The Price of Being Cool? A Quarter-Billion Dollars.
Deep in the canyons of New York’s financial district, there is an office tower that matches the cultural moment, for better and for worse. It might be the first “It” building.
Known as the WSA building (short for Water Street Associates), the 31-story structure, at 175 Water Street, has become a nexus for the kind of people who might not otherwise set foot in this neighborhood of bankers and brokers.
It is owned by developers who have been awarded a $41.3 million discretionary tax break from a recently established New York City government program to help pay for their vision and the $150 million renovation that goes with it.
Built in 1983, the tower was the longtime global headquarters of the insurance giant A.I.G. After A.I.G. sold the building for about $270 million in 2019, it sat all but empty during much of the pandemic, when scores of companies, including A.I.G., left the financial district. In late 2022, an LLC under the name 99c bought the building for $252 million and announced a bold plan to “reinvent” the property.
Now, in place of the underwriters and claims adjusters who once toiled on its floors, the building is starting to fill up with artists, designers and boutique creative agencies, many of whom pay rents far below the going rate. By night, it has become the site of splashy events that generate reams of social media content and press coverage.
The model Emily Ratajkowski co-hosted two parties there after the annual Met Gala, drawing guests including Kendall Jenner and the singers Lana Del Rey and Bad Bunny. At two awards dinners held in the building, GQ magazine attracted a who’s who of the modern-day statusphere — the Formula 1 champ Sir Lewis Hamilton, the novelist Min Jin Lee, the Apple chief executive Tim Cook, and the multi-hyphenate Donald Glover. In September, when Ms. Jenner wanted to show the world that she had gone blonde, she posted photos of herself taken inside the tower.
On a recent afternoon, WSA tenants stopped in at the lobby cafe to pick up $35 sashimi lunches and cold-pressed juices. Several floors above, models and stylists traded air kisses while waiting for a casting. Elsewhere, amid the din of construction, movers lugged 1980s-inspired office furnishings by Vladimir Kagan, Tobia Scarpa, and Joe Colombo into plush-carpeted conference rooms, as if readying them for important business meetings.
Vases filled with artfully arranged flowers were everywhere, even on the vacant 17th floor, where a test kitchen and screening rooms were not yet open. On the 23rd floor, known as the Water Lounge, wellness professionals tended to clients in treatment rooms, where a 60-minute jojoba-oil massage costs $225.
Word of mouth and select invitations, sweetened by the bargain rents, have brought in the creative class. Leases obtained by The New York Times show that some tenants have signed steeply discounted two-year leases, with an option to renew for a third year, when rents will nearly double.
When one prospective tenant toured a 3,000-square-foot office in the building, the rent was quoted as “28.” Because of the location and luxe amenities, she assumed that meant $28,000 per month. Shocked to learn it was $2,800, she signed posthaste.
A 3,000-square-foot space at $2,800 per month works out to $11.20 per square foot. The average asking rent for downtown office space is $57.16 per square foot, according to a recent report by the broker CBRE.
WSA seems to be going with a warp-speed version of a strategy that many landlords have used to boost rents in once-industrial neighborhoods: Buy an old building, spruce it up, bring in creative professionals to make the area buzzy — and hope that tenants able to pay full price will follow.
But the economics remain daunting. In addition to the planned $150 million renovation, WSA’s developers must bring in enough to cover the $165 million mortgage they have taken out on the building. There are also broker commissions and operating costs, which, according to commercial real estate agents, run $10 to $12 per square foot in Lower Manhattan. “The numbers just don’t pencil out,” observed a developer who owns office buildings in the city, speaking on the condition of anonymity to offer an assessment of the project.
WSA has certainly attracted the people it wants. The independent fashion designers Bode, Luar and Rosie Assoulin have space in the building. Other tenants include the chefs’ collective Ghetto Gastro and the underground-ish magazine and media company Office.
The unusual goings-on have spurred talk, even among people who rent there. “Nobody knows,” one tenant said, when he was asked how the developers could afford such a dramatic renovation and perks like afternoon Champagne carts while charging so little. Then he shrugged, filled a cup with gratis gummy worms in a spotless communal kitchenette, and returned to his retro-chic office space.
The Team Behind the Dream
The project’s driving force and de facto spokeswoman is Gabriella Khalil, a style-conscious woman in her early 40s who grew up in Conshohocken, Pa., about 15 miles from Philadelphia.
Married to Matthew Khalil, a British real estate developer, Ms. Khalil has spent many of her adult years in London. These days, she is a fixture at WSA functions and posts frequently about the building on social media.
