“The Most Complicated Deal I Personally Have Handled.”
By Jotham Sederstrom January 17, 2012 12:04 pm
reprintsHarry Fox, a musical licensing agent, subleased the space from apparel giant Tommy Hilfiger, an even bigger tenant than Dentsu McGarryBowen at Starrett-Lehigh, and the company had the right of first refusal to take space back for its own use. As it turned out, Tommy Hilfiger, too, was looking to expand just as Dentsu McGarryBowen was.
Mr. Hollander now had a problem on his hands: He had to convince Tommy Hilfiger to back off. At the same time, Harry Fox had to find a new home, no easy task in a tightening Manhattan office market.
“The transaction became like a series of dominoes getting knocked over,” said Greg Taubin, an executive at Studley who represented Harry Fox. “Once the transaction got going, every component triggered consequences for the other.”
Mr. Hollander needed leverage, and he quickly found a way to get it.
The Harry Fox offices were on the Starrett-Lehigh Building’s fifth floor and it wasn’t the only space there that Tommy Hilfiger had subleased.
Department store Lord & Taylor also occupied approximately 21,000 square feet of sublease space from Tommy Hilfiger and was negotiating to lease it back to the company. Dentsu McGarry Bowen stepped in. It would take the 21,000 square feet for higher rents than Tommy Hilfiger was willing to pay.
If the situation was turning into a game of poker, Mr. Hollander was bluffing. In reality, the Lord & Taylor space wasn’t good for Dentsu because the expiration came more than three years before the company’s lease for its existing space on floors 10 and 11 expires in 2024. When renewal time came for the expansion space, Mr. Hollander knew that the landlord would have a huge advantage negotiating an extension because Dentsu would be a captive tenant, with the bulk of its space upstairs.
In the meantime, Matthew Astrachan, an executive with Jones Lang LaSalle who represents Tommy Hilfiger, was busy trying to facilitate a solution. He was convinced Tommy Hilfiger didn’t need the Harry Fox space. It could seize the Lord & Taylor space at a more affordable price and retain nearly 20,000 square feet it was preparing to sublease on the building’s 17th floor. Mr. Astrachan said Tommy Hilfiger initially wanted to shed the 17th floor space because it sat outside the company’s primary envelope of offices on the fourth, fifth and sixth floors. Whether through Mr. Astrachan’s urging or its own reflection,
Tommy Hilfiger eventually realized that the 17th floor was actually ideal. Part of the reason the company needed expansion room was to use a portion of space to construct and test retail showrooms that it could then deploy in its stores.
“It was fine to have that up on the 17th floor because it was a separate operation they were doing that was different from the use they had in the rest of their space, which is all offices,” Mr. Astrachan said. “Once we figured that out, it uncorked the deal.”
