Underground Man

Train Man: MTA Chairman Peter Kalikow in one of his cars.Photo: Emily Shur

Riding uptown in his chauffeur-driven Lincoln one recent snowy morning, MTA chairman Peter Kalikow was worried about his switches. All through this unusually frigid winter, the cold has caused Metro-North and Long Island railroad switches to freeze, playing havoc with train schedules and Kalikow’s peace of mind.

“You cannot believe what the weather does to our system,” he says, shaking his head in frustration. “All the maintenance, all the track work, all the attention to detail goes out the goddamned window because of the cold. Unbelievable.”

It seems an odd thing to have to fret about for someone at Kalikow’s point in life. Rather than sit on a few corporate boards and attend fund-raisers, the man who spent three decades building high-rise towers, once owned the New York Post, and was the financial architect of Alfonse D’Amato’s Senate career is consumed with the grinding task of overseeing a public-transportation network that employs 65,000 people and serves 8 million riders a day (3 billion a year). It is a job in which he gets blamed for every closed token booth, dirty subway car, and broken escalator. People often ask him why he subjects himself to the rigors of the chairmanship when he could be doing just about anything else. “I had no idea what I was getting into,” he sometimes smiles and says.

But the truth is more complicated. After surviving a painful, highly public bankruptcy in the early nineties, Kalikow was determined to give something back. The impulse is part altruism, part effort to erase the blot on his record through achievement.

Kalikow likes to say he doesn’t want anything from the job (“What could I want? I have everything”), but, of course, that’s not entirely true. Making money is no longer paramount. “I do this,” he says, “because I want my legacy to be something other than money.”

Though Kalikow has already changed the MTA in significant ways—he’s instituted management reforms to ensure increased accountability and efficiency, and put more transparency in the budget process—he has staked his legacy on expansion. The MTA is about to begin the largest, most far-reaching construction of public-transportation facilities in the city in more than 60 years. It is the kind of infrastructure-building program that will dramatically affect life in New York for decades.

Kalikow believes his experience as a developer has uniquely prepared him for this challenge. He knows how to manage megaprojects (“I’ve been known to have the ability to make sure people do what they’re supposed to when I want something done”) and has the vision to see and understand what the construction will mean to New York 30 or 40 years from now. “They left us a system that’s gone 60 years without expansion,” he says. “And in truth, we weren’t ready to expand. We didn’t really know how to run a system. Now we’ve proved we can do it, and that’s why we can ask for the money. It’s time.”

First up is what’s referred to as East Side Access. At a cost of $6.3 billion, this project will enable Long Island Rail Road trains to go directly into Grand Central Terminal. Right now, 40 percent of all LIRR riders are forced to backtrack to get to the East Side once they reach Penn Station. In addition to saving commuter time and energy, East Side Access would ease the burden on buses, subways, and taxis.

“I told Alfonse, ‘If you screw around, I’m going to kill you. I want to be a success here, and you’re going to help me.’ ”

The MTA plan calls for construction of a whole new level of platforms deep in the bowels of Grand Central and what may by the world’s longest escalator: ten stories. Kalikow says the MTA is in final negotiations with the federal government for funding. “We want them to cover 50 percent of the cost,” he says. “We have a very good shot at getting this done before Congress breaks for summer recess in July.”

The MTA, in fact, has already spent nearly a third of what its portion of the project would be, on excavation and track work in Sunnyside. If the federal money is appropriated, construction should be completed between 2010 and 2012.

The other project Kalikow believes will begin by year’s end is the long-hoped-for Second Avenue subway. “It’s the most famous thing that’s never been built in New York,” says Gene Russianoff, a lawyer with the Straphangers Campaign.

With a price tag of $17 billion and a fifteen-year timetable for construction, it’s a much more complicated project than East Side Access. The new line would run from 125th Street to the southern tip of Manhattan. Also moving forward is a $400 million reconstruction of the South Ferry station and a smarter, more user-friendly $750 million redesign of the maze of stations and eight or nine subway lines that come together at the Fulton Street–Broadway Nassau complex. This will be done with already-allocated federal 9/11 funds.

