Real Estate: Out on That Limb

From his circular penthouse office on Madison Avenue, Manhattan Real Estate Tycoon William Zeckendorf frequently sallies out on a limb, leaving all his competitors and creditors agape with suspense. For years, people have been expecting Zeckendorf to take a tumble, though he has always managed to regain his balance. Recently, though, Zeckendorf's balancing act has been getting more and more precarious. Last week the Alleghany Corp, complained that Zeckendorf's Webb & Knapp, Inc, had failed to pay it $570,000 in back rent on some Denver properties, and rotund Bill Zeckendorf, 57, admitted that his $400 million empire was in its worst trouble ever. Said he: "I think the odds are about fifty-fifty whether we'll make it, and we'll know by the middle of the summer."

Zeckendorf has always depended for balance on his ability to shuffle his properties about like ballast, but the shuffling has suddenly gotten a lot harder. New York City's Freedomland, which Zeckendorf hoped would catch on as a kind of Disneyland East, has turned out to be a tunnel of horrors, lost several million dollars last year. His scheme for selling his hotels and leasing them back has backfired because of falling occupancy rates and higher costs. The softening real estate market has forced him to defer many of his plans to sell off Webb & Knapp buildings to raise cash. And, to top it all off, the New York Stock Exchange finally turned down the two-block site near Wall Street that Zeckendorf had proposed for its new home, decided on another instead. All told, Webb & Knapp last year lost $19,625,151.

As usual, Zeckendorf hopes to pull out of his present bind by selling off properties, but that will take some doing. Webb & Knapp's recently released 1962 annual report is a textbook of corporate debt and declining assets; its long-term debt is an astonishing 83% of its assets. Webb & Knapp's finances are sometimes so complicated that its own auditors are unable to unravel them. Two months ago, outside auditors had to be called in to double-check some calculations. The result: instead of the previously reported $5,000,000 profit for 1962's second and third quarters, Webb & Knapp was forced to declare a $7,700,000 loss.