Empire State of Mine

tony malkin getty Empire State of Mine

The Commercial Observer: How did 2009 shape up for Malkin Holdings?

Anthony Malkin: We leased over 1.1 million square feet, of which just over 400,000 square feet was renewal, but the balance was all new leases. We did over 200,000 square feet in our suburban office portfolio in Stamford and White Plains. We also did just under 100,000 square feet of retail leases in our retail portfolio. We also did a fair amount of financing in 2009, with life insurance companies and with commercial banks. We have a very low leverage, so very conveniently and easily we’re able to get financing done these days. Two other big accomplishments in 2009 would be the unveiling on April 5 of our energy efficiency retrofit program at the Empire State Building and the unveiling of our restored and modernized lobby at the Empire State Building.


Your W&H portfolio posted great numbers in 2009. Surprising in a downturn, eh?

It was a record-breaking year. We’ve been replacing a tremendous number of our tenants. We’re consolidating the number of suites to make larger suites. Our typical tenant is between 25,000 square feet and 2,500 square feet. We have some hundred thousand footers and we have some 50,000 footers, but what we’re getting rid of throughout our portfolio is probably over a thousand suites below 1,500 feet. We’re consolidating those spaces as a prelude to new modern installations.

Therefore, we are doing a lot of new leasing as we cycle out older and smaller tenants, and we’re also redirecting the portfolio. Because of its higher quality, we’re seeing better brokers and better tenants-brokers and tenants we never would’ve seen five or six years ago. Because our buildings are in better shape, those are the kinds of tenants who pay higher rent, and so, therefore, we’re signing a lot more new leases than renewal leases, but that’s by design.


In the case of the Empire State Building, only five years ago there were 600 tenants. Now it’s down to 250 tenants. Where did they all end up?

The Empire State Building tenants are moving elsewhere, but not into our portfolio. Don’t forget: We have an 8 million-square-foot portfolio, O.K.? That’s nine buildings. So there has been a lot of movement. It’s not just the Empire State Building. We took control of the Empire State Building in August of 2006, so it was later in the process. We started this consolidation process in 2003.


You worked at the Empire State Building as a teenager. What is your earliest memory?

The impression I had early on was of this great international icon, with all this wonderful international imagery, but it was filled with sport coats and belts and shoes and handbags and hundreds and hundreds and hundreds of tiny tenants. In the building itself, even back in 1980, you had the long hallways, which seemed to have hundreds of doors on them, and it seemed as though it was a terrazzo floor and fluorescent overhead lights and most had frosted glass windows and gold lettering on them, and it looked like a combination of a hotel and an episode of The Twilight Zone.


You were a venture capitalist. Do you miss those days?

I had the benefit of coming out of school and going to work at a firm that was then called Chemical Venture Partners. It became JPMorgan Capital Partners, and now it’s completely different; it’s another firm. But one of my greatest benefits was that I worked for somebody else. I didn’t work for the family. So I was held to task by a really, really smart person working with a very smart group of people for which I had no preferential treatment of any kind on anything. I learned business and I learned about cash flow and I learned about discount rates and I learned about financial analysis, which has helped me tremendously in targeting our buildings to the types of tenants we want to attract.


Do you have a sentimental favorite in the portfolio?

Well, let’s start by saying that it’s unavoidable to not think of the Empire State Building. But that, to me, is like hunting the great white whale. Making it successful is a giant, giant project, and I view it without sentiment.

But if I have a soft spot in my heart, it’s for 1359 Broadway because, when we took that building over, it was 40 percent occupied and one-quarter of that occupancy wasn’t even paying rent. It was a low-priced, ladies dresses textile showroom. There’s no low-priced ladies textile business in New York City, let alone in the United States. It’s all overseas. We took this building and we turned it into one of the finest boutique office buildings in New York City, with a fantastic tenant roster. We tore up the lobby, and while doing so we realized the vestiges of the original lobby ceiling underneath the ceiling that had been put in there in the 1960s. We re-created the original ceiling. You know, I look at that and to me that’s really an example of making something from nothing. It had no debt on it and it was losing money, and now it’s a fantastic success.


How close do you work with Helmsley-Spear these days?

We work closely and constructively with the Helmsley estate. Over time they will be selling all of their interests, and over time we will be the likely buyers. In most instances, we have the rights to be the first purchaser. I consider that one of our great accomplishments, which was to be able to sit down with them after years of litigation and hardship and to be able to demonstrate to them that our ideas were sound, our execution capacity was excellent and that we would be able to prove to them that we were not the evil bad people that Helmsley Spear had made us out to be. So we have a constructive relationship with them, but it’s necessarily short term. It’s not going to go on for a long time because they’re going to sell. But we look forward to buying their interests and moving forward.


At a recent real estate seminar, you were quoted as saying, ‘We are in a world of disruption of information.’ What does that mean?

Well, I was applying it to a real estate context in the current time. Without transactions taking place, there aren’t that many data points. Businesses are changing radically, while at the same time we’re going through an economic difficulty. So from my perspective, the most important thing is to understand what you know and do what you know. Focus on it and be good at it, and chart your own course because if you’re looking around for indications for where things are going, there’s total uncertainty out there.



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