns with the least possible risk. But it was also predicated on the notion that Times Square had deteriorated beyond hope of redemption by less drastic means. "Times Square is a cancer, a blot on the city," Park Tower's principal owner, George Klein, said in 1984. "We're going to clean it up."
Appalled by the sterility of the plan, which also included a giant merchandise mart and hotel, a dozen civic groups joined forces with Broadway theater interests and the Municipal Art Society to champion the continuation of Times Square as a low-rise, high-wattage entertainment district. Unlike the typical preservationist cause, this one developed a broad commercial following, for its arguments were grounded as much in economics as aesthetics. Even at its most decrepit, Times Square remained an offbeat venue of legitimate commerce, where tourists by the millions came to gawk at advertising.
There was no hope of halting the wrecking ball in boomtown Manhattan, but the city again amended the zoning code "to ensure that the unique and valuable sense of place of Times Square will be retained." The most novel of the new rules mandated that facades must be fitted with outsize illuminated signs. The notion of having to bedeck their marble-and-granite palaces with neon outraged developers, none more so than Klein.
In lower Times Square, the sign issue was rendered moot as the 42nd Street project was stalled by 47 lawsuits challenging its every aspect. The litigants included the Durst family, which had hoped to erect an office tower on part of the site the state had awarded to the TSCA. The Dursts pressed on, even taking a long-term lease on the six theaters included in the government plan. "We hoped to show that the theaters could be redeveloped without subsidy," says Douglas D. Durst, the third-generation president of the Durst Organization.
By the time the new office towers in upper Times Square were completed in 1990, the Manhattan real estate market was in the early throes of a deep contraction. Unable to attract tenants even at sharply discounted rents, the developers of three just-completed office towers strung along Broadway from 45th Street to 49th Street put their handsome, empty skyscrapers into bankruptcy.
DELAYS, DELAYS. Meanwhile, down on 42nd Street, the moment of truth had arrived for the TSCA. By now, all the legal challenges had been resolved in the government's favor, and the next step was for Prudential to post a $241 million letter of credit that the state would use to pay for 9 of the 13 acres targeted for condemnation. The developers had yet to sign up a single tenant, and the prospect of filling 4 million square feet in a weakening market was daunting, but Prudential put the money down as promised. "I couldn't believe it," Durst says. "I never thought they'd take such a big risk."
By 1992, Prudential was sorry it had. The TSCA still hadn't found an anchor tenant and had no likely prospects. With the real estate market worse than ever, the developer and the government jointly decided to delay construction indefinitely. By this time, the plans for the merchandise mart and hotel also had come to naught, sticking the state with 1.5 million square feet of dilapidated, mostly vacant properties. Disaster loomed. "We had become a pariah politically," admits Rebecca Robertson, the head of the government agency created to redevelop 42nd Street.
Robertson and her remaining allies decided to shift emphasis from office-tower development to rehabilitating 42nd Street as an entertainment hub for the masses. The TSCA resisted the change in direction at first but fell into line when the new interim plan--42nd Street Now!--was unveiled to a public acclaim unknown to the old approach. Buildings that were to have been razed now would be refurbished as restaurants, stores, and state-of-the art amusement venues, all done up in bright lights and outre displays. In addition, the state would condemn the last remaining stretch of pornographic blight along 42nd, extending the renewal zone all the way to Eighth Avenue.
GETTING ANIMATED. City and state officials began soliciting entertainment purveyors of all sorts. "At one point, we were kind of enthralled with mud wrestling," says Robertson. The first major company to seriously consider 42nd Street was Tussauds Group, a division of London's Pearson PLC. Tansley, Tussauds' executive director, flew in on several cautious scouting expeditions. "We were interested," he says. "But we didn't want to be the only ones."
Enter Walt Disney Co., which over the years had repeatedly declined invitations to invest in Times Square. In late 1992, Disney decided to make a stage show of its animated feature Beauty and the Beast and was scouting Broadway real estate. In March, 1993, Disney Chairman Michael D. Eisner made a spur-of-the-moment inspection of the New Amsterdam Theater. The place was a ruin, but Eisner was intrigued by its possibilities. And Robertson was determined to land Disney at all costs. "We were more than prepared not to fool around," she says.
By January, 1994, Eisner and the government had reached a tentative agreement on terms highly favorable to the company. Disney would invest $8 million, and the state and city together would lend the company $26 million at 3% to cover the balance of the cost of remodeling the New Amsterdam and adding 200 seats. Disney set two conditions to a final deal: Robertson would have to sign at least two more major entertainment companies for 42nd Street, and officials would have to make good on their promises and cough up the $35 million needed to buy out the remaining X-rated shops.
