SL Green Honchos on Foreign Investment, the Sapirs, the Aqueduct and the Collapsed Deal at 485 Lex
Dana Rubinstein Dec. 7, 2009, 10 p.m.
At the Mandarin Oriental on Monday afternoon, the city’s largest office landlord beamed rays of optimism onto its collective shareholders.
“We can regain absorption quickly when people start hiring again,” said Marc Holliday, SL Green‘s CEO. “We’re at 85,000 job losses now, but that can quickly reverse itself. … It’s not going to take much, in my opinion, before you will see vacancy levels trending to 10 percent and under, and rents starting to rise again.”
Mr. Holliday pointed to the relative lack of huge blocks of space in Midtown Manhattan — only 10 blocks of space of 250,000 square feet or more, and only five in midtown’s “core”: 11 Times Square, the old New York Times building, 120 Park Avenue, 345 Park Avenue, and 510 Madison Avenue — and to the paucity of recent development.
“Roughly, there was an 8-million-square-foot net increase over 10 years,” Mr. Holliday said. “That’s about a quarter point a year addition in inventory.”
Nor is there much new construction in the pipeline, or many prime development sites left in midtown. Even better, who owns the primest of the prime? SL Green, according to SL Green.
“The one that sort of stands out is our development site at 317 Madison Avenue, which we’ve always said would be a next-cycle development,” Mr. Holliday said. “We’re certainly approaching that cycle.”
Mr. Holliday said the folks at his firm are even more optimistic than Cushman & Wakefield’s head researcher, the optimistic Ken McCarthy, who recently told Cushman brokers that the recession is just about over.
Mr. Holliday and his team also dished on foreign investment, the Sapirs, the Aqueduct, and the collapsed sale of an interest in 485 Lexington Avenue.
In no particular order, on foreign investment:
Andrew Mathias, SL Green’s president and chief investment officer, said that in his global peregrinations, he’s been struck by the diversity of the investors eager to invest in real estate — hence the slide to the right. Even better, he’s found that investors were largely interested in only two places: midtown Manhattan and London. “[They] are all drawn to the safety and liquidity of these two worldwide markets,” he said.
On the Sapirs, the former owners of 100 Church Street, on whom SL Green is in the process of foreclosing:
Mr. Holliday and friends never named the Sapirs explicitly, but they didn’t really need to. Matt DiLiberto, SL Green’s vice president and controller, referred to the building’s “very litigious borrower,” while Steve Durels, executive vice president and director of leasing, described the “poor stewardship of the prior owner” and the “seriously flawed lobby renovation.” More specifically, he called the Sapirs’ installation of more than 50 Swarovski crystal chandeliers — supposedly the world’s largest such installation — “hideous.” SL Green is, needless to say, planning a major lobby renovation.
On the never-ending bidding process for the development and racino rights at the Aqueduct in Queens, a process that has spanned three gubernatorial administrations:
“[We] believe that the departure of a prominent Vegas gaming mogul you can fill in the blank, has proved that construction in New York requires resilience and a skill set unlike any other place in the world,” said Ed Piccinich, executive vice president for property management and construction.
A selection could be coming soon. According to Mr. Holliday, the recently passed state budget, “included amounts from the Aqueduct in this current fiscal year, indicating they will try to wrap things up shortly.”
And, finally, on the sale of a 49.5 percent interest in 485 Lexington Avenue to Optibase and Gilmor, a deal that collapsed because, said Mr. Mathias: “The special servicer has effectively rejected the assumption of the loan”:
It looks like a lawsuit is pending. Said Mr. Holliday, “We have an entity out there that’s trying to rewrite the rules and it’s not good for the industry that that happens.”