She made her name with Palm Heights, a luxury hotel on Grand Cayman island that she opened with her husband in 2019. Vogue called her “the coolest hotel creative director” and described the resort as “the A-list’s new favorite winter escape.”
After moving to New York two years ago with her husband and daughter, Ms. Khalil captured the attention of fashion and lifestyle publications as she set about attracting the right kind of tenants to the WSA building.
Into the Gloss reported on her skin-care regimen. British Vogue showcased her two-bedroom New York apartment, in the Jenga Building of Tribeca. A year later, a jewelry website ran a photo shoot of Ms. Khalil in a different New York dwelling, a loft on Canal Street. The décor in both apartments was similar to that of the WSA building.
None of those stories went into any detail on how the WSA building had come together. In an interview for this article, Ms. Khalil was visibly uncomfortable answering certain questions, adding to the opacity surrounding the project.
She was seated in the WSA members’ lounge on the 10th floor, with views of the East River and the Brooklyn and Manhattan Bridges. Asked who owned the building, she was unforthcoming. “A few private families own the space,” she said. She noted that her family was not among the owners, adding, “There’s been a million layers to this over the past couple years.”
She seemed more at ease talking about the particular shade of the carpeting — “I say rust, but cognac probably sounds better” — and her duties, which include furnishing the space with Instagrammable pieces like the whimsical bed in the shape of two giant feet (intermittently available for upward of $30,000 on 1st Dibs) in the lobby. She also laid out ambitious plans for production facilities, art galleries, restaurants, bars and a four-floor department store.
Ms. Khalil studied contemporary art at the Sotheby’s Institute of Art in London before working in galleries and as an interior designer. Which galleries? “Small, boutique ones,” she said. In her time as a designer, did she work for a firm? Or have her own clients? “A little bit, but not really,” she said.
She said she met the man who would become her husband while visiting Miami about 20 years ago. Mr. Khalil, 44, declined interview requests, leaving his wife to speak on his behalf. The website of his London company, Khalil & Kane, describes it as “an international multi-award winning real estate development and advisory firm.”
Also within the Khalils’ purview is Happier People Management, a hospitality group founded in 2022 that employs between 200 and 500 people, according to its LinkedIn page. Happier People operates WSA and Happier Grocery on Canal Street, a market that sells things like Blue Milk (ingredients include spirulina, almond milk, magnesium and royal jelly) at $9.99 for a 16-ounce bottle.
The Khalils are also involved in Scott Avenue Associates, a members-only club in Brooklyn. Located at 154 Scott Ave., across from a recycling plant, SAA offers access to work spaces, a gym and a yoga studio. It also has a marble spa and rooftop pool that was filled with water over the summer but apparently has yet to open. Some SAA patrons have canceled memberships, frustrated that some of the facilities were not up and running.
Gathering the Crowd
From the dozens of interviews conducted for this article, it seems that Ms. Khalil is very well liked and Mr. Khalil is very private. Before running Palm Heights, the hotel in the Caymans, the couple had no apparent track record in hospitality.
“I don’t know their experience before this,” said Zoe Lukov, a curator who has installed exhibits at the WSA building and Palm Heights.
Sarah Harris, a longtime editor at British Vogue, knew Ms. Khalil socially, since their daughters attended the same nursery school. “She didn’t have such a high profile in London,” Ms. Harris said. “I don’t remember hearing her talk about, ‘Well, I’d love to open a hotel one day.’”
Many WSA tenants have been guests at Palm Heights, which opened shortly before the pandemic limited travel. Amid that global disaster, this spot on Seven Mile Beach, with its signature yellow umbrellas, hosted a sexy celebrity scene. Pamela Anderson and Hailey Bieber did photo shoots there. In August, the model Gabbriette posed in a lavender metallic bikini on the sand.
A number of people within the WSA orbit have stayed at Palm Heights free of charge. “Who’s to say no to checking out a new hotel in the Cayman Islands?” said Sue Chan, whose company, Care of Chan, handles culinary programming at Palm Heights, SAA and the WSA building, where it rents space.
As Condé Nast Traveler and The Wall Street Journal gave Palm Heights glowing reviews, workers told another story. The Cayman News Service reported last year on staff complaints about poor working conditions, discrimination and a lack of gratuity payments. When workers reportedly walked off the job, a Caymanian government agency conducted an investigation of Palm Heights. The agency said it could not comment on its findings.
Ms. Khalil said Palm Heights started on a whim. While vacationing on Grand Cayman, she and her husband came upon what she described as an undesirable beachfront property that “felt like a motel.”
