Infor and the Lease Negotiations Behind Its Deal at 641 Avenue of the Americas
Jotham Sederstrom Nov. 29, 2011, 10 a.m.
Hired to lease 641 Avenue of the Americas earlier this year, Peter Turchin, an executive at the real estate services firm CBRE, quickly knew what potential takers the 170,000-square-foot building could appeal to.
The property is located at the edge of Chelsea, a neighborhood that in recent years has attracted an influx of technology, Internet and social media-related firms. Earlier this year, the area’s rise as the focal point of what is being dubbed a burgeoning “Silicon Alley” in Manhattan was cemented by Google’s $2 billion acquisition of 111 Eighth Avenue, a nearly three-million-square-foot property between 15th and 16th streets where the Internet search and software company bases its New York operations.
Still, Mr. Turchin said he didn’t want to rest on the neighborhood’s credentials alone.
When he, and his CBRE colleague Gregg Rothkin, took tenants on tours of 641 Avenue of the Americas, which had several vacant floors totaling tens of thousands of square feet, he gave them the usual slide-show presentations and promotional materials detailing both the building’s and the neighborhood’s features and amenities. But to really drive home the neighborhood’s transformation in recent years, Mr. Turchin went a step further.
“Every time I’ve ever done a space tour in the past, you always take the tenant down to the lobby and it’s there where you shake hands, say thank you and head off on your way, but not on this assignment,” Mr. Turchin said. “As part of every tour we marched tenants outside and across the street to the Limelight.”
The Limelight Marketplace, which is kitty-corner to 641 Avenue of the Americas across 20th Street, features a collection of high-end boutiques and food shops that Mr. Turchin said immediately gave prospective tenants a sense of the neighborhood’s flare.
“You have this church and a lot of people will walk by and not know what’s on the inside, but when we showed tenants what was beneath the surface here, it brought home a lot of what’s gone on in this neighborhood,” Mr. Turchin said.
Mr. Turchin and the CBRE team’s approach produced success. Working with Mr. Rothkin, Mr. Turchin bagged a deal with the social media software company Meebo in September to have the firm fill the eight-story building’s roughly 22,000-square-foot seventh floor.
In recent weeks, Mr. Turchin and his team reeled in an even bigger software company, Infor, which took 42,000 square feet on the building’s entire third and fourth floors for rents in the $30s per square foot.
With more space on the table in that transaction, Mr. Turchin felt like he had to do more than sell the tenant on the surroundings. Indeed,
Infor, according to Bruce Mosler, a brokerage executive from Cushman & Wakefield who headed its search, was cruising between Midtown South and Midtown, unsure of which location it would choose and unconvinced at the outset that either was better than the other for its needs.
“There’s two things to getting a deal done,” Mr. Turchin said. “You have to sell a tenant on a neighborhood but also the building.”
In this case, a clever investment by 641 Avenue of the Americas’ owner, Atlas Capital Group, helped push the deal forward.
The pursuit of Internet and tech tenants may have had some landlords scrambling to update key infrastructure such as a building’s electrical capacity or Internet connectivity. At 641 Avenue of the Americas, a historic office property that was built in 1902, those would have been expensive upgrades. Recognizing this, Atlas, Mr. Turchin said, was determined to be more focused.
“Atlas had replaced some of the windows in the space that Meebo ended up taking and Meebo really responded to that upgrade,” Mr. Turchin said, noting that many tech firms don’t need any more infrastructure than a conventional office user.
The landlord, with Mr. Turchin’s support, went on to swap out all the old wooden windows in the property with all new window modules.
“It’s not the kind of upgrade you notice until it’s been changed,” Mr. Turchin said. “It was a subtlety that really was a huge thing. When you saw the space with the new windows, it just looked completely different. Light was flooding in.”
The CBRE team scrambled to find ways to highlight and enhance the upgrade, asking that walls be knocked down in the vacant spaces that obstructed the building’s perimeter and cut off the majority of the space from the abundant light that was now flooding in.
“Atlas was incredibly responsive,” Mr. Turchin said. “They moved very fast. When a tenant is looking to take a space, they’re moving fast and you need a landlord who can move accordingly. At 641 Avenue of the Americas, the window decision was a quick decision for Atlas. When we needed a wall torn down, they had the workers in that day practically starting on the work to get it done as soon as possible.”
After seeing the building in a better light—literally—Infor began to warm to the prospect of being in Chelsea.
“We had looked at lots of different alternatives in Midtown,” Mr. Mosler said, noting that the search process was a learning experience for Infor’s top executives because the firm was based in Atlanta and 641 Avenue of the Americas will be its first office in the city. “They saw the neighborhood as a place that was going to be conducive to the talent pool they want to attract.”
The deal was also attractive to Infor because it allows the company to stage its growth. According to the terms of the transaction, the company will take 31,500 square feet of its space immediately and then grow into the remaining 11,500 square feet after a given amount of time.
“It gives them a lot of flexibility to grow,” Mr. Mosler said.
For Mr. Turchin, the deal was a gratifying lesson in being focused.
“That’s what a good landlord does,” Mr. Turchin explained. “You can think of a thousand things to do to a building. The key is selecting the two or three things that the tenants are really looking for.”