“The Most Complicated Deal I Personally Have Handled.”

It’s not uncommon to hear Manhattan’s real estate market characterized as sophisticated or complex.

Not every day, however, does a requirement as straightforward as Dentsu McGarryBowen’s uncork such an elaborate and interconnected series of transactions as it did at the Starrett-Lehigh Building.

A longtime tenant in the 2.3-million-square-foot building and one of the property’s largest users, the advertising firm needed to expand. But there was a small problem: Despite its size, the building—an artsy, far West Side location popular among creative tenants—had virtually no available space.

starrett lehigh1 “The Most Complicated Deal I Personally Have Handled.”

Starrett-Lehigh Building. (Courtesy Property Shark)

Dentsu McGarryBowen occupied more than 100,000 square feet in the building with several years left on its lease, but it couldn’t imagine relocating elsewhere or subleasing the space.

“This building is exactly their style,” said David Hollander, an executive with CBRE who, along with colleague Sacha Zarba, represented Dentsu McGarryBowen in the transaction. “They didn’t want to be in a more conventional location. They couldn’t imagine being anywhere else.”

Mr. Hollander poked around and soon found an opportunity. The Harry Fox Agency, a tenant on the fifth floor, was looking to relocate and shed its 50,000 square feet—exactly the amount of space Dentsu McGarryBowen was hoping to accumulate. Adding to the luster of the potential deal, Mr. Hollander had been in conversations with the building’s landlord, RXR Realty, which was willing to cancel the Harry Fox lease so that it could sign one directly with Dentsu, an arrangement that offered advantages for the tenant.

But what seemed at first glance like a perfect swap turned into anything but.

Harry Fox, a musical licensing agent, subleased the space from apparel giant Tommy Hilfiger, an even bigger tenant than Dentsu McGarryBowen at Starrett-Lehigh, and the company had the right of first refusal to take space back for its own use. As it turned out, Tommy Hilfiger, too, was looking to expand just as Dentsu McGarryBowen was.

Mr. Hollander now had a problem on his hands: He had to convince Tommy Hilfiger to back off. At the same time, Harry Fox had to find a new home, no easy task in a tightening Manhattan office market.

“The transaction became like a series of dominoes getting knocked over,” said Greg Taubin, an executive at Studley who represented Harry Fox. “Once the transaction got going, every component triggered consequences for the other.”

Mr. Hollander needed leverage, and he quickly found a way to get it.

The Harry Fox offices were on the Starrett-Lehigh Building’s fifth floor and it wasn’t the only space there that Tommy Hilfiger had subleased.

Department store Lord & Taylor also occupied approximately 21,000 square feet of sublease space from Tommy Hilfiger and was negotiating to lease it back to the company. Dentsu McGarry Bowen stepped in. It would take the 21,000 square feet for higher rents than Tommy Hilfiger was willing to pay.

If the situation was turning into a game of poker, Mr. Hollander was bluffing. In reality, the Lord & Taylor space wasn’t good for Dentsu because the expiration came more than three years before the company’s lease for its existing space on floors 10 and 11 expires in 2024. When renewal time came for the expansion space, Mr. Hollander knew that the landlord would have a huge advantage negotiating an extension because Dentsu would be a captive tenant, with the bulk of its space upstairs.

In the meantime, Matthew Astrachan, an executive with Jones Lang LaSalle who represents Tommy Hilfiger, was busy trying to facilitate a solution. He was convinced Tommy Hilfiger didn’t need the Harry Fox space. It could seize the Lord & Taylor space at a more affordable price and retain nearly 20,000 square feet it was preparing to sublease on the building’s 17th floor. Mr. Astrachan said Tommy Hilfiger initially wanted to shed the 17th floor space because it sat outside the company’s primary envelope of offices on the fourth, fifth and sixth floors. Whether through Mr. Astrachan’s urging or its own reflection,

Tommy Hilfiger eventually realized that the 17th floor was actually ideal. Part of the reason the company needed expansion room was to use a portion of space to construct and test retail showrooms that it could then deploy in its stores.

“It was fine to have that up on the 17th floor because it was a separate operation they were doing that was different from the use they had in the rest of their space, which is all offices,” Mr. Astrachan said. “Once we figured that out, it uncorked the deal.”

Mr. Astrachan drew up a deal for Tommy Hilfiger to sublease 21,000 square feet of space back from Lord & Taylor, and Mr. Hollander and Mr.

Zarba arranged a 50,000-square-foot direct lease with RXR Realty for Harry Fox.

Then everything hit one last nerve-jarring speed bump.

The deal that Mr. Taubin was arranging downtown for Harry Fox collapsed. It was early November, two months into a fevered tangle of dealmaking. That elusive window in which everyone’s interests had finally aligned was closing. Mr. Taubin, however, had smartly arranged a backup plan at the Donald Trump-owned office building 40 Wall Street.

“After our first deal fell apart, we literally drew up a deal at 40 Wall Street in a week,” Mr. Taubin said. “The Trump Organization was incredibly accommodating. They really wanted us as a tenant in their property.”

Harry Fox ended up signing a 37,000-square-foot deal for 40 Wall Street’s entire sixth floor. Although the space is smaller than the office it leases at the Starrett-Lehigh Building, Mr. Taubin said the firm is able to house the same number of employees because its offices will be tailored to the company’s real estate needs.

“The space at Starrett Lehigh was great for HFA five years ago, but through a new build-out, we’re getting tremendous efficiency now,” Mr. Taubin said.

On the Thursday before Christmas, both Tommy Hilfiger and Dentsu inked expansion deals. Tommy Hilfiger will occupy approximately 350,000 square feet, and Dentsu will take roughly 170,000 feet.

“This was seriously the most complicated deal I personally have handled,” Mr. Hollander said. “Every deal has its posturing, but in the end, it worked because we all cooperated and worked together.”

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