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The Dark Side of Real Estate – 432 Park Avenue on Billionaire’s Row

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By: TJVNews.com

Developed by CIM Group along with real estate mover and shaker Harry B. Macklowe and designed by Rafael Vinoly, the residential skyscraper at 56th Street and Park Avenue in Midtown Manhattan that is known as 432 Park Avenue is not only the third-tallest residential building in the world with exquisite views of the city. It is home to the wealthy and famous but unfortunately, as with most unique real estate ventures, there is an unseemly dark side to this Billionaires’ Row tower.

432 Park Avenue is located on the site of the former Drake Hotel, which was sold to Macklowe in 2006. The project faced delays for five years because of lack of financing as well as difficulties in acquiring the properties on the site. Construction plans were approved for 432 Park Avenue in 2011 and excavations began the next year. Sales within 432 Park Avenue were launched in 2013; the building topped out during October 2014 and was officially completed in 2015. The tower is segmented into 12-story blocks separated by open double-story mechanical spaces that allow wind gusts to pass through the building.

Real estate mover and shaker Harry B. Macklowe

432 Park Avenue has 85 stories above ground: a mezzanine and 84 numbered stories. Five two-story windbreaks, spaced every 12 floors from the top, are unenclosed and serve to reduce the tower’s wind load. The windbreaks contain modular mechanical services for the six floors above and below to reduce required ducting. The floor numbering system includes mechanical levels near the building’s base, so the top story is numbered as floor 96. The building is so tall, even compared to others in New York City, that its construction required approval from Federal Aviation Administration.

As trendy as it may sound and appealing it may be to those who wish to live in a skyscraper that is very close to 1400 feet high in the heart of Billionaires’ Row, there are numerous drawbacks and even serious safety issues that have plagued this unique building.

Many informed observers of the genesis of 432 Park have noted that almost everything about this building is shady in nature; a scam of sorts. Having gained consensus among their contemporaries, the observers have said that 432 in not on 57th street, but rather 56th street. Despite the information disseminated concerning the number of floors in the building, it actuality it does not have 96 floors.

According to a February report on the SurfaceMag.com web site, author Ryan Waddoups has said that residents at 432 Park Ave have more than enough to contend with as they are at loggerheads with the developers of the building due to “millions of dollars worth of water damage from mechanical and plumbing issues, frequent elevator malfunctions, and unbearably creaky walls when the building shimmies during high winds.”

– The 21-story Drake Hotel that was built in 1926 was the site where 432 Park Avenue was built. Photo Credit: City Realty

Having sustained several floods, Waddoups informs his readers of one in particular that resulted in an estimated $500,000 in property damage to a $17 million high floor pad purchased by a one Sarina Abramovich and her husband. He writes that this was caused by a “blown” flange and a “water line failure” that caused water to enter elevator shafts, removing two of the building’s four residential elevators from service for weeks.” One can only imagine what kind of inconvenience that this caused.

The New York Times reported that Abramovich said “I was convinced it would be the best building in New York. They’re still billing it as God’s gift to the world, and it’s not.” Abramovich and her husband, Mikhail, retired business owners who worked in the oil and gas business, bought a high-floor, 3,500-square-foot apartment at the tower for nearly $17 million in 2016, to have a secondary home near their adult children, as was reported by the Times.

In a February 3, 2021 report on TheCut.com web site, author Amanda Arnold writes of the building’s elevator malfunctions.  “Residents say they suffer frequent malfunctions; in one particularly horrifying incident in October 2019, “a high-wind condition” caused one person to be “entrapped” in an elevator for nearly an hour and a half, per a management email. Apparently, in a building this tall, wind-related elevator issues are not uncommon; neither is unsettling noise, of which residents also complain.”

According to an engineer who spoke to the New York Times on the condition of anonymity, wind sway can cause the cables in the elevator shaft to slap around and lead to slowdowns or shutdowns. His knowledge stems from his experience working on other towers in New York with similar issues.

