Real Estate: The Sad Saga of Big Bill

Like a character in an oldtime western serial, Real Estate Tycoon William Zeckendorf has ridden his ailing corporate steed, Webb & Knapp, Inc., through a series of cliffhanging adventures and crises. Somehow he has managed to avert disaster each time with an ingenious plan or a daring, last-minute rescue. Last week Bill Zeckendorf, 59, found himself in the worst trouble of his spectacular career. With no rescue in the script this time, the end seemed finally in sight for a saga that has endlessly fascinated and amazed the business world.

Webb & Knapp is so short of cash that it could not even afford to hire an auditor and issue its annual report, an omission that caused the Securities and Exchange Commission to ban trading in its stock. Fearful that the company would go broke before bondholders could be paid off, Manhattan’s Marine Midland Trust Co., trustee for $4,298,200 in Webb & Knapp debenture bonds, petitioned the courts for reorganization of the company under the Bankruptcy Act. Besieged by a growing army of creditors and unable for once to raise the money to pay them off, Bill Zeckendorf last week agreed in federal court to join rather than fight Marine Midland’s petition, promised to cooperate in reorganizing Webb & Knapp’s $69.7 million complex. The SEC lifted its ban on trading in Webb & Knapp stock, but an American Stock Exchange ban still stands.

Under the Bankruptcy Act, control of Webb & Knapp will be taken from Zeckendorf and given to a court-appointed trustee. He will consult with Zeckendorf, analyze the company’s problems and sell unproductive properties, hoping to make the company profitable again and pay off its debts. If the untangling reveals no hope of salvage, the trustee could recommend that the company be liquidated. “We have always managed to avert bankruptcy,” says Bill Zeckendorf, “and we could have come up with something this time too. But what can you do when you’re hit on the head?”

Better Alive than Dead. It was a sorry pass for Bill Zeckendorf, the onetime office-building manager who joined Webb & Knapp in 1938, bought control and built it from a small conservative firm into a freewheeling real estate empire, the world’s largest. In 1959, its banner year, Webb & Knapp had assets of nearly $300 million, owned hotels, office buildings, shopping centers, housing developments and valuable parcels of land in 17 states and Canada.

The company also picked up some problems along the way. Instead of sticking to acquiring existing real estate with a minimum of cash and a maximum of imaginative borrowing, Zeckendorf pushed Webb & Knapp into such unfamiliar enterprises as hotel management, urban renewal and building construction. By 1960, he had $500 million in construction projects under way. When costs began to skyrocket beyond his original estimates, Zeckendorf was unable to pay them. He began mortgaging his assets, borrowed money at excessive interest rates, some higher than 20%. He answered his critics by saying: “I’d rather be alive at 18% than dead at the prime rate.”

Fast Financial Footwork. Since 1959, when his debts reached a staggering $104 million, Zeckendorf has kept Webb & Knapp alive by fast financial footwork. The company lost $19.6 million in 1962, $32.3 million in 1963. Zeckendorf has lost or sold all of his hotels, one to Goldman & DiLorenzo, partners in a fast-rising real estate firm (TIME, March 12) that has bought other Zeckendorf buildings and is thriving on Webb & Knapp’s decline. He also launched a number of money-raising operations. This year, in a complicated series of transactions based on the sale of a promising and diversified company affiliate, he reduced Webb & Knapp’s liabilities by $13 million to $32 million. The sales, however, further weakened the company’s position. Says President William Zeckendorf Jr., 38: “When you reduce your debts, you sell assets. This leaves you with very little with which to generate new deals.”