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.