Jotham Sederstrom July 12, 2010, 5:20 p.m.
Earlier this year, Steve Meringoff and Leslie Himmel recognized the 25-year anniversary of Himmel + Meringoff, a firm that has embarked on an aggressive buying spree over the past 12 months. That benchmark, combined with successful leasing at 521-33 West 57th Street and 729 Seventh Avenue recently, has given the partners plenty to celebrate.
The Commercial Observer: You’re in acquisition mode. Why now?
Ms. Himmel: We’ve been partners for 25 years and have a master portfolio of a few million square feet, and throughout that time we’ve built a fairly conservative long-term philosophy. We think at this time in the market, there’s going to be wonderful opportunities to buy real estate and really get our hands around the management leasing and the acquisitions. So through our renovating, re-tenanting and repositioning, we think our strategy will be able to be implemented.
‘The deals are like a drug. They’re like a magnet. But at this lecture, it was Harry Helmsley, and at the end, Harry said, “Thank you,” and Larry Silverstein said, “Would you entertain some questions, Harry?” And Harry said sure. So Leslie was the first person to raise her hand and she said to Harry …’
Have you already begun to acquire new properties?
Ms. Himmel: We never go out of the market, but we definitely time our sales and our purchases. We think there’s a time to sell and there’s a time to buy, and the last few years we’ve sold more than we’ve purchased. And we’re back on a buying binge at this point.
Mr. Meringoff: What we do is mostly value-add properties. Value creation is what we called it in the early ’80s. “Creation of Value in Real Estate” was our logo. In today’s market, often a core or a core-plus property becomes a value-add property maybe because they lose a major tenant, or they have other issues with the property. Value has now gone down sufficiently to where we can actually make sense of acquiring property not necessarily on only a cap-rate basis, but on a dollar-a-foot basis. And that’s emboldened us to want to buy.
What kind of properties are you looking at now?
Ms. Himmel: We’re basically looking for properties that are anywhere from 100,000 to 500,000 square feet, with a value of $40 million to about $200 million. We’re looking for properties that are both on market and off market, and we believe that even though net-effective rents are way lower, the issue of vacancy and trying to understand what to do with the property is going to be important in the next cycle.
Himmel + Meringoff has been fairly conservative. Have you refinanced recently?
Mr. Meringoff: Yes. We’ve been to this movie before. This is our third cycle. It’s 33 years for us now. For us, this is the sequel. This is like Toy Story 3. We kind of sensed it. I don’t want to say we’re so smart that we knew, but when people were starting to buy property from the people who were buying them at prices we couldn’t make sense out of, we knew that something was likely to burst. So what we did was, we bullet-proofed our portfolio. That was what we decided we wanted to do.
Part of it was to strategically sell a few properties-we very, very seldom sell-but the properties we sold were primarily development-type properties that needed to be knocked down with a new building built in its place. Three-sixty-five Broadway; Pearl and Water Street-these were development sites, and we sold them to people who paid a lot of money for the land based on the development rights of those properties. We don’t do that. We don’t do ground-up develop. We don’t do residential. We generally stay inside Manhattan, although we have a property in Queens and, from time to time, venture out to New Jersey.
But, basically, we’re Manhattan-bound. In addition to the sales, we bullet-proofed our loan portfolio. We have a significant number of loans on 20 properties and each one of them has the option to extend that maturity. That’s very unusual. We bargained for it. We paid a higher rate to get it.
How did you two meet and become partners?
Mr. Meringoff: Well, that’s a great story. We met at a lecture that was conducted by a fellow named Larry Silverstein at N.Y.U.’s school of real estate on 42nd Street. He had a wonderful series of lectures back in the mid-’80s. We met in 1984 or 1985. He had very wonderful people-friends of ours-who would come in and talk about the real estate industry. For me, I was in the business seven years already and I was a fairly well-established principal, but I would drop everything to go to this lecture because it was fascinating to see and hear somebody as talented and as successful as Harry Helmsley talk about deals.
The deals are like a drug. They’re like a magnet. But at this lecture, it was Harry Helmsley, and at the end, Harry said, ‘Thank you,’ and Larry Silverstein said, ‘Would you entertain some questions, Harry?’ And Harry said sure. So Leslie was the first person to raise her hand and she said to Harry …
Ms. Himmel: I said, ‘So, you’ve spoken all about your buildings, but what’s been your greatest accomplishment?’
Mr. Meringoff: And he said, ‘What are you doing later tonight, sweetheart?’ [laughs] And I thought, ‘Now, that’s gutsy.’ So I went over and said, ‘You seem like someone who has the same kind of moxie that I do, and here’s what I’m doing and I would just like to talk about possibly going into partnership together.’ At that time, I had separated from a partner that I’d had since 1978, and I was looking to expand with a partner. I love doing business with partners. I’d much rather do twice as many deals with half of the equity than own 100 percent. It gives me somebody to talk to and it gives me someone to play with every day.
So, nearly 30 years later, do you still work well together?
Mr. Meringoff: Yeah, we’re great partners. We celebrated our 25th year of partnership this year. We’ve never had a harsh word, never had a fight and never had a disagreement. We may have disagreed about things, but it’s always been good.
Ms. Himmel: I think, from my perspective, what I love about the partnership is that Steve is one of the brightest people I’ve ever met, and I try to surround myself with a lot of bright people. So I think the synergy of our minds, we’re constantly challenging each other. So after 25 years, I come to work and I’m really charged up about buying a property. And Steve will come in, and we’ll talk about something, and the synergy of the conversations and the competition brings me to another level.