Though few would argue against the need to expand the system—bus ridership is up 46 percent and subway-rail ridership is up 35 percent—specific choices are another matter. East Side Access is the pet project of Governor George Pataki. Both he and D’Amato made it a campaign promise in 1998, knowing the appeal it held for suburban voters.

Kalikow’s ties to both men have opened the door to criticism that he is simply doing the governor’s bidding. The Second Avenue subway, on the other hand, has long been championed by State Assembly Speaker Sheldon Silver, a Democrat, who represents the Lower East Side. “My complaint is not with the choices themselves,” says Congressman Jerry Nadler. “It’s with the way they’re made. The projects picked are the ones with the most political clout.”

Kalikow argues that yes, the choices are political in the sense that one elected official or another’s constituents will always benefit from public construction. “But that’s not how we make decisions. We’re trying to serve the most people possible, and all of these projects are heavily reviewed. However, if a project we select happens to benefit a certain important state leader who lives in Albany, I won’t lie to you. I’m not annoyed by that.”

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They call the Second Avenue subway the greatest New York project never built. They may have to think of a new name. (April 5, 2004 issue of New York Magazine)

One contentious project with serious Republican backing that will not be in the MTA’s new five-year capital plan when it is released in July is the extension of the 7 train to the Javits Center. This is a priority for Mayor Michael Bloomberg and Dan Doctoroff, his deputy for economic development. It is a critical piece in any West Side redevelopment plan, which Doctoroff announced last week is moving forward: a stadium for the Jets (and perhaps Olympic use) and an expansion of the convention center.

Kalikow has refused to budge on this issue despite steady pressure from the mayor. He says the MTA does not want to be the obstacle to a project everyone agrees would have great benefits for the city. But he is emphatic that the MTA will not fund any part of the project. “I’m getting beaten up pretty good internally because I haven’t taken my pants down over this No. 7 project,” Kalikow says. “That’s okay. I’m a big boy. I don’t want you to think everybody goes to Peter Luger with cigars and doles this stuff out. Some of these decisions are the result of knock-down, drag-out battles with powerful, competing politicians at the table.”

What the city wants from the MTA, in addition to the extension of the 7 train, is the construction of a platform over the rail yards between Eleventh and Twelfth avenues. Any stadium that gets built would actually sit on this deck. And while Doctoroff’s press conference made it sound as though a deal with the MTA has been struck, it hasn’t. “My fight with Doctoroff is over what happens to my development-rights money for that site and some other property the MTA owns in the area,” Kalikow says. “That’s what we’re arguing about. We think they’re worth $400 million to $600 million over fifteen years, and we want compensation.” Initially, the city did not want to give the MTA anything. Now the two sides have begun to negotiate and the process is moving forward.

“Kalikow is a tenacious defender of the MTA’s rights,” Doctoroff says. “But I’m certain we’ll reach an agreement that’s fair for everyone.”

The MTA’s preliminary five-year capital plan will be released this summer. And in addition to everything already mentioned, it will likely include system improvements such as satellite monitoring of buses, additional subway cars and buses, computerized signals on some subway lines, and plenty of station renovation. “Kalikow is a builder and a doer with a big vision,” says Russianoff, “and that’s both a negative and a positive. He knows how to sell projects. My concern is that the debt service is already a huge part of the budget, and there’s talk about a fare increase in 2005.”

Kalikow remains unfazed. He has maneuvered his way around opposition on virtually every project he’s ever built. It’s the only way things get done in New York. “When we complete East Side Access and when we build the Second Avenue subway, it’ll be like throwing a rock in a lake. The ripples will go on for decades.”

A block and a half from Grand Central is 101 Park Avenue, a soaring glass-and-steel tower that is Kalikow’s signature building. When he bought the property in 1978, everybody told him he was crazy. Conventional wisdom said you couldn’t build office space below 42nd Street. However, he rented all 1.3 million square feet in his new building in just three months.

Kalikow’s office is on the 25th floor. It is a stunning space with tall wraparound windows, buttery leather furniture, and soothing natural tones. Among the vanity snapshots capturing moments along his career arc is one of Kalikow with Donald Trump, Bob Dole, and Al D’Amato. Kalikow had them all sign the photo because of what it means to him: all four men suffered a difficult, embarrassing setback while at the top of their game.

