Richard Baxter Dishes on the Drama Behind the Deals at Casa Lever
Jotham Sederstrom Jan. 3, 2012, 3 p.m.
It was lunchtime at Casa Lever, the high-end restaurant in the iconic Lever House, and Richard Baxter was on his BlackBerry negotiating.
It was a busy year for Mr. Baxter and his colleagues at Jones Lang LaSalle. His four-man team comprised some of the city’s most prominent brokers of large-scale commercial office buildings, and as the Manhattan sales market’s post-recessionary thaw continues, Mr. Baxter estimated that the group had tallied an impressive $1.3 billion in deals this year.
Three days before Christmas, however, it wasn’t one particular skyscraper Mr. Baxter was bargaining over from his plum seat at Casa Lever. In a year-end rush, his group had loose ends to tie up, deals to close and transactions still in the works. And so, on this particular Thursday amid a bustling lunch crowd, Mr. Baxter was not negotiating with a buyer or a building owner, but rather one of his own assistants, whom he was asking to stay late to receive critical documents and to help get the team through the rest of the day.
“She was going to take the train to Boston,” said Mr. Baxter, after hanging up with his assistant. “But we just booked her a flight for later this evening.”
Such are the costs of deal making in the city, much like lunching in prime and pricey spots like Casa Lever. On the way in, Mr. Baxter, along with JLL colleagues Ron Cohen and Glenn Tolchin, stopped to chat with Jon Mechanic and Sush Torgalkar, who were having lunch at a nearby table. The conversation that ensued had all the easy chatter and laughs of old acquaintances catching up, yet it wasn’t difficult to imagine how casual encounters like this can spawn business. Mr. Mechanic is the city’s top transactional real estate attorney and Mr. Torgalkar is the chief operating officer of Westbrook Partners, an active buyer and seller with holdings that include boutique asset 444 Madison Avenue.
A natural networker with a sharp wit, Mr. Baxter seems readily able to take advantage of such opportunities. Having a grasp of the industry’s personalities is helpful in brokerage, allowing a level of insight beyond the facts and figures of a transaction. To hear him tell it, simmering disputes, hidden ambitions and other underlying factors can play as much of a role in sealing a deal as an investment’s rate of return or a building’s vacancy.
Settling into what he claimed was the real estate investor Aby Rosen’s usual booth, Mr. Baxter shifted conversation to the Seagram Building, the trophy tower that sits across Park Avenue from Lever House and, like Lever, is also owned by Mr. Rosen.
Years ago, Mr. Baxter was one of the brokers who sold a stake in the property to the billionaire investor Peter Brant. Earlier this year, Mr. Brant traded that interest at a huge profit to the Blackstone Group.
Rumors in the industry circulated that the sale had as much to do with Mr. Brant’s soured relationship with Mr. Rosen as it did cashing in the stake’s big returns. According to published reports, in fact, Mr. Rosen had allegedly made insulting comments about Mr. Brant’s wife, the former supermodel Stephanie Seymour.
“A woman’s scorn,” Mr. Baxter said, acknowledging with both amusement and marvel the dramatic sequence of events that may have led to the investment’s turnover.
In a more recent deal that Mr. Baxter wasn’t involved in but that also highlighted the hidden psychology underpinning the business, SL Green, among the city’s largest commercial landlords, was rumored to have snapped up the office building 10 East 53rd Street. SL Green has been one of the city’s most active acquirers of office buildings, specially through the downturn in the market when prices sagged from record highs. But the JLL team’s assessment of the deal was more penetrating than attributing it simply to SL Green’s voracious appetite.
SL Green had likely been disappointed at not getting 510 Madison Avenue, a nearby building that the firm nearly foreclosed on last year by buying up the property’s debt. The deal had slipped away from the firm when the rival REIT Boston Properties recapitalized the property, taking control. SL Green was paid handsomely, but 10 East 53rd Street was its way of restoring a bruised ego, picking up a boutique building that can potentially compete for the same kinds of tenants that 510 Madison Avenue attracts.
What is such insight worth in a deal? Perhaps not much. But if a broker’s job is to decide who is going to have the extra oomph to fully realize a property’s potential value, perhaps a lot.
“It is a matter of marketing and finding the buyer with the right vision for the asset,” Mr. Baxter said. “Directing the buyer towards maximizing the property’s true potential enables us to obtain premium pricing for our sellers. The five to ten percent premium wins the property. That is what our team does.”
