The 2012 Owners Inquisition
The Editors Sept. 18, 2012, 7 a.m.
It all began with a simple premise: If you could ask the city’s biggest, most powerful commercial real estate owners 15 questions, what would they be, and what would that list look like?
Sure, it would include market predictions and boilerplate real estate stuff, like views on Midtown South’s dramatic uptick in popularity and its ongoing trendiness among tech upstarts. But it would also feature more intimate questions about politics and family, art and personal achievement. In short, it would be our platonic ideal of a night out with some of the most successful businessmen in New York.
And to our surprise, real estate owners responded enthusiastically and, in many cases, with a level of candor previously unseen in an industry where owners often play their cards close to the vest. Indeed, real estate titans like Anthony Malkin, Jason Pizer and Donald Trump let down their guard—if only for a moment—to share a lifetime of personal wisdom, market predictions and some strongly held convictions, from the outcome of November’s presidential elections to a dollop of property tax angst.
However, even some of the omissions in their answers to our inquisition were telling. When asked, “Is LEED certification all it’s cracked up to be?” Douglas Durst, the co-chairman of the Durst Organization, widely considered to be one of the real estate industry’s most outspoken boosters of sustainable building, avoided the question altogether. So did a few political animals when asked to predict the elections.
As much as possible, we viewed this, our First Annual Owners Inquisition, as an opportunity to include the city’s diverse array of landlords, from real estate investment trusts like SL Green and Vornado—who together command in excess of 50 million square feet of property in Manhattan—to smaller, nimbler companies like RXR Realty, Newmark Holdings and a host of other players whose well-known names dot the borough’s skyline. The only requirement, in fact, was that the submissions come from owners boasting property in Manhattan rather than the outer boroughs, which hundreds of additional landlords call home.
Between July and September, we sent questionnaires to the media liaisons of the 50 largest Manhattan real estate owners, asking that they forward the questions to their company’s president, chief executive and chairman. In some cases we reached out to the principals themselves, to managing directors or anyone else with access to decision-makers. Still later, we publicized the project through Twitter, The Commercial Observer’s own website and other avenues. By last month, with dozens of questionnaires already submitted, we added a second layer of landlord profiles in an effort to create as comprehensive a list of the industry’s ownership community as possible.
PRESIDENT, PARAMOUNT GROUP
Paramount Group Inc., New York’s largest foreign privately held real estate investment and management firm, was undaunted by this year’s collapse of the law firm of Dewey & Leboeuf LLP, which created a 450,000-square-foot vacancy in its building at 1301 Avenue of the Americas.
“With respect to New York, we have always been and will continue to be bullish,” said Dan Lauer, vice president of acquisitions, who declined to comment on the vacancy or deals to re-lease the space.
Dewey & Leboeuf, in the largest law firm collapse in history, listed the building owner as its second-largest unsecured creditor.
Headed by President Albert Behler, Paramount has established a reputation as a leasing juggernaut. The Dewey & LeBoeuf debacle was followed by a spate of deals, reported in The Commercial Observer, that may have lessened the blow, including an agreement by Chadbourne Parke LLP to take about half of the space being vacated.
In addition, Wilson Sonsini Goodrich & Rosati, whose founding partner Larry Sonsini is known for providing counsel and representation to technology firms, signed an almost 40,000-square-foot lease at the 1.7-million-square-foot building. And Centerview Partners, a financial firm, signed a nearly 18,000-square-foot expansion deal at Paramount’s 31 West 52nd Street.
Chadbourne Parke had been shopping around the Manhattan market for months in search of a new home, coming close to leases at 1 World Trade Center and 230 Park Avenue only to pull away and resume its search. The firm had also been rumored to be potentially taking space at 11 Times Square and 250 West 55th Street, Eighth Avenue buildings that have attracted other law firms.
Sources said that one of the attractions of the deal at 1301 Avenue of the Americas is the fact that the firm can inherit the office installation left behind by Dewey rather than building it from scratch, an expense that can run into the millions of dollars for a large office.
Paramount continued to add to its investments in the New York market this year. In July, the company said its joint venture with investment vehicles managed by affiliates of Colony Capital LLC closed on a $125-million preferred equity investment in connection with the acquisition of 1 Court Square by a partnership led by David Werner. The deal was made through the Paramount Group Real Estate Special Situations Fund.
“This investment affords Paramount Group the opportunity to participate in the continued revitalization of Long Island City, an emerging NYC office submarket.” Mr. Behler said in a statement announcing the deal.
