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Trouble At Turtle Bay

The numbers for the U.N.'s new renovation project just don't add up.

1:10 PM, May 16, 2005 • By JOHN HINDERAKER
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An executive vice president at Newmark, Scott Panzer, said renovation prices could range between $120 and $200 per square foot. Mr. Panzer, who works with many corporations to redevelop their buildings for future efficiency and energy cost savings, put a price of $70 to $100 per square foot on infrastructure upgrades. Those would include heating; ventilation; air conditioning; replacing the central plant; fenestration (specifically, switching from single-pane to thermal-pane windows); upgrading elevator switch gears, mechanicals, and vertical transportation; improving air quality, and making security upgrades. On top of that amount, another $50 to $100 per square foot would take care of the inside office improvements.

The chairman of global brokerage at commercial real-estate firm CB Richard Ellis, Stephen Siegel, said high-end commercial renovation usually runs $50 to $100 per square foot. For a renovation that does not include new furniture--according to the 2002 Capital Master Plan, the United Nations' will not--but does provide for improved heating, ventilation, and air-conditioning equipment, as well as work on the building exterior, the cost would be closer to the $100 end of the range, Mr. Siegel said. Even accounting generously for upgrades that might be peculiar to the United Nations, Mr. Siegel added, he would set $250 per square foot as the absolute maximum.

It would appear, then, that hundreds of millions of dollars are unaccounted for, even on the most generous assumptions.

Trump has gone further, expressing the view that the expenses projected by the U.N. can only be the result of graft or incompetence. In a speech on the Senate floor on April 6, 2005, Senator Jeff Sessions recounted his conversation with Trump:

Let me share this story with you, which is pretty shocking to me. The $1.2 billion loan the United Nations wants is to renovate a building. Some member of the United Nations, a delegate, apparently, from Europe, had read in the newspaper in New York that Mr. Donald Trump . . . had just completed the Trump World Tower--not a 30-story building like the United Nations, but a 90-story building, for a mere $350 million, less than one-third of that cost. So the European United Nations delegate was curious about the $1.2 billion they were spending on the United Nations. He knew he didn't know what the real estate costs are in New York. So, he called Mr. Trump and they discussed it. Mr. Trump told him that building he built for $350 million was the top of the line. It has the highest quality of anything you would need in it. They discussed the matter, and an arrangement was made for Mr. Trump to meet Kofi Annan, Secretary-General, to discuss the concerns. . . . So according to Mr. Trump, who I talked to personally this morning, they go meet with Mr. Annan, who had asked some staff member to be there . . . When the European asked how these numbers could happen, Mr. Trump said the only way would be because of incompetence, or fraud. That is how strongly he felt about this price tag because he pointed out to me that renovation costs much less than building an entirely new building. So he has a meeting with Mr. Annan, and they have some discussion. And Mr. Trump says these figures can't be acceptable. He told me in my conversation this morning, he said: You can quote me. You can say what I am saying. He said they don't know. The person who had been working on this project for 4 years couldn't answer basic questions about what was involved in renovating a major building. He was not capable nor competent to do the job. He went and worked on it, and talked about it, and eventually made an offer. He said he would manage the refurbishment, the renovation, of the United Nations Building, and he would not charge personally for his fee in managing it. He would bring it in at $500 [million], less than half of what they were expecting to spend, and it would be better. . . . Yet he never received a response from the United Nations.

It appears there are serious questions about the U.N.'s renovation project. Depending on which assumptions one accepts about cost and square footage, anywhere from $500 million to $1 billion in expense is unaccounted for. Given the U.N.'s history, is there any reason to doubt that the costs projected by that organization include substantial sums representing, as Trump put it, incompetence or fraud? Given what we know about the oil-for-food program, is there any reason to trust the U.N.'s business or accounting practices?