They took it on as a family project sometime around 2017, she said. The owner was Cayman Shores Development, an entity belonging to the American expatriate billionaire Ken Dart, who is believed to be the Caymans’ biggest landowner. At the time, the Khalils were not acquainted with the artists, designers and influencers who now inhabit the world of WSA.
“We had to basically try and recruit people,” Ms. Khalil said.
In 2017, the couple met Sam Wessner, the co-owner of El Rey, a now-closed cafe on New York’s Lower East Side. Who connected Mr. Wessner and the Khalils? The name slips everyone’s minds.
Mr. Wessner said in a telephone interview that he agreed to get involved, though he was not familiar with Mr. Khalil’s work as a developer. “Their vision of a type of hospitality was different than what I’ve heard before,” Mr. Wessner said.
Away they went on a recruitment spree, with Mr. Wessner as the conduit to cool. He made introductions to Emily Adams Bode Aujla, who designed the Palm Heights uniforms. Raul Lopez, designer of the fashion line Luar, was invited to Grand Cayman for a dinner party in 2018.
“It was a lot of people who were fresh and kind of doing their thing, but not yet established,” Mr. Lopez recalled. “It was really fun.” Describing Ms. Khalil, he said, “She’s been a mentor, such a machine.”
Mr. Wessner also introduced the Khalils to Ian Nicholson, a hotelier with decades in the business.
As the former chief executive of Faena Hotels, Mr. Nicholson has applied his touch to the Château Marmont in Los Angeles, the Soho Grand and Tribeca Grand in New York, and André Balazs’s Standard brand, which has hotels in New York and other cities around the world. What sold him on Palm Heights?
“They had the real estate,” he said.
A WSA spokeswoman said that Mr. Nicholson is now the chief operating officer of Happier People, the Khalils’ management company.
The Dart of It All
Given the opaquely named LLCs listed in public records, not to mention Ms. Khalil’s reluctance to go into detail, it’s not easy to single out who owns the WSA building. Initial reports on the 2022 sale in real estate trade publications pointed to Mr. Dart, the secretive billionaire.
Mr. Dart grew up a scion of a Michigan family business, Dart Container, a leader in the polystyrene foam market. He moved to the Caymans in the early 1990s, renounced his U.S. citizenship and has not spoken to the media since 1993.
In September 2022, before the deal had closed, news outlets reported that one of his companies, Dart Enterprises, was acquiring the WSA building. The next month, an article in The Real Deal reported that Mr. Dart was not part of the deal and that Francesco Bellini, a Canadian bio-pharma mogul, was a lead buyer by way of 99c, an LLC he had co-founded with his son, Carlo Bellini, and Dawson Stellberger, a real estate developer in Brooklyn.
When the sale had closed, Carlo Bellini said the group would bring “a comprehensive re-use plan” to the building. (As part of that plan, the property has a new street address, 161 Water Street, though it is still listed as 175 Water Street in public documents.)
Mr. Stellberger has developed industrial and commercial properties, mostly in Brooklyn, including Elsewhere and 99 Scott, a space that has hosted photo shoots, raves and fashion shows for indie designers.
Mr. Stellberger, who said he met Mr. Khalil a decade ago, was the only 99c partner who agreed to be interviewed for this article. He said he focuses on “buildings that generally are out of favor, that people don’t know what to do with, and find a way to activate them and build community and make them alive again.”
He and his partners entered Lower Manhattan partly because of the recent drop in prices. “Typically, you wouldn’t see artists coming to these sorts of office towers in the financial district,” Mr. Stellberger said. “But as pricing shifted and people didn’t want to be in these buildings, it became feasible to repurpose the space.”
Despite the earlier reports that Mr. Dart was out of the deal, businesses affiliated with the Dart family appear to have a connection to the WSA building, according to a Times review of public records.
The signature of Thomas Ta appears on a number of WSA-related documents, including the deed for the building and the mortgage for $165 million. Public records also show that, since 2004, Mr. Ta has had many of the same home addresses as Corina Dart, one of Mr. Dart’s three daughters from his first marriage.
New York City Real Estate Property Transfer Tax documents also suggest a link between the WSA building and Dart companies. Specifically, the records show that a 31 percent ownership stake in six properties associated with Mr. Stellberger — including 175 Water Street, 154 Scott Ave. and 53 Scott Ave. — was sold by Atlas USA Holdings LLC to Titan Group Development. Atlas and Titan are both Dart entities.
Why the secrecy on the part of the Khalils and their partners?