Trump miscalculated badly, overextended himself, and nearly lost his real-estate empire. Dole was whipped by George Bush senior for the Republican presidential nomination. D’Amato was investigated for ethics violations. And Kalikow, who, like Trump, was overleveraged and underprepared for the bottom to fall out of the real-estate market in the early nineties, was forced to endure a humiliating, prolonged public bankruptcy.

“That picture is there to remind me,” Kalikow says one morning, dressed in his usual dark-blue suit and blue shirt with white collar and cuffs, “that no matter how successful you get, you’re always only one step from trouble.”

Kalikow’s fall was steeper than most. He was raised in Forest Hills, went to Hofstra University, and then straight into the family business. His grandfather, a Russian immigrant who came to America with nothing, eventually started a real-estate business, buying huge tracts of undeveloped farmland in Queens in the thirties. (“He was an organizational genius,” Kalikow says, “and incredibly full of himself.”)

Joined by Kalikow’s father after World War II, the men built thousands of apartments in six-story buildings on the land they owned. They made a fortune. Peter learned the family business by hanging around his father’s office and visiting construction sites, and by the time he was ready to take his place beside his father, low-rise apartments in Queens held little appeal for him.

He wanted to do something bigger, sexier, more interesting. He wanted to build in Manhattan. Though his father was in his middle fifties and thinking about retirement, Peter convinced him to take a risk. They started buying property in Manhattan in the late sixties and early seventies.

That led to the purchase of the property at 101 Park, which he could see from the window of his old office across the avenue. “By the time I bought this property, we’d built ten apartment buildings.” Including the Fifth Avenue co-op across from the Metropolitan, where he still lives with his wife of 30 years, Mary, in a triplex penthouse. Throughout the eighties, Kalikow couldn’t miss. In addition to the luxury apartments and office towers, he decided near the end of the decade to build a hotel (the 56-story Millenium, across from the World Trade Center, whose name he intentionally misspelled because he didn’t like the way it looked with two n’s).

“In 1986, everybody was itching to do everything,” Kalikow says almost wistfully. “So I got this brainstorm that Larry Tisch was going to take over CBS.”

Putting his money where his brainstorm was, Kalikow bought 800,000 shares of CBS stock at $128 a share. His bankers called him to explain himself. “Have you lost your mind?” they asked. They said they’d give him any amount of money to build a building. But speculating in the market? They told him to sell the stock.

“I got $160 a share, which was a nice little profit,” Kalikow says, “but the stock went to $325. My profit would’ve been $160 million if I’d held it.”

Then, in 1988, Kalikow decided he wanted to buy the New York Post from Rupert Murdoch. The price was $37.6 million. On its face, it was an even more ridiculous idea than his CBS stock purchase. He had no newspaper experience, no media background of any kind. It just seemed like it would be fun to own a newspaper. It was, in the context of the roaring eighties, simply the next interesting thing.

And this time his bankers made no attempt to talk him down off the ledge. They figured since he was so right about CBS, maybe he knew something they didn’t. “I was a victim of my own success,” Kalikow says. “If that CBS stock had gone to $20 a share, it would’ve been a blessing for me. I believed I could do anything, that nothing would ever go wrong. I got a severe lesson that life doesn’t work that way.”

Kalikow thought going in that he could make a success of the Post. The newsroom in that era was a raucous, irreverent playground for some of the most talented, dysfunctional characters ever to put out a tabloid. “For no money, we put out a damn good paper,” he says. “They got stories because they went out and got them, not because of big budgets or expense accounts.”

His deep affection for the paper and that part of his life comes up all the time, even now, more than ten years after he walked out of the newsroom for the last time.

Jerry Nachman, the legendary, rotund, egomaniacal newsman whom Kalikow named editor of the Post, died recently. On the way to the memorial service, where Kalikow was one of the speakers, his sadness was palpable in the car.

“I’ve now had to speak at the funerals of three people who I thought would eulogize me. First Eric, then Mike, and now Jerry,” he said, referring to Eric Breindel, who was editorial-page editor at the Post, columnist Mike McAlary, and Nachman.

