L&L Holding Company’s development of 425 Park Avenue may be the company’s current marquee project, but the firm, which chairman and CEO David Levinson co-founded with Robert Lapidus in 2000, continues to make a mark on Midtown South. In January, L&L purchased 114 Fifth Avenue in a $165 million joint venture, planning to model it after 200 Fifth Avenue, a thriving symbol of Midtown South’s bull real estate market. Mr. Levinson, 64, who owns a stake in the New York Yankees, spoke with The Commercial Observer about Midtown South, the threat of bomb attacks and the Bronx Bombers.
The Commercial Observer: The success of 200 Fifth Avenue is emblematic of Midtown South’s ascent. What’s your current take on the submarket’s health?
Well, look, the tenancy of the city is somewhat bifurcated. The big, institutional financial-related tenants and tenants that support them—law and accounting firms—that part of the market is sort of static. Tenants that are more connected to the cultural change going on in the United States—media, tech, creative areas—are much stronger. And those tenants have turned their faces southwest, all the way down to the Financial District.
Tenants are moving to lower Manhattan because Midtown South is getting very pricey and there’s less product.
What kind of asking rents are you seeing there now?
We’re developing 114 Fifth Avenue, and the rents there will be between $75 and $85 a square foot. We’ll have almost 400,000 square feet available there. And we’re doing a full gut renovation. It will be like 200 Fifth Avenue on a smaller scale.
Any idea how much renovations will cost?
We’ll probably spend around $40 million.
What sort of tenants are you seeking at 114 Fifth Avenue?
We’ll probably end up replacing the same type of tenant that’s already there—advertising, high-end fashion and high-end media. There are only three big-name tenants—Grey Healthcare Group, Armani and Disney. We had to move them out to do the renovation and will likely refill it with tenants from that same world.
When will you start marketing it?
We’ll be marketing that space probably in the next 60 days.
What’s the latest at 150 Fifth Avenue?
EMI is still there and has several years to go on the lease. We bought the building in 2000. So we’ve been in the marketplace a long time. Going way back to 1980, in the early stages of my career as a broker, I was part of the team that renovated 40 West 23rd Street, which was really the first big renovation down there.
I’ve always described Midtown South as a steam valve for an overheated Midtown. Now, it’s really got its own culture and is a very strong submarket. In the better buildings, rents are comparable to Midtown.
Has lower Manhattan has become a steam valve for an overheated Midtown South?
Yes, exactly. I think that over time, we’ll stop calling it the Financial District. There should be some major announcements this year about other big media companies going down there.
Tenants along the lines of Condé Nast?
Yes. Another big advertising agency, that’s what’s happening. That said, there are things still missing in lower Manhattan that Midtown South has. It’s robust with restaurants, nightclubs and quality shopping.
What’s also very interesting is this mixture of residential, commercial and industrial real estate. It’s all commingled. My view is that the commingling of these three categories is the future. And it’s much more present on the West Side, from the Flatiron District into Chelsea.
Jumping off of the idea of commingling, young tech and new media tenants often have an appetite for collaborative work spaces. How does it affect the market when tenants aren’t gobbling up huge swaths of traditional office space?
In the long term. I don’t think it will have any impact. I think it’s having an impact on how people design buildings and how tenants design space. The trend is less space per individual but more space for collaboration, and that won’t go away.
Do you think the Midtown South market has peaked?
No, it hasn’t peaked. There’s still plenty of opportunity there. The issue you have is that a lot of the buildings are smaller. To some extent, that’s kept inventory limited. And a lot of buildings are landmarked. You have a big problem tearing stuff down.
Tech has driven Midtown South. Do you think we might be in another bubble?
I think we knew there was a bubble in 2000. Now, the use of tech and its ubiquity—it’s really here. This is the end result. I have young children; they’re 5 and 10 years old. I don’t know where they learned how to use the iPhone, but they show me stuff on there that I didn’t know it had.
Looking at the broader economy, as there’s been improvement, has your interest in gold investing waned?
Listen, my investment in gold was not for a trade. This was a long-term, generational acquisition. We bought bullion and we’ve got it stashed away. It’s a long-term inflation hedge and catastrophic protection I bought for my family and future generations.
Is it stashed in a bunker? Do you agree with the survivalist movement’s mind-set?
I’m not an avid or rabid survivalist. But I’m absolutely certain of how fragile the world is and how things are likely to change. It’s one reason why we’re building our own security company. In the future, we’ll provide not only secure buildings, but also security services.
I think it’s a permanent issue. I’m not sure how it will manifest itself, whether it will be cyber attacks, bio attacks, nuclear attacks, bomb attacks … I can’t really tell you that. But there are a lot of dangerous people out there. We want to be forward-thinking about what’s going to happen in the world.
Are there panic rooms in your buildings?
That’s not anything we’d really want to talk about. But I can tell you that we’re prepared. I hope. I think we’re prepared.
You own a stake in the Yankees. They’re hobbled right now. Can they turn it around?
Look, this issue of injured and older players—they’ve been dealing with this for a few years. And management has done an excellent job patching together some guys who’ve been out to pasture and some guys who are still in diapers. We’ve had a lot of experience with age and injury. I remain very optimistic. There’s a culture of winning, and I think we’re going to do just fine.