Mr. Baxter and his team’s grasp of the industry’s players has paid off in the deals they have arranged in recent months. This year, the group sold both 737 Park Avenue and 150 East 72nd Street, for $360 million and $70 million respectively, to Harry Macklowe. Mr. Macklowe, once the prince of Manhattan’s real estate industry, took a precipitous and publicized fall during the recession. Though few doubted that Mr. Macklowe was still well-heeled enough to compete for major assets in the city, the acquisitions marked a surprising comeback and earned Mr. Baxter and his team accolades for identifying Mr. Macklowe as a buyer with resilience when many others had counted him out.
Mr. Baxter began his career during the early 1980s in sales brokerage at Newmark, where he and Mr. Cohen first became brokerage partners. The pair shifted to the Edward S. Gordon Company by the 1990s, at the time one of the city’s major real estate firms. ESG, as the firm’s name was abbreviated, eventually was acquired, first by Insignia, and later by the world’s biggest real estate services firm, CBRE.
CBRE, however, already had a powerful brokerage duo in place: Darcy Stacom and William Shanahan, who had a contractual right at the company to broker its deals in the city, said Mr. Baxter and Mr. Cohen. With a bustling business of their own, the pair proposed merging into a four-member group to defuse a potential rivalry and allow everyone to operate within Manhattan.
“It got complicated,” Mr. Baxter said about the talks then to join the teams, preferring not to go into the details of what those complications entailed.
Soon after, the pair ended up departing for Cushman & Wakefield, where they met Scott Latham and Jon Caplan, two sales executives at the firm. The two groups quickly merged and have been negotiating deals together ever since, although they have their specialties.
Mr. Cohen, for instance, has focused on recruiting foreign buyers and sellers into the team’s pipeline of contacts and deals, especially from Israel, where he is from and where investors have been active in the New York commercial real estate market in recent years. The four-man team’s time at C&W proved successful: In 2007, the group brokered the $1.8 billion sale of 666 Fifth Avenue, then the biggest commercial office sale in Manhattan, to the real estate investor, and Commercial Observer owner, Jared Kushner.
Last year, however, Mr. Baxter and his colleagues took a gamble, leaving Cushman for the rival brokerage firm Jones Lang LaSalle. The move, one of the biggest shakeups in the city’s investment sales industry in years, was a clear victory for JLL, whose lack of a competitive sales team was becoming increasingly conspicuous in the eyes of many real estate observers, not least of all those at the dominant brokerage firm CBRE.
For a time, the team seemed to lose ground to competitors like Ms. Stacom and Mr. Shanahan, who in 2010 appeared to re-energize the investment sales market by scoring a string of prominent sales, not least among them 340 Madison Avenue, 125 Park Avenue and 600 Lexington Avenue.
But Baxter and the team have regained ground. Aside from prominent deals like the pair of residential buildings the group sold to Mr. Macklowe, the team has sold smaller but still-lucrative assets, like 15 Little West 12th Street, which the group traded to investor Steve Elghanayan for $70 million in May. In June, they sold 70 Pine Street to Metro Loft for $205 million.
Heading into 2012, meanwhile, the group has even bigger deals in the pipeline. Indeed, the team will be hitting the market in the upcoming quarter with two prominent assets—one of them in Midtown, the other in Midtown South—that Mr. Baxter expects will trade for $600 million and $300 million respectively. “New York is a huge market and the way we look at it, there’s room enough for everyone,” Mr. Baxter said.
Mr. Baxter, Mr. Cohen and Mr. Tolchin were clearly in a hurry to leave Casa Lever. With so much to do, they had ordered a car to meet out front and shuttle them back to the office. By then, Mr. Mechanic and
Mr. Torgalkar had left, but in their place was Andrew Mathias, president of SL Green and the man in charge of overseeing acquisitions at the firm. Mr. Baxter and his team exchanged hellos and slid in to catch up.
The sense of urgency to leave was suddenly gone. The office could wait.
- SL Green Realty Corp.
- seagram building
- Jon Mechanic
- Jon Caplan
- Glenn Tolchin
- Scott Latham
- Darcy Stacom
- lever house
- Jones Lang LaSalle
- Richard Baxter
- Casa Lever
- Boston Properties
- Edward S. Gordon
- 444 Madison Avenue
- 10 East 53rd Street
- 510 Madison Avenue
- William Shanahan
- Stephanie Seymour
- Sush Torgalkar
- Blackstone Group
- Andrew Mathias
- Harry Macklowe
- Westbrook Partners
- 737 Park Avenue
- Peter Brant
- Ron Cohen