“We like to kind of remain in the background,” Mr. Stellberger said. “I think there’s a lot of big personalities in New York City real estate and hospitality. It’s just not sort of our ethos.”
Further requests for clarification about WSA, 99c, Happier People, Dart entities and others involved in the project were denied.
The Tax Break
The plan for the $150 million renovation includes the “demolition” and rebuilding of “all interior spaces,” according to public documents.
To help defray the cost, the WSA team applied for a tax incentive available through the newly established Manhattan Commercial Revitalization Program, or M-CORE, a city government program meant to help developers weather the post-pandemic slump. It is overseen by two nonprofits, the New York City Economic Development Corporation and the New York City Industrial Development Agency.
During a Jan. 23 meeting of the M-CORE board, the directors expressed enthusiasm about WSA’s plan to bring so-called FACT (fashion, arts, creative and technology) tenants to the building. Some board members said that the entry of such people into the financial district would create a “ripple” effect that would revitalize the area. Only one dissented: Francesco Brindisi of the New York City comptroller’s office.
According to the published minutes, Mr. Brindisi said he doubted the developers needed M-CORE assistance, given that they had spent a quarter-billion dollars to buy the property and had stated at the time of the sale — before M-CORE was up and running — that they planned on an overhaul. He was the only board member who voted against giving aid to WSA under the program.
Emily Falda, the executive director of the New York City Economic Development Corporation, voted yes after cautioning that the agency would “terminate” the arrangement “if the project isn’t completed as described in the project docs.”
Shortly after the meeting, the agency announced that it had awarded $41.3 million in tax breaks to WSA over a 20-year period. The incentive, it said, would help the developers install “a conceptual department store spanning four floors” as well as “production facilities” and “numerous restaurants and bars.” The aid from the program comes in addition to $39.8 million in tax breaks that the building’s owners had already received for the project, according to public documents.
The M-CORE approval came with caveats. In a report published after the vote, the board noted that WSA “does not currently have an anchor tenant.” It also stated that WSA “may need to transfer a controlling interest in the facility to unrelated persons or entities, such as lenders, prior to the completion of project improvements, pending approval to do so by the board.” Despite those misgivings, the agency concluded that the WSA plan would “improve an outdated commercial office building that is facing significant and prolonged vacancy.”
Asked in an interview how the WSA project had made the cut, Melissa Román Burch, the chief operating officer of the New York City Economic Development Corporation, cited “transformations that they’ve done in buildings in London that were really important precedents.”
Asked to provide detail, Ms. Roman Burch mentioned 180 the Strand, a Brutalist building in Central London that went through a renovation over the last decade.
“There’s a signature asset there that is very much positioned around this sort of FACT tenant thesis,” she said.
Mr. Khalil was a “general partner” in that project, according to the agency’s report. A WSA spokeswoman would not comment on Mr. Khalil’s role at 180 the Strand.
That building is owned by the veteran real estate developer Mark Wahdwa. “I know Matt very well,” Mr. Wahdwa said by phone from London, referring to Mr. Khalil. Mr. Wahdwa did not specify exactly what role Mr. Khalil played in the development of 180 the Strand.
Mr. Wahdwa’s vision for 180 the Strand presents an exact template for WSA. Its early tenants included the designers Virgil Abloh and Grace Wales Bonner. Mr. Wahdwa’s wife, the fashion designer Alex Eagle, also has space there.
Mr. Wahdwa described his approach: “Give a home to incredible talent who then earn more money because of the community they have, who then pay more rent. If you’re clever enough to hang around me a lot, you could understand that.”
This fall, WSA has been lit up with events and installations. There was Collectible, a furniture and design fair; Available Works, an art book fair; Yes, Chef, an art show including works by the artists Marilyn Minter, Sarah Lucas, Chloe Wise and Tavares Strachan; and a pop-up restaurant, Black Caesar. A few weeks after Ms. Jenner revealed her new hair color at WSA, Beyoncé posted to Instagram photos of herself at Waters, a restaurant at 175 Water Street billed as “coming soon.”
Now Ms. Khalil needs workers to serve the crowd she has assembled. Happier People Management has posted job listings for chefs, pastry cooks, baristas, massage therapists, internet techs and bookkeepers. There is also a slot, with a minimum salary of $60,000, for a “music and culture manager.” A tally of the salaries listed for the jobs suggest a monthly operating budget in the millions.
In July, 99c bought another skyscraper in the financial district, at 180 Maiden Lane, for $297 million. Will there be enough cool kids left in New York City to fill it?
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