Troubles for Manhattan, Mort, and the Real Estate Market

WHAT should New York do about Mort Zuckerman?

Mort Zuckerman, the publisher who dines at the White House and plays softball with the literati; and, in this case, Mort Zuckerman, the real estate mogul.

Eight years ago, Mr. Zuckerman paid $455 million for the right to develop one of New York's prime pieces of real estate, the city-owned site of the Coliseum and the attached office tower at Columbus Circle. He promised to erect Columbus Center, a gateway to Manhattan's Upper West Side.

At the time, he said: "Obviously, it's one of the greatest sites in New York, the single largest and most dramatic development that has come along in New York City in the last 25 or 30 years."

That was in the good old days when real estate values seemed only to be going up. Since then, the proposed development has become embroiled in lawsuits and is now a casualty of the moribund New York real estate market. Since 1985, the city has agreed to reduce the price to $338 million, but Zuckerman does not believe that is low enough.

Over the past 10 months, Zuckerman and his company, Boston Properties, have been negotiating with the city and the Metropolitan Transit Authority (MTA) about changing the price, size, and completion date for the project.

MTA officials now say the talks have stalled and some local politicians believe the city should force Zuckerman either to tear down the old buildings and build on the site or lose his $33.8-million down payment.

"What a mess," says Ronnie Eldridge, the Democratic councilwoman for the Upper West Side. Ms. Eldridge says the city must act soon because the delay is causing the area to degenerate.

On a recent day at noon, six homeless men lounged around the front of the building on the property. Debris littered the doorways where they sleep at night. The last remaining tenant of some retail stalls was preparing to close his T-shirt and umbrella shop. He said the city had asked all the merchants to leave. "They wanted us two years ago, now they don't," he said. He said he had heard that a K mart was moving into the Coliseum, where trade shows were once held.

The MTA says a K mart is only one of the options it has examined. In April, it asked for new proposals for the space. Developers suggested leasing it to a Bradlees Discount department store, a massive theater complex, a multi-sports and entertainment arena, television studios, and an extensive center for children under 12.

Eldridge says the city should accept one of these proposals and then try to sell the space at a later date. "If they want to give Zuckerman the right to use his deposit for a future bid, that's fine with me," she adds. In order to lease the existing space, however, the MTA would have to send Zuckerman a notice that he must either submit a proposal the city can approve or lose his deposit.

RUTH MESSINGER, Manhattan Borough president, is calling for a two-month negotiating deadline. She says the MTA has assured her it will not allow the negotiations to simply drift. Zuckerman and the city must either renegotiate a new development plan, "which fits the needs of the neighborhood," or it should be reopened to new bids, Ms. Messinger says.

"We cannot afford to have a real crossroads of the world shut up and fallow and fail to open up to people from all parts of the borough," she says.

Mayor David Dinkins has not indicated yet what he thinks the city should do. Leland Jones, a spokesman for the mayor, says the city government is aware that it must make a decision on the property.

But making a decision about the project is not easy. Zuckerman has become much more influential in New York since he won the bidding. He is now the owner of the New York Daily News, in addition to the Boston-based Atlantic Magazine and the Washington-based U.S. News & World Report.

For some time, city officials wanted to defer any decision on the site because Zuckerman was looking for a location for a new color printing plant for the Daily News. They hoped he would keep the plant in the city. But in early June Zuckerman announced that the printing plant would be located in Jersey City at an old Clorox plant.

For its part, Boston Properties says it will move ahead with the project "as soon as it is economically possible." Spokesman Mori Berman points out that Zuckerman recently renewed his down payment for another year (in the form of a letter of credit) - an indication that the developer wants to proceed with the project.

Boston Properties has presented the city with a plan for a two-phase development. The first phase would begin once a major tenant is located. The company claims it is in negotiation with an unnamed potential tenant. Zuckerman would start the second phase once the real estate market improves.

A spokesman for the MTA says this proposal is unacceptable. So now it is up to the city to decide what to do about Mort.