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Gronich, Stuckey win Most Ingenious Deal.

Dan J. Gronich and James P. Stuckey, chairman and managing director respectively of Gronich & Company, won the 1991 Henry Hart Rice Award for The Most Ingenious Deal of the Year for overcoming political and regulatory obstacles in consummating a 20-year lease between the Russian Trade & Cultural Center and the Port Authority of New York and New Jersey for approximately 75,000 square feet at 5 World Trade Center.

The Robert T. Lawrence Award was given to Brian Corcoran, executive vice president of Cushman & Wakefield, and Joseph P. McClusky and Alan Goldberg, senior vice president and vice president respectively, of Helmsley-Spear, Inc. for their work on the conversion of the 42-story Ritz Tower Hotel at 465 Park Avenue into a two-unit condominium with 220,000 square feet of residential space and 40,000 square feet of commercial space.

Each year the Real Estate Board of New York presents its "Most Ingenious Deal Award" to the brokers of an outstanding commercial transaction. This year the Sales Brokers Committee voted to honor Henry Hart Rice by naming the award after him. Rice, who died this February, set a record by winning the prize four times and won the Robert T. Lawrence Award as well. Hart's son, Edward, spoke at the award ceremonies to express his family's gratitude.

The transaction carried out by Gronich and Stuckey marked a new era in commercial and cultural relations between Russia and the United States, and fortified the city's role as an international capital. In order to bring the Russian Trade and Cultural Center to lower Manhattan, the brokers inventively overcame obstacles posed by the rapid dissolution of the Soviet Union, the unstable status of Russia's currency and long-standing federal restrictions that prohibited American property owners from making direct leases with Russian and Soviet companies or governmental entities.

The brokers visited Moscow in 1990 to present their proposal for a trade and cultural facility in the World Trade Center. Suspecting that the Russian nation would survive the teetering Soviet regime, Gronich and Stuckey decided to negotiate with the Russian Federation. In January of 1991, a delegation of Russian officials arrive to work on a letter of intent with Port Authority executives. In light of the uncertain standing of Russian currency, the letter provided for the alternative of barter payment, including jet fuel in Moscow airports with appropriate charge-back to airlines at Port Authority airports, timber for the Port Authority's marine facilities, or Russian helicopters for the Port's aviation fleet. At a more advanced stage of the transaction, the brokers were instrumental in forging a relationship between Inkombank, the third largest private Russian commercial bank with a Western money-center bank. As a result, Inkombank eventually opened an account with the latter to allow for a letter of credit to secure the lease at the World Trade Center. The letter was fully collateralized by hard currency wired to the Western bank from Incombank.

With the Russians primed to pursue a free market economy, President Yeltsin and his colleagues favored the brokers' plan for a trade and cultural center in New York as a way of bringing investors and hard currency to their country, and building bridges to other markets around the globe. In the summer of 1991, however, the brief Soviet uprising coincided with the closing chapters of the transaction, interrupting communications between New York and Moscow at a critical juncture and, of course, casting doubt on Russia's future. The failure of the coup to take hold, however, confirmed, among other things, the brokers' conviction that the Soviet experiment was rapidly winding down. The Department of State issued the single exception to the Foreign Missions Act in 70 years, thereby, allowing the Port Authority and its Russian tenant to sign a direct lease between them. Lieutenant Governor Stan Lundine was present for the lease signing ceremony in December of 1991.

The creation of two condominium units at 465 Park Avenue achieved three major objectives. First, it shielded owners of the residential cooperative, with full hotel services, from additional taxes that would come due when leases on its prime commercial space expired and new rents pierced the 20 percent federal limit on co-op income. Second, it provided fresh capital for upgrading the building's roof, wiring, plumbing and facade. Third, it gave Mitsukoshi (U.S.A), the commercial tenant, a subsidiary of a Japanese retailer, an opportunity to expand on site and obtain equity in a choice retail location.

The transaction required the brokers to deal with such issues as an existing lease on the majority of the ground floor and some of the basement that a had six years to run at a rent far below market; other below-market leases with 10 small tenants with varying expiration dates; a lease fee on Park Avenue (owned by the late Henry Hart Rice, after whom the Most Ingenious Deal Award is now named) whose lease conditions would hinder the condominium conversion; Mitsukoshi's desire to retain the benefit of its current modest rent; and the relocation of the Ritz's room service kitchen.

The brokers' accomplishments included securing possession of space occupied by the New York Bank for Business, a ground floor tenant; getting Mitsukoshi to provide a letter of credit secured by a mortgage held by Mitsukoshi on the building that could be drawn upon by the bank after vacating its space; structuring the condominiums; resolving the allocation of percentages of common areas between the residential and commercial condominiums, and the disposition of condemnation proceeds or insurance losses, as well as sharing the costs of future capital repairs and improvements.

The brokers' skill and determination in solving these and other problems, according to REBNY, demonstrated high professional achievement in coping with a multi-faceted transaction. Corcoran of Cushman & Wakefield represented the Ritz Tower cooperative corporation, and McClusky and Goldberg of Helmsley-Spear, Inc. represented Mitsukoshi (U.S.A.).

The awards were presented at a cocktail party hosted by the Real Estate Board's Sales Brokers Committee whose chairperson is Vin Carrega, senior marketing consultant, James Felt Realty Services, a Grubb & Ellis Company.

The Henry Hart Rice Achievement Award for the Most Ingenious Deal of the Year was presented by Jonathan S. Miller, senior marketing director, James Felt Realty Services, one of last year's winner of this prize.

The Robert T. Lawrence Award was presented by Jerry L. Colen, vice chairman of William A. White/Grubb & Ellis.

In addition to Carrega, the members of the panel that picked the winners were: Joseph O'Gara, senior managing director, Julien J. Studley; William Jay Lippman, Kronish, Lieb, Weiner and Hellman; Douglas Durst, vice president, The Durst Organization; and Gerald Levy, vice president, Chemical Bank Realty Group. Cornelius Mahon, senior marketing consultant, James Felt Realty Services, chaired the contest subcommittee.
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Title Annotation:Dan J. Gronich, James P. Stuckey, 1991 Henry Hart Rice Award for The Most Ingenious Deal of the Year
Publication:Real Estate Weekly
Date:Apr 1, 1992
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