“Owning the Post was like having a mistress. You knew you shouldn’t go there every day to visit because it would cost you more money. But it was so much fun you just couldn’t stop.”

Kalikow’s problem, however, was not just the paper. He had two other huge losers. He’d borrowed $156 million to build the Millenium Hotel. And he had fourteen small apartment buildings between 78th and 79th streets with $90 million in loans against them. His plan was to relocate the tenants, tear the buildings down, and put up a luxury high-rise. He hadn’t figured the tenants would fight him—and win.

By the time he was forced to file for bankruptcy in the summer of 1991, he owed a dozen banks more than a billion dollars. His assets, with the real-estate market in the tank, were valued somewhere around $500 million. Because he had signed several personal guarantees, his private assets were also at risk. In addition to his Fifth Avenue triplex, he owned his own jet, a twelve-acre estate in Montauk, a car collection worth more than $7 million, and the biggest yacht on the East End.

“Donald Trump had essentially the same problem as Peter, with one critical difference,” says developer David Mack, a lifelong friend of Kalikow’s who has also known Trump since they were kids. “The banks felt they needed Trump’s name, that it added value to the properties. So they didn’t force him into bankruptcy. With Peter, they didn’t care.”

In order to finalize his workout with the banks, Kalikow was helped with a critical infusion of more than $20 million in cash. The money came from his mother and David Mack and another developer friend named Sheldon Solow. He lost the Post, the Millenium Hotel, and the East Side property and was forced to sell most of his other buildings in a depressed market to pay off his debt. And even then, many creditors got less than twenty cents on the dollar.

Though he was out from under the thumb of the banks by the beginning of 1994, Kalikow says it took until 1998 to fully restructure his company, make it “as bulletproof as possible,” and get things back on track. Today, in addition to his Fifth Avenue penthouse and Montauk estate, his primary commercial assets are 101 Park Avenue and 195 Broadway. Because of his significant equity, however, an aide puts Kalikow’s net worth between $500 million and $1 billion.

“I was up as high as you can get, and then I got the shit kicked out of me,” he told me one afternoon recently. “It was personally devastating only when I thought about it. But I never focused on what the ultimate impact of failure would have been. I have this facility for deluding myself, which is a nice thing to have.”

Not surprisingly, Kalikow’s dance along the edge of the abyss was a transforming experience. “I thought business was everything,” he says. “I found out it’s not.”

Ironically, given his strong Republican ties, it was Governor Mario Cuomo who suggested to Kalikow that he get involved in public service, and it was Cuomo who initially appointed him to the MTA board. Nevertheless, ever since Kalikow took up his responsibilities at the agency there has been a strong whiff of Republican cronyism wafting around him.

Much of this, but not all, is the result of his long-standing ties with former senator D’Amato. On the Friday after Thanksgiving in 1979, Kalikow, D’Amato, and David Mack met for breakfast in a Long Island diner. D’Amato surprised the two of them by announcing that he was running for the Senate. (“I asked him from what state,” Kalikow says.)

Despite whatever doubts he may have initially had—D’Amato was going up against fellow Republican Jacob Javits, a New York Jewish icon—Kalikow became his finance chairman, and the two have been inseparable since. “All my friends take heat with respect to me,” D’Amato says. But these ties run very deep.

Kalikow hired a D’Amato staffer named Rick Nasti more than twenty years ago, and he became one of the developer’s closest confidants. While Kalikow owned the Post, Nasti, a vice-president, pleaded guilty to misdemeanor charges of violating state financial laws for artificially inflating the paper’s circulation numbers. Kalikow himself was never implicated, and Nasti, who is still with him, now works in his company’s offices at 101 Park.

D’Amato’s lobbying firm, Park Strategies, is also on the 25th floor at 101. And, though it happened before Kalikow became MTA chairman, D’Amato was paid a $500,000 fee for making one phone call to grease the wheels of the MTA’s move of its headquarters to Two Broadway.