1 Court Square, designed by Skidmore, Owings and Merrill, has been occupied by Citibank since it was built. It is currently net leased by the unit of Citigroup Inc. until 2020. The 50-story tower has open views in all directions and features a direct subway connection to Midtown Manhattan at 53rd Street and Lexington Avenue, adjacent to Citigroup Center.
“That’s a transaction where we loved our price-per-square-foot exposure,” said Mr. Lauer, who represented Paramount. “It’s a great asset with a great tenant, we simply liked the metrics.” ✯
PRESIDENT & CEO,
COHEN BROTHERS REALTY
Most prized asset: My family
Most prized possession: My health
Asset you wish you owned: I’m very content with what I have.
Real estate prediction for 2013: Challenging times demand creative solutions.
If given the choice, what tax would you abolish? Commercial occupancy tax
Is LEED certification all it’s cracked up to be? Explain. Represents progress and more respect for environment
What real estate policy should new York’s next mayor make a priority? Reduce NYC real estate taxes, the highest in the nation and a major burden for commercial tenants.
Who will be the next president of the United States? Wish I knew.
What book, piece of music or work of art has most influenced your career? Been influenced by many, not just one.
How much money are you willing to allocate per square foot for tenant improvements? Depends on various factors.
Best decision made in your career: Stick with what I’m comfortable with.
Personal role model: My father
Favorite vacation spot: Caribbean
Asset you wish you owned: Central Park
Real estate prediction for 2013: 1 WTC will be two-thirds leased.
If given the choice, what tax would you abolish? CRT
What real estate policy should New York’s next mayor make a priority? Fixing NYC’s property tax system
Who will be the next president of the United States? My candidate is Stephen Colbert.
What book, piece of music or work of art has most influenced your career?The Teachings of Don Juan
How much money are you willing to allocate per square foot for tenant improvements? A lot
Best decision made in your career: Marrying Susanne
Worst mistake made in your career: Looking at Soho in the late 1960s and deciding that no one would ever want to live there
Personal role model: My father
Favorite vacation spot: Home
Most prized asset: The Archive Building, 666 Greenwich Street, in the West Village
Most prized possession: My books are very valuable to me. I mostly have paperbacks that have been read roughly. I don’t like keeping my books pristine; I think they should be really taken out for a spin.
Asset you wish you owned: More office buildings in Manhattan. We are looking heavily for value-add opportunities.
Real estate prediction for 2013: Steady commercial rental rates, continued growth in residential rental rates
If given the choice, what tax would you abolish? This is a tough one. One thing I would like to abolish is the United States subsidy on gasoline costs, which discourages public transportation and encourages a reliance on oil. Not a direct tax, but citizens are ultimately taxed to pay for this subsidy.
Is LEED certification all it’s cracked up to be? Explain. In New York we find that LEED certification is not very important to tenants, except for new developments. D.C. tenants often require LEED certification because of their interactions with the U.S. government.
What real estate policy should New York’s next mayor make a priority? Completing the upzoning of Midtown East. The upzoning will encourage the development of new product, which is important for New York as a global city.
Who will be the next president of the United States? Barack Obama
What book, piece of music or work of art has most influenced your career? The Sopranos may not have directly affected my career, but I think it’s a good metaphor for running a medium-sized American business. I also think it’s the best television show of all time.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? Other office markets are trying to emulate the success of Midtown South. We’re seeing more open office plans, exposed ceilings and generally edgy design to attract these tenants.
How much money are you willing to allocate per square foot for tenant improvements? It depends on the credit of the particular tenants, but we generally provide TI in the range of $50 to 70 per RSF.
Best decision made in your career: Buying land in Long Island City
Worst mistake made in your career: I remember I was doing a lease once with someone who seemed extremely trustworthy. But I learned that all that glitters is not gold.
Personal role model: I admire Mike Bloomberg greatly. I think he is very bold and willing to fight for what he believes in.
Favorite vacation spot: Paris. It’s the closest thing to time travel I’ve ever experienced.
CHAIRMAN AND CO-FOUNDER,
Most prized asset: Carnegie Hall Tower (152 West 57th St), a Cesar Pelli-designed building adjacent to Carnegie Hall, is the crown jewel of our commercial portfolio and an architectural icon in its own right.
