New York financial district’s hip mystery tower

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-storey structure, at 175 Water Street, has become a nexus for the kind of people who might not otherwise set foot in this neighbourhood of bankers and brokers.

It is owned by developers who have been awarded a US$41.3 million discretionary tax break from a recently established New York City government programme to help pay for their vision and the US$150 million renovation that goes with it.

Built in 1983, the tower was the long-time global headquarters of insurance giant AIG. After AIG sold the building for about US$270 million in 2019, it sat all but empty during much of the pandemic, when scores of companies, including AIG, left the financial district. In late 2022, an LLC under the name 99c bought the building for US$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.

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 (sq ft) office in the building, the rent was quoted as “28”. Because of the location and luxe amenities, she assumed that meant US$28,000 per month. Shocked to learn it was US$2,800, she signed post-haste.

A 3,000-sq-ft space at US$2,800 per month works out to US$11.20 per sq ft. The average asking rent for downtown office space is US$57.16 per sq ft, 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 neighbourhoods: 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.

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But the economics remain daunting. In addition to the planned US$150 million renovation, WSA’s developers must bring in enough to cover the US$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 US$10 to US$12 per sq ft 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. 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.

The project’s driving force and de facto spokesperson is Gabriella Khalil, a style-conscious woman in her early 40s who grew up in Conshohocken, Pennsylvania.

Married to Matthew Khalil, a British real estate developer, Gabriella 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. She moved to New York two years ago with her husband and daughter.

In an interview for this article, Khalil was visibly uncomfortable answering certain questions, adding to the opacity surrounding the project. 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.

She said she met the man who would become her husband while visiting Miami about 20 years ago. Matthew 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. The Khalils are involved in Scott Avenue Associates, a members-only club in Brooklyn, as well.

The team behind the dream

Gabriella 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 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,” Gabriella Khalil said.

In 2017, the couple met Sam Wessner, a co-owner of El Rey, a now-closed cafe on New York’s Lower East Side. Who connected Wessner and the Khalils? The name slips everyone’s minds.

Wessner said in a telephone interview that he agreed to get involved, though he was not familiar with Matthew Khalil’s work as a developer. “Their vision of a type of hospitality was different than what I’ve heard before,” Wessner said.

Away they went on a recruitment spree, with Wessner as the conduit to cool.

Wessner introduced the Khalils to Ian Nicholson, a hotelier with decades in the business. As the former CEO of Faena Hotels, Nicholson has applied his touch to the Chateau Marmont in Los Angeles, the SoHo Grand and TriBeCa Grand in New York, and Andre Balazs’ 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 spokesperson said that Nicholson is now the chief operating officer of Happier People, the Khalils’ management company.

But given the opaquely named LLCs listed in public records, not to mention Gabriella 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 Dart, the secretive billionaire.

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 US 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 Dart was not part of the deal and that Francesco Bellini, a Canadian biopharma mogul, was a lead buyer by way of 99c, an LLC he had 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 reuse plan” to the building.

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.

Stellberger, who said he met Matthew 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 favour, 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,” 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 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 US$165 million. Public records also show that since 2004, Ta has had many of the same home addresses as Corina Dart, one of Ken 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 per cent ownership stake in six properties associated with Stellberger – including 175 Water Street, 154 Scott Avenue and 53 Scott Avenue – 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,” Stellberger said. “I think there are a lot of big personalities in New York City real estate and hospitality. It’s just not sort of our ethos.”