But the intermingling doesn’t end there. David Mack, one of Kalikow’s best friends and one of the people who helped him through his bankruptcy, is also an MTA board member. And he too has been a D’Amato buddy and supporter for more than 30 years. In fact, Mack and D’Amato played an instrumental role in engineering George Pataki’s initial run for governor.

In 1993, Republican consultant Arthur Finkelstein had come up with a list of ten qualities the ideal candidate should have to defeat Mario Cuomo. The criteria were fairly straightforward: The candidate should be from outside the city, have a fresh face, support the death penalty, and the like. D’Amato, Mack, Mack’s brother Earle, and two other Republican heavyweights from Nassau County met for lunch at the Marriott near La Guardia airport. With Finkelstein’s wish list in hand, D’Amato suggested they get behind the then little-known Pataki.

The five of them formed the nucleus of Pataki’s team. To pick his running mate, Pataki, D’Amato, and Kalikow held what amounted to a one-day casting call in a New York City hotel room during the Republican state convention. “It was a really tedious day,” says one source, “and then Betsy came in with her pearly whites and long legs and it was a done deal.” Betsy McCaughey Ross was selected as Pataki’s running mate, according to several sources, because she “was the prettiest.”

Kalikow argues without rancor that the people closest to him have all been an enormous help. “I told Alfonse, ‘If you screw around, I’m gonna kill you,’ ” Kalikow says. “I told him, ‘I want to be a success here, and you’re going to help me.’ And he does. I’ve gotten to see a lot of people in Washington who might not have taken my calls. And I know when to see them and what to say. If that’s cronyism, I’ll take the heat.”

State Assemblyman Richard Brodsky, who heads the committee that has oversight responsibilities for the MTA, says: “One of Peter’s strengths is that he’s a member of this big-guy Republican club. And one of Peter’s weaknesses is that he’s a member of the big-guy Republican club. On the positive side, it means they let him in the room. But the question is, can he stand up to them when he has to? I’ve seen signs of it, but there needs to be more.”

Kalikow acknowledges the validity of the criticism and the charge that he has gone easy on the governor when it comes to funding public transportation. He even says he might be making the charge himself if he were on the other side. But this is the year the MTA’s five-year capital plan will be set. “We’re going to the governor and the Legislature this year,” Kalikow says, “and Albany is going to have to lead the way in providing funding.”

Though he can be prickly and demanding, Kalikow is well liked, even by his adversaries. He is an entertaining mixture of power and money with the essential qualities of a kid from Queens. In conversation, he makes seamless personal references to people like Elie Wiesel, Bill Moyers, and Stephen Ambrose (Kalikow is mentioned in his last book), while at the same time exhibiting the slightly twitchy body language of a guy from the streets.

Kalikow is the kind of guy who fixes and tinkers with the nearly 50 exotic cars he owns and who, as one friend put it, could be found on his $10 million yacht watching The Honeymooners—his favorite show—as guests were arriving for a dinner party.

He is without artifice, which makes him both accessible and direct—what he himself would call a straight shooter. “Peter’s very engaging,” says Gene Russianoff. “He’s the kind of guy who will call you if he sees a comment you’ve made in the newspaper and tell you what he thinks.”

Kalikow works at maintaining good relations even with his opponents. The one exception is State Comptroller Alan Hevesi. When the battle was joined over the fare increase last year, an ugly public dispute developed between the two men that has left raw feelings even a year later. “To Hevesi’s discredit,” Kalikow says, “he tried to get political mileage out of what was happening. That’s what you call unscrupulous. I think he should be ashamed of himself.”

Hevesi apparently hasn’t lost any of his passion for the dispute either. “Once again, Kalikow is not telling the truth,” he responded when told what the MTA chairman had to say. The comptroller argues that as a result of demanding public accountability from Kalikow and his board, the MTA has reformed its financial-reporting practices.

Despite the battering Kalikow and the MTA took for raising the fare, he believes they did the right thing. He is looking forward now, focused on expansion. “This job and this system,” Kalikow says, “are too important to leave before I’ve accomplished everything I’d like to get done.”

And besides, he loves what he’s doing. But the MTA is not his last stop. “I’m still a developer,” he says. “And I know I have one more great building in me.”

Underground Man