Most prized possession: Nude with Green Turban—an Egon Schiele painting
Asset you wish you owned: A lot of things … but Chelsea Mercantile (252 Seventh Avenue) is one building in particular that I wish we had not let go. We converted the former government supply building into a residential building over 10 years ago and held on to only the retail space. The building is trading at great numbers now, and we wish we had kept it.
Real estate prediction for 2013: Both commercial and residential rents will be up 10 percent in our portfolio.
If given the choice, what tax would you abolish? The very onerous commercial occupancy tax
Is LEED certification all it’s cracked up to be? Explain. LEED certification is a tricky one because the criteria is rigid and much of it is neither efficient or cost-effective. We certainly prioritize sustainable development, and efficiency in construction and design, and as a result, much of our portfolio does indeed meet LEED certification; it’s just not a label we proactively seek to obtain.
What real estate policy should New York’s next mayor make a priority? City pension fund and union costs for the city are exorbitantly high, and the way they fulfill those costs are to simply increase the real estate taxes—now, to insupportable levels. This may be a quick fix for the city, but it is not a long-term solution. The mayor is only one player; he will need to work effectively with the governor and state Legislature to coordinate compromise with the unions.
Who will be the next president of the United States? It will be close, but President Obama will be re-elected.
What book, piece of music or work of art has most influenced your career? Max Beckmann’s Self-Portrait w/ Sailor Hat
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? We are seeing that Midtown South is a very hot area for New York’s Silicon Alley; one of our Midtown South properties, 387 Park Avenue, is in the process of being upgraded in preparation for all of the interest from tech startups. Soon, however, these companies will certainly expand and migrate outward from Midtown South, going as far north as 42nd Street and as far south as 14th Street. This is a great hope for New York in terms of jobs recovery.
How much money are you willing to allocate per square foot for tenant improvements?$40 per square feet.
Best decision made in your career: The best decision we made was to create an office portfolio of over 2 million square feet in Washington, D.C. We developed eight separate buildings after 9/11 when we decided it was time to diversify.
Worst mistake made in your career: We used to own a lot of property in the Meatpacking District that we sold off as far back as 25 years ago, including three blocks of prime retail space that now houses very high-end and profitable retail tenants.
Personal role model: My father, Nourallah Elghanayan, who was both a global and New York City entrepreneur
Favorite vacation spot: The French Riviera
PRESIDENT & CEO,
DURST FETNER RESIDENTIAL
Most prized possession: I have a lifetime supply of Purell. I don’t know what I would do without it.
Asset you wish you owned: Something big in Brooklyn
Real estate prediction for 2013: Residential rents will continue to climb as demand outpaces supply.
If given the choice, what tax would you abolish? Something has to be done about the taxes that Class 2 rentals pay. It’s hurting the development of rental buildings and the long-term sustainability of affordable housing.
What real estate policy should New York’s next mayor make a priority? Fix the broken property tax system.
Who will be the next president of the United States? Barack Obama
What book, piece of music or work of art has most influenced your career? The Syracuse University fight song
How much money are you willing to allocate per square foot for tenant improvements? I’m a residential guy, so I’m happy to paint the place.
Best decision made in your career: Bringing Damon Pazzaglini in as my partner
Worst mistake made in your career: Blowing off a pitch from Thomas Keller to invest in The French Laundry
Personal role model: My father’s values, Larry Silverstein’s patience and Douglas Durst’s intuition
Favorite vacation spot: Key Largo
SENIOR PARTNER, FISHER BROTHERS
With its 5.2 million square feet of office space almost fully leased, Fisher Brothers was focused earlier this year on getting greater use from the space outside one of its buildings, while senior partner Arnold Fisher continued the family’s tradition of philanthropy.
The company has plans to replace the fountains in front of its 1.9-million-square-foot building at 1345 Avenue of the Americas with glass entryways to an underground retail space—a vision that echoes the cube retail addition to the GM Building, which houses an Apple Store. One rendering of Fisher’s plan shows two glass pyramids that would enclose elevators to bring shoppers to an underground retail space, while another shows glass spheres outside the 50-story tower between 54th and 55th streets, The New York Observer reported in June.
The retail space will measure 15,545 square feet and will be marketed by Cushman & Wakefield. If the plan succeeds, zoning experts predicted more office landlords will follow suit to take better advantage of the wide plazas along the Avenue of the Americas.
