The Million Dollar Quartet
Jotham Sederstrom Oct. 19, 2010, 2:39 p.m.
It was a Tuesday in October, and the leaders of Jones Lang LaSalle’s newly retained Capital Markets group had yet to settle into the corner office they took control of four months earlier.
The walls were bereft of art, the room nearly absent of personal affects. In fact the only hint that a new team of brokers had arrived were the stacks of papers littered across otherwise empty desks.
Since their ballyhooed arrival in May from Cushman & Wakefield, brokers Richard Baxter, Yoron Cohen, Scott Latham and Jonathan Caplan have had nary a moment to spare as they work to expand what was once a single-minded Capital Markets group.
Indeed, where at Cushman the veteran brokers focused solely on investment sales, the foursome, vice chairmen all, will now wrap their arms around loan sales, recapitalizations, restructuring and financing, among other services.
“We’re doing similar work, although we also have a little more breadth than what we had at Cushman, in terms of capital markets activity in New York,” said Mr. Latham, 52.
“We shifted to this company in order to expand our business,” added Mr. Cohen, 57, whose list of clients has included foreign investors like El Ad Properties and Safra National Bank.
The move itself, said the foursome, followed several months of contract negotiations with both firms and nine other associates on their team. Although several stayed behind at Cushman, most came along, they said.
In the meantime, they said, the group made dozens of conference calls and traveled across the globe in a bid to plug into Jones Lang LaSalle’s network of international brokerage firms.
“Getting established and having the office built for us certainly took the first 30, 45 days,” said Richard Baxter, 55, who prior to both Cushman and JLL served as an executive managing director at the former Insignia/ESG. “In addition, we were completing and working on some assignments that were left over for Cushman.”
Those assignments included the sale of a building owned by the drug and alcohol rehabilitation clinic Daytop Village to Allied Partners. The $26.5 million deal at 54 West 40th Street went into contract in August. Daytop, whom the group represented while at Cushman, will lease back the 11-story building for a year and then deliver it vacant.
As for the level of interest the 50,000-square-foot building drew when it went on the market in March, Mr. Baxter said that 250 confidentiality agreements were signed by potential buyers–or, in other words, more than twice the number of agreements that normally crosses the group’s desk.
“It was just the pent-up demand in the market and the attractiveness of the property in that it faces Bryant Park,” said Mr. Baxter, a 30-year real estate veteran. “And it was also the multiple uses that it could be: everything from a hotel to residential, offices, etcetera.”
In June, meanwhile, the foursome brokered the purchase of a 412,000-square-foot office tower at 417 Fifth Avenue to the investor Carlos Slim for $140 million. According to Mr. Baxter, the group first brokered a deal for the building at the peak of the market–in July of 2007–for about $250 million.
“It sort of defined the bottom of the market in 2009 and 2010 when we put it in contract,” added Mr. Baxter.
Beside their outstanding assignments for Cushman, the group is currently the exclusive representative for KBS Realty Advisors in the REIT’s sale of 434 Broadway. The nine-story office building is 100 percent leased, with bids due this week, Mr. Baxter said. “We had a great response to the offering,” he said. “We’re expecting multiple bids.”
Asked why demand has been so high for many of their recent assignments, Mr. Caplan said that employment rates have been higher than expected while vacancy rates remained a bit lower.
“In terms of the leasing fundamentals, the vacancy rate didn’t go as high as some people were projecting,” said Mr. Caplan, 56, who prior to both Cushman and Jones Lang served as a senior vice president at CB Richard Ellis. “We’re also starting to see some tightening in the leasing market in certain pockets, and net rental rates are actually going up as people start to pull back on concessions. So, it’s really starting to turn into a better story.”
The elephant in the room that day was Cushman & Wakefield’s reputation for fostering silos among its service lines. The hierarchical business model, which tends to favor the separation of service lines, has been criticized by competing firms and may have been one reason the foursome were unable to fully expand their New York Capital Markets group while still at Cushman.
Indeed, shortly after his appointment in April as Cushman’s chief executive, former Centro Properties CEO Glenn Rufrano suggested he would seek to reverse the firm’s long-standing model.
“This company and probably many other companies–especially over the last few years–have created silo mentalities to survive,” Mr. Rufrano told The Commercial Observer in June.
“Here we have a bit of that, whether it’s a global silo issue or national,” he continued. “But we have people and employees and other associates who understand that to compete you need to take the full power of the company brand to try to maximize itself at any given point. … Now it’s a question of how you get people to work together.”
While the quartet took pains to speak positively about Cushman, where their group first took shape in 2003, they also emphasized Jones Lang LaSalle’s embrace of a collaborative culture.
“I don’t want to say anything negative, but the culture here is much more from an advisory nature and helping the client coming to the best decision possible for their companies,” said Mr. Cohen. “We enjoy that culture and that’s how we think. This is one of the benefits we find in this company–that it’s set up this way. It gives us a lot of pleasure to come in in the morning.”