The world reacted as if the company had touched 42nd Street with a magic wand. "Before Disney, most of the calls I got were from Times Square property owners trying to get me to calm the fears of prospective tenants about coming to Times Square," says Gretchen Dykstra, the director of the Times Square Business Improvement District. "After, it was all brokers trying to get a piece of the action."
AMC soon took an option on a site that included two historic theaters. Tishman Construction was selected as the developer of a hotel-entertainment complex at the newly condemned Eighth Avenue end of the Deuce. Tussauds Group worked up a plan to acquire the landmark tower 1 Times Square Plaza but was outbid at auction. Forest City Ratner then negotiated its own deal with the state to develop a large complex to house AMC, Tussauds, and other tenants. In July, 1995, Disney committed fully to restoring the New Amsterdam, which will reopen next spring as a venue for Disney's own productions.
Meanwhile, the TSCA invested an additional $25 million to refurbish the dozen low-rise buildings that stood on its Seventh Avenue site for retail use and to build a Disney Store, which will be hooked into the New Amsterdam. "We leased all of it faster than expected and at very attractive rents," says Brian Murphy, managing vice-president at Prudential Realty Group. "Forty-second Street is going to be a fantastic address."
GLITZ AND GLAMOUR. For Prudential, though, the real question was whether it would become a corporate address. If the insurer was ever to see a return on the $300 million it had sunk into 42nd Street, it would eventually have to put up a couple of office towers. By 1995, the Manhattan office market was showing signs of life, but with Prudential in the midst of reevaluating its plans for commercial real estate, the insurer was in no hurry to build in Times Square or anywhere else.
Sensing Prudential's enervation, Durst decided to try to buy his way into the project that his lawsuits had failed to stop. If Durst could combine the large parcel he had assembled with the dormant TSCA tract adjacent to it, he would have an ideal site for a new office tower. Through an intermediary, Durst gingerly approached Klein, who agreed to meet with his old nemesis. "The mood," says Durst, "was somber." Although Klein wanted to hang on to his dream site in its entirety, Prudential was willing to deal. The Durst-Prudential negotiations were arduous and broke off entirely several times. In the end, Durst agreed to pay about $75 million for about one-fourth of TSCA's acreage, and Klein reluctantly went along.
In May, Conde Nast Publications Inc., publisher of Vanity Fair, Vogue, and a dozen other glossy magazines, agreed to lease about one-third of Durst's planned 48-story tower, to be named The Conde Nast Building. The $500 million project has already conferred a provisional cachet on 42nd Street as a corporate address, for Conde Nast is one of the city's most glamorous tenants and the Dursts are known as cautious developers who have made few missteps over the years.
Although Tishman Construction won't begin demolition on its site for six months, it has already found tenants for 70% of the 200,000 square feet of space in its arcade. It is so confident of leasing the rest at even higher rents that it is holding it off the market. Meanwhile, Forest City Ratner has lined up tenants for all but 40,000 of its 400,000-square-foot development. "There won't be room for all the retailers who will want space on the new 42nd Street," predicts John L. Tishman, the Tishman organization's chairman.
In two years, 42nd Street will be unrecognizable. In many ways, though, the entire Times Square district has already been reborn. There are now more legitimate theaters--36 at last count--than X-rated ones. Only 20 porn palaces remain, down from 50 two years ago, and the incidence of serious crime has fallen 55% since 1993, exceeding the average rate of decline for Manhattan. Safer, cleaner streets have spurred ticket sales on Broadway, which, during the recently completed 1995-96 season drew the largest audiences in 15 years. Literally as well as figuratively, the Great White Way is aglow, for Times Square's famous signs again are as numerous and luminous as in their 1950s heyday.
All three of the office towers that stood empty and bankrupt four years ago have been purchased, at what have proved to be bargain prices, by top-flight companies for use as headquarters. Morgan Stanley & Co. snapped up both 1585 Broadway and 750 Seventh Avenue, while Bertelsmann bought 1540 Broadway. The German media colossus occupies two-thirds of the building and has leased out the rest to tenants that include Sony Theaters and Virgin Retail Group. Virgin recently opened an elaborate entertainment superstore that is pulling in $1 million a week--double its expectations.
In the Cyber Age, no place--not even Hollywood--will ever again dominate popular culture the way that the old Times Square did. But if all goes according to plan, by the turn of the century, Times Square--the self-styled "Crossroads of the World"--will have reestablished itself as a live entertainment center nonpareil.Return to top