The 97-year-old company’s office space is concentrated in just four buildings, three of them larger than 1 million square feet. The company website in August listed just two office spaces available, both in 606 Third Avenue, for a total of less than 12,000 square feet, and a retail space at Park Avenue Plaza. The company is also developing a mixed-use complex in Washington, D.C., and owns a development site in excess of 75 acres just off the Las Vegas strip.
Arnold Fisher was raising money for a $100 million project by the Intrepid Fallen Heroes Fund, which grew out of the philanthropic efforts of his uncle, the late Zachary Fisher. In partnership with the Pentagon, the fund plans to build 7 to 10 clinics on military bases geared toward treating and researching the types of injuries that have proliferated among American soldiers harmed by roadside bombs in Iraq and Afghanistan.
“The signature wounds of these wars are traumatic brain injury and post-traumatic stress,” Mr. Fisher told The New York Times. “And to this day, we are not treating these people well.”
Army officials told The Associated Press that the foundation has provided a way to sidestep government bureaucracy on construction projects. In 2007, the fund opened a $65 million rehabilitation center for severely burned troops and amputees at Brooke Army Medical Center in Texas, known as the Center for the Intrepid. Its next major project, the National Intrepid Center of Excellence in Bethesda, opened in 2010.
Mr. Fisher said the success of the program would hinge in part on the government financing grants to hire specialized personnel—something that may prove problematic as troops leave Afghanistan and the armed services cut their budgets. He estimated those grants would cost $25 million to $50 million over the next three years.
“I don’t want anything else from the government” except that it take care of its responsibility, he told the Times. “These guys go out and get hurt and all you give them is pills? Not in my America.”
Zachary Fisher founded the Intrepid Museum Foundation, which saved the World War II carrier and brought it to New York. The family then created the fallen heroes fund, which initially paid grants to survivors of troops who died on duty. ✯
HANDLER REAL ESTATE ORGANIZATION
Most prized asset: My family
Most prized possession: Watch collection
Asset you wish you owned: Chrysler Building
Real estate prediction for 2013: NYC, with few exceptions, will be strong
If given the choice, what tax would you abolish? Inheritance
Is LEED certification all it’s cracked up to be? Explain. Not certain
What real estate policy should New York’s next mayor make a priority? Rezoning of certain areas so that they are more consistent with “NYC 2013” than at the time the specific zoning requirements were established
Who will be the next president of the United States? Obama
What book, piece of music or work of art has most influenced your career? “Conquistador”, Procol harem
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? Yes, it has added a new vital sector to the market, which makes us less reliant on any one “use” to inhabit space.
How much money are you willing to allocate per square foot for tenant improvements? Varies, depending on property, use, term and tenant credit
Best decision made in your career: To hire executives who were smarter than me
Worst mistake made in your career: Don’t regret any decision; just look forward
Personal role model: My dad
Favorite vacation spot: Ana Capri, Italy
GENERAL COUNSEL & COO,
HFZ CAPITAL GROUP
Most prized asset: My incredibly supportive family, including my 2-year-old daughter, Jayda Jynx
Most prized possession: My reputation
Asset you wish you owned: The Barclays Center. It gives me great pride to see the impending opening of the Barclays Center, as I was involved and instrumental in all pre-development and legal activities for the project. As an avid sports fan and former general counsel to the Nets, it is so exciting to see professional sports come back to that area.
Real estate prediction for 2013: The residential rental and condo markets will continue to boom in New York, the office market will grow as lease turnovers continue, and the economy will thrive post-Obama.
If given the choice, what tax would you abolish? The estate tax. I have already paid my income taxes. Why should my heirs have to pay on my savings again?
Is LEED certification all it’s cracked up to be? Explain. Like any system of accreditation or certification, the LEED system is not perfect. But I can tell you this … 15 years ago, a green building was a pre-war brick building covered with ivy.
What real estate policy should New York’s next mayor make a priority? Thanks to the Bloomberg administration, the real estate industry has enjoyed an environment in which it has been able to thrive, expand and meet the needs of the city’s business and residential communities as well as support an explosion in tourism. An important initiative would be to focus on infrastructure, especially ways to privatize it and turn it over to the development community.
Who will be the next president of the United States? Whoever it is, I hope it is someone with leadship skills who can bring government together to be able to make rational decisions, create jobs, bring back the dreams that Americans have, move our education system to its expected place of prominence, reinstate the confidence that existed in America being the number-one country in the world … and repeal Obamacare.
