“That was a deal we had been working on for 18 months that was complex because of the size of the transaction, the nature of the tenants and the fact that we had many competing landlords that were trying to coerce Citi to relocate elsewhere,” Mr. Kessner said. “As a nimble company, we can sprint to the finish line … but we also can handle the marathon deal.”
Another “marathon” deal went down at the Graybar Building, where the Metro-North Commuter Railroad Company signed a 20-year, 265,903-square-foot lease at the classic 420 Lexington Avenue property. The subsidiary of the Metropolitan Transportation Authority renewed its space across the entire 11th, 12th and partial 22nd floors and expanded into an additional 132,400 square feet on lower floors.
“The first critical challenge was if we could provide enough space,” Mr. Kessner said of that deal. “The secondary challenge was if we would be able to create a commercial condo that would allow Metro-North to take advantage of a tax exemption pursuant to a statute specifically designed for them.”
Mr. Durels, the firm’s director of leasing, has called that deal an “exceedingly complicated transaction, which took nearly 20 months to complete and involved a plethora of moving parts, including the participation of numerous stake-holders.” The firm ultimately assembled 34 separate spaces and relocated or recaptured 15 occupied spaces, assuming responsibility for construction of upgrades and the tenant’s build-out.
“Steve [Durels] worked extensively and spoke with me about it at the term sheet stage to see if we could possibly create the ground lease condo structure,” Mr. Kessner said. “I advised him that, yes, we could. It would be difficult and time-consuming, another ‘marathon,’ if you will, but we could do it.”
The deal required a simultaneous lease with Metro North and the building’s fee owner, as well as negotiations with each of SL Green (SLG)’s lenders. The firm also had to exercise an early renewal option on the ground lease and a new ground lease to create a new condo among other hoops.
“These were fairly atypical deals in the sense that it’s not the bread-and-butter deals that my team typically handles because of the nature of the complexity,” Mr. Kessner said. “Having said that, SL Green is known in the real estate community as a company that is well versed in working on complete real estate deals.
“It’s an enormous challenge and a lot of fun, and it certainly keeps you on your toes.”
