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Bibliophiles Disagree Over Price of Air Above

By STEPHANIE STROM

February 08 2006

So rich was the price negotiated for some 86,000 square feet of air over the Grolier Club and Christ Church at Park Avenue and East 60th Street $430 a square foot that the magazine Business 2.0 listed the sale as one of "the 101 dumbest moments in business" last year.

But several members of the Grolier, an elite society of bibliophiles, now say the price for their portion, at least about $6.9 million was too low.

The club stands between the church, at 520 Park Avenue, and two tenement buildings owned by the sibling developers Arthur W. and William L. Zeckendorf. The developers plan to knock down the tenements and, using the air rights, put up a 35-story apartment building whose top floors will have views of Central Park.

Some Grolier members say their club deserves a higher price for its ether than the church is receiving because its 16,000 feet remain pivotal to the deal. So now they want the club to pull out. It is a dispute that has split the normally docile precincts of the club, even bringing tears amid heated accusations of conflicts of interest at one uncharacteristically raucous meeting.

Without the club's air rights, the Zeckendorfs and their partners would almost certainly have to scale back their plans for a luxury high-rise building next door.

Carolyn L. Smith, the club's president, confirmed the controversy but said she was not sure how widespread the opposition is. "Fewer than dozens, I think," she said. "We have almost 800 members, and I'd be surprised if there wasn't someone unhappy about it."

Ms. Smith said that the sale had been discussed for more than a year before Grolier's council, the oversight body equivalent to a board, approved it, and that 14 of the 21 council members had voted in favor.

Six voted against, however, and some have continued to press their case, seeking legal counsel in hopes of finding a way to break the contract signed by the club. Ms. Smith, the one abstaining vote, said she had recused herself to avoid any appearance of conflict of interest because she is a member of Christ Church, which stands to receive $30 million for its air rights if the deal stands.

Getting the opponents of the sale to voice their concerns for the record has proved challenging. "I have very strong feelings about this thing, and while I'd love to tell you things, I'm in a position where I really can't," explained one club member who is opposed to the sale, echoing three others who offered similar reasons for speaking on the condition of anonymity. "I've been involved with this club for years. I know the people there, and I don't want to damage those friendships, which are very dear to me."

The space above the Grolier is crucial to the project because the Zeckendorfs can transfer only the air rights contiguous to the site where they plan to build. They cannot transfer the church's air space to their site without also having the club's.

Arthur Zeckendorf said he and his brother and partners, who consider the deal done, were paying a premium price.

"Also, there's really only one buyer for those air rights, us, because we own the buildings directly west of the club," he said. "It's not like they can go sell them to Donald Trump or somebody else for more."

Opponents on the council and other club members charge that the decision to sell was tainted by conflicts of interest, like the one Ms. Smith cited in recusing herself, and a failure to follow state legal restrictions governing the sale of major assets by nonprofit organizations.

They pointed to the vote of David Alan Richards, a real estate lawyer who is a member of the council and who served as an adviser to the club on the deal. Ms. Smith said the council had voted to allow him to continue to participate in the club's governance while serving as its business representative.

Some opponents are also concerned about the impact of the planned high-rise on their neighborhood and on the structural soundness of the 1917 town house cum clubhouse.

Their objections were aired at a meeting on Dec. 12, after Ms. Smith sent a letter to the membership about the council's plan to approve a sale. Two of the club's former presidents, William B. Warren and Robert D. Graff, rose to denounce the plan, according to members who attended.

And Leonard L. Milberg, chairman of Milberg Factors, vigorously opposed the sale and criticized Ms. Smith for having any part in it because of her membership in the church, according to four members who attended. The outburst by Mr. Milberg, who declined to comment, reduced Ms. Smith to tears and shocked the 40 to 50 Grolier members at the meeting.

"Several people expressed sort of regrets, and one member was violently opposed," recalled Stephen C. Massey, a book and manuscript appraiser and consultant who has appeared on Antiques Roadshow, though he did not name any members in particular.

Mr. Massey, who served on the council from 1993 until last spring, said he thought the deal to sell the air rights was "magnificent," though he would have preferred slightly different terms. "My rapture is heavily modified by the fact that I'd rather we had some real estate space in the new building and less money," he said.

Martin Hutner, another longtime member, said that Charles Tanenbaum, a well-known collector of 18th century books, maps and other documents, had proposed that the opponents raise an equivalent amount through donations. "Because he didn't like the idea of selling the air rights, Mr. Tanenbaum courageously offered $250,000," Mr. Hutner said. "But no one else in the room came forward."

Ms. Smith said the bulk of the $6.9 million the club will receive from the deal will go into its endowment, more than doubling it.

New York State law requires that certain types of nonprofit corporations, like the Grolier, seek court approval for major asset sales, that they notify the attorney general's office of their plans and that they obtain approval of the sale from a majority of their members.

Ms. Smith said that law applied only to the sale of what it calls "all or substantially all" of an organization's assets. "Our clubhouse itself is probably worth a minimum of $15 million, our endowment is about $5 million and our collection of books is worth at least $10 million," Ms. Smith said. "This is not a substantial asset for us."

A guide from the New York State attorney general's office on the sale of significant assets by nonprofit groups notes that there is no set standard for determining what constitutes a substantial asset. "Court approval is required where the asset to be sold represents a large portion of the corporation's assets," the guide states.

At the agreed-upon price, the Grolier's air represents roughly 20 percent of its assets. In the profit-making world, anything with a value of 5 percent or more of total assets is considered substantial.

M. Myers Mermel, a real estate broker who is working pro bono on the deal for Christ Church, said the church planned to sign its contract this week. It and the club will then seek court approval, he said.

The opposition from some Grolier members is unsettling to the church, which hopes to use the $30 million from its part of the deal on various missions to help the poor, Mr. Mermel said.

"Their case has no merit, but I've been surprised at the lengths to which they've gone to snatch defeat from the jaws of victory and put at risk the opportunity for this money to help so many needy people through the church," he said.

Copyright 2006 The New York Times Company
 

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