What book, piece of music or work of art has most influenced your career? Who Moved My Cheese? An Amazing Way to Deal with Change in Your Work and in Your Life, by Spencer Johnson. The book contains certain motivational concepts that really resonated with me, including “What Would You Do If You Weren’t Afraid?” I hung that page on the wall of my office and it inspired me to push past my fears and take chances I might not otherwise have taken.
Best decision made in your career: To transition from being outside legal counsel to going to work on the development side and negotiating the deals as a business person.
Worst mistake made in your career: Staying in a job for too long for which I had no passion. If you’re not happy, find something you love to do and go do it!
Personal role model: Mary Anne Tighe, who is incredibly smart, talented and polished. She has risen to the top in a male-dominated industry—all with elegance and grace. Also, my father, Gerry, who was a self-made man, and taught me that hard work, perserverance and integrity are the keys to success in business.
Favorite vacation spot: The Colorado Rockies—skiing has always been a favorite sport of mine and the Colorado Rockies have some of the most majestic views and amazing skiing conditions in the world. Aspen and Vail are my happy places!
GLOBAL HEAD OF REAL ESTATE, BLACKSTONE GROUP
Blackstone Group LP, which owns approximately 8 million square feet of Manhattan office and hotel space, stands in contrast to the family-owned companies and REITs that dominate the New York commercial property market.
Blackstone’s real estate unit, led by Jonathan D. Gray, is one of five lines of business for the private equity firm, which had a total of $166.2 billion of assets under management at the end of last year. The firm acquired most of its real estate in transactions before the financial crisis, including the $39 billion leveraged buyout of Equity Office Properties. Rather than nurture portfolios and pass them from generation to generation, Blackstone may need to sell holdings to return money to investors in funds that typically liquidate after 7 to 10 years, The Wall Street Journal reported in July.
“When we exit the real estate, my expectation is that we will really crush it and we will really do extremely well,” Stephen Schwarzman, Blackstone’s chairman and chief executive, told analysts in February.
The Journal, citing real-estate executives who have discussed the matter with the firm, said Blackstone was considering selling its portfolio, worth about $22 billion, in regional increments to take advantage of recovering values and “strong demand from pension funds and other institutional investors for the type of well-located, mostly leased office buildings that Blackstone owns.”
That doesn’t mean a sale of New York holdings is imminent.
“We are not actively marketing our office portfolio right now,” Peter Rose, Blackstone’s senior managing director of public affairs, said in an email in August. “We continue to monitor the market and at the right time, when we think we can achieve an optimal return for our investors, we will consider dispositions. But we are not looking to sell immediately.”
The New York-based firm has signaled a continued commitment to real estate and to the city.
The firm has raised more than $23 billion for its last two real estate funds, and its latest fund was expected to close this year with a record $13 billion, said the Journal.
Blackstone this summer was set to purchase CalWest, an $2.1 billion portfolio comprised of 95 industrial properties, after acquiring the mezzanine debt on the property, aiming to increase the occupancy rate to 95 percent from 84 percent.
Blackstone’s Manhattan properties include office buildings at 1095 Avenue of the Americas and 1411 Broadway that have more than 1.1 million square feet of space each, as well as the Waldorf Astoria and New York Hilton hotels. The firm has invested in completing renovations to boost occupancies at 1095 Avenue of the Americas and a smaller building at 1140 Avenue of the Americas.
The company also was active as a tenant in New York this year, signing up to lease the 48th floor at 601 Lexington Avenue from Citadel Group for the remaining five years on Citadel’s lease.
The location is convenient for Blackstone, which has its world headquarters just a block away at 345 Park Avenue. Sources said the company plans to the use the floor for a division involved in technology within the company.
Since joining Blackstone in 1992, Mr. Gray has led the privatization of public real estate companies valued at more than $100 billion, including Extended Stay America, Carr America, Equity Office Properties and Hilton Hotels. He’s now among six executives being groomed to succeed the 65-year-old Mr. Schwartzman, who founded Blackstone in 1986, Reuters reported August 27. ✯
Most prized asset: Flatiron Building
Most prized possession: My family
Asset you wish you owned: Any of the few buildings we have sold
Real estate prediction for 2013: Rents will be flat and cap rates will rise.
If given the choice, what tax would you abolish? Abolish double tax on corporations that city assesses.
Is LEED certification all it’s cracked up to be? Explain: Yes. Reducing energy costs and making the planet better is our obligation.
What real estate policy should New York’s next mayor make a priority? The next mayor should help create a better method of assessing property to make it more uniform and equitable.