Quoting the Times report, Waddoups adds that back in 2016, an anonymous unit buyer discovered grounds on which to get out of a 2016 deal to buy an 84th floor apartment by citing a “catastrophic waterflood” that caused major damage to the 83rd to 86th floors. The person who was to have bought the 84th floor apartment was already in contract and was going to plunk down a staggering $46.25 million for the luxury pad. According to sources familiar with the lawsuit, the buyer was a member of the Beckmann family, the owners of the Jose Cuervo tequila brand. The suit was quietly settled the following year.

The SurfaceMag.com report also indicated that due to water related problems in 2018, insurance costs increased by 300 percent and that there were $9.7 million in covered losses.

Among other legitimate complaints about 432 Park from its residents include the buildings creaky walls which according to the report produced by Waddoups sounds like the galley of ship. If that weren’t enough to cause more than a bit of anxiety, he also reported that the sounds of garbage bags going down a communal chute are reminiscent of that of a bomb going off.

Waddoups also reports that in addition to residential service charges having been significantly increased which resulted in apartment owners being most definitely irked.  They are particularly annoyed at the fact that they received an enormous increase in the service fee for 432 Park’s private restaurant. According to the report, it is helmed by Michelin-star chef Shaun Hergatt. When the restaurant made its debut in 2015, apartment owners were required to shell out $1200 annually for the service. By 2021, the fee ballooned to $15,000 even though pandemic mandates called for significantly reduced hours.

He also writes that Mrs. Abramovich told him that the worst part of living there was the fact that “everybody hates each other here.”  She intoned that things in general were not on the level as she stated, “Everything here was camouflage.” The report also indicated that Mrs. Abramovich is now facing $82,000 in late fees and interest for refusing to cover recent increases in common charges.

The report on TheCut.com web site corroborates the aforementioned information by writing of 432 Park:   “What was once believed to be a literal pinnacle of high living has turned out to be the most wretched of hellholes: The $3.1 billion building is falling apart, largely due to its unreasonable height and design flaws. And its billionaire residents — who are butting heads not only with developers but with one another — are dismayed.”

Waddoups writes that, “432 Park’s developers also exploited a planning law loophole by filling a quarter of its floors with structural and mechanical equipment, which normally wouldn’t count towards maximum height.”

Because of its gargantuan height, serious problems have arisen at 432 Park and the building’s critics raise some very cogent points as it pertains to safety concerns.

Speaking to the Guardian newspaper of the UK, Sean Khorsandi, executive director of preservation group Landmark West! said, “We’ve been following the safety concerns of supertalls for a long time. I was in architecture school on 9/11. We watched the towers fall. There were all sorts of symposiums and public statements that we’re never going to build that tall again. All we’ve done in the 20 years since is build even taller.”

So, how did a building like 432 Park come to find itself embroiled in multiple imbroglios? In retrospect, it is noteworthy to explore the initial phases of this project.

As we previously mentioned, New York City real estate tycoon Harry Macklowe purchased the iconic Drake Hotel in 2006 for $418 million. The Drake, which was built in 1926 was the site that 432 Park was built on. For those not in the know, Macklowe attracted headlines in 2019 over his contentious, $2 billion divorce from his wife, Linda. They were married for 59 years and they had two children together. Very soon after the divorce was finalized Macklowe remarried a much younger woman named Patricia Lazar-Landeau. After his wedding ceremony, Macklowe placed a massive picture of himself and his new wife on the corner of the 432 Park building in what was widely seen as an insult to his former wife.

Another question that should be raised is precisely how Macklowe became involved in 432 to begin with. According to a detailed report on the Wikipedia website, in late 2007, Joseph Sitt, founder of Thor Equities, introduced Macklowe to an investment firm named CMZ Ventures. The letters “CMZ” represented Arthur G. Cohen, a New York real estate developer; Paul Manafort, a former lobbyist, political consultant, and lawyer; and Brad Zackson, a frequent partner of Manafort and Fred Trump.

At the time of the introduction of Macklowe to the CMZ Ventures group, Paul Manafort was not employed as Donald Trump’s campaign manager. Photo Credit: AP

At the time of the introduction of Macklowe to the CMZ Ventures group, Paul Manafort was not employed as Donald Trump’s campaign manager and was not charged with the kind of criminal activity that landed him up in jail.  In May of 2020,  Manafort who was serving a 7½-year sentence on charges brought by special counsel Robert Mueller was released to home confinement due to concerns about the spread of the coronavirus in federal prisons. On December 23, 2020, President Trump pardoned Manafort.

In 2008, CMZ Ventures agreed to pay $850 million for the development site which would fully pay off the Deutsche Bank loan that was taken on the building and would represent a small profit on top of Macklowe’s total acquisition price. In fact, the purchase price was higher even than the appraised value of $780 million, a premium of over 10 percent which was unheard of for development site purchases.

The partners wanted to build a 65-story building with a Bulgari-branded luxury hotel, condominiums, a private club, and a vertical mall. In late 2008, Dmytro Firtash, a Ukrainian natural gas oligarch and alleged associate of Russian organized crime, agreed to fund $112 million in equity and paid Manafort a deposit of $25 million, as was reported by Wikipedia. The deposit was wired from a Raiffeisen Zentralbank account that U.S. officials alleged was a front for Russian organized crime “boss of bosses” Semion Mogilevich. Manafort had met Firtash while consulting for the pro-Russia Party of Regions, at the time the ruling political party in Ukraine. French fund Inovalis also agreed to arrange another $500 million of equity for the project from various backers. Ultimately, the bid fell apart when CMZ could not arrange the necessary financing, according to the Wikipedia report.

In late 2008, Dmytro Firtash, a Ukrainian natural gas oligarch and alleged associate of Russian organized crime, agreed to fund $112 million in equity and paid Manafort a deposit of $25 million, as was reported by Wikipedia. Photo Credit: AP

In 2011, the former pro-European Union prime minister of Ukraine, Yulia Tymoshenko, alleged in the United States District Court for the Southern District of New York that Firtash violated the Racketeer Influenced and Corrupt Organizations Act. Specifically, Tymoshenko stated that Firtash had used CMZ as a front organization for funds that he skimmed unlawfully from RosUkrEnergo, the natural gas company that he jointly controlled with Russian state-owned enterprise Gazprom. Tymoshenko also alleged that Firtash planned to use the money for political purposes, rather than as a real estate investment; specifically, she claimed that the money would go to help her opponent, Victor Yanukovych, a pro-Russia politician who became Ukraine’s president in 2010, as was reported by Wikipedia.

Another CMZ Ventures investor was Oleg Deripaska, a sanctioned Russian oligarch and leader of the world’s second-largest aluminum company Rusal. Deripaska agreed to invest $56 million into 432 Park Avenue through an investment fund named Pericles which was managed by Rick Gates, a Manafort partner who has since pleaded guilty to conspiracy against the United States and making false statements in the investigation into Russian interference in the 2016 United States elections.

Following his acquisition of the Drake Hotel, Macklowe paid French delicatessen company Fauchon $4 million to shorten the terms of their lease on the ground floor of the hotel and vacate in April 2007 instead of 2016. Shortly after the agreement was reached, Fauchon sued Macklowe in New York Supreme Court claiming that the developer was harassing the store to leave by blocking their entrance with scaffolding and threatening to cut off air conditioning and access to the hotel’s bathrooms.

Wikipedia reported that in April 2007, Macklowe purchased the Buccellati store at 46 East 57th Street for $47.5 million. This followed Macklowe’s purchase of the Audemars Piguet store at 40 East 57th Street for $19.2 million, the Franck Muller store at 38 East 57th Street for $60 million, as well as 44 and 50 East 57th Street for $41 million. Following over 14 months of negotiations, Macklowe also had to pay Audemars Piguet $16.6 million to end their lease early and move across the street to 137 East 57th Street. The total cost of additional nearby parcels and air rights brought the acquisition cost to over $724 million and yielded a large L-shaped site between 56th and 57th Streets.

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