Who will be the next president of the United States? Obama
What book, piece of music or work of art has most influenced your career? Profiles in Courage, by JFK
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? Lowered rents in Midtown
How much money are you willing to allocate per square foot for tenant improvements? TI allowance depends on location and financial strength of tenant—in Soho $10, in Midtown South $45 and in Plaza district $65.
Best decision made in career: Bringing Barry Gosin into Newmark and ending up partners with him
Worst mistake made in your career: Opening a racino five miles from an Indian casino that pays no taxes
Personal role model: Jack Weiler
Favorite vacation spot: St. John
Most prized asset: We’re fortunate to have accumulated some great real estate in Manhattan. Buying the note at 960 Sixth Avenue (corner Herald Square) in 2009, and then foreclosing, at 33 percent of the 2007 sale price, stands out … so does purchasing the development site at 133 Greenwich Street (corner World Trade Center) just as that neighborhood is on the verge of its rebirth.
But the most prized might be 240 West 35th Street (steps from Penn Station). We purchased it two weeks before the collapse of Lehman Brothers. Together with our partners, Meritage Properties, we were successful in rebranding and re-tenanting the building during the depths of the recession, through a significant capital improvement campaign, and working with the best brokers and tenants in the city. The building is nearly 100 percent occupied at rents substantially higher than at purchase, and is a testament to the hard work and creativity of our staff and partners.
Real estate prediction for 2013: Continued improvement in real estate fundamentals as tenants, buyers, lenders and visitors to Manhattan all feel better—as our country and others around the globe get their affairs in order
Is LEED certification all it’s cracked up to be? Explain. Absolutely. It’s not as expensive up front as some think; it actually generates significant annual savings and makes a building more appealing to many tenants.
What real estate policy should New York’s next mayor make a priority? Landmarking. I think it has gotten a bit out of control.
Worst mistake made in your career: Spending time, energy and money on real estate deals outside of NY. NY is the best market in world and it’s where me and my family live and what we know. Why go anywhere else?
Favorite vacation spot: Home. Enjoy life … and every day is a vacation.
HIMMEL + MERINGOFF PROPERTIES
Most prized asset: My enduring partnership with Stephen Meringoff
Most prized possession: My sense of humor
Asset you wish you owned: I have always wanted to own the Empire State Building.
Real estate prediction for 2013: There will be a lot of new properties for sale as mortgages from 2006-2008 come due and cannot be refinanced.
If given the choice, what tax would you abolish? The new Medicare tax as it applies to investment income, which will especially hurt the elderly and people on fixed income
Is LEED certification all it’s cracked up to be? Explain. Yes. It has stimulated the construction of some of the most technologically smart buildings in N.Y., for example the new Goldman Sachs headquarters and Bank of America Tower.
What real estate policy should New York’s next mayor make a priority? We need to deal with both short-term issues like underfunded pension liabilities and the long-term fiscal health of New York City.
Who will be the next president of the United States? We desperately need significant change in the Federal government’s economic and fiscal policies. Hopefully, Romney/Ryan.
What book, piece of music or work of art has most influenced your career? The poem “Invictus” by William Ernest Henley
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? It has shifted the nexus of office occupancy southward, as new areas like Lafayette Street have become highly desirable office locations for tenants seeking creative space in a trendy neighborhood.
How much money are you willing to allocate per square foot for tenant improvements? We prefer to let the tenant share in the cost of improvements, but will build for a credit tenant.
Best decision made in your career: Choosing to form a partnership with Stephen Meringoff in 1985
Worst mistake made in your career: Not being more acquisitive in the early 1990s
Personal role model: Harry Helmsley, for his sense of humor, sophisticated financial structuring and his love of the real estate game
Favorite vacation spot: Skiing in Aspen, Colo.
CEO, SL GREEN
SL Green Realty CEO Marc Holliday and President Andrew Matthias displayed the clout that comes with being New York’s biggest commercial landlord when they signed Viacom Inc. to renew and expand its lease at 1515 Broadway, rather than follow its Times Square neighbor Condé Nast downtown.
Viacom agreed in April to take over the entire tower, increasing its space to 1.6 million square feet from 1.4 million. It was the largest non-sale leaseback office lease in Manhattan history, the company said.
“This lease will allow Viacom to increase its corporate visibility to millions of New York City visitors at the ‘Crossroads of the World’ for years to come,” Mr. Holliday said in a statement announcing the deal. “The transaction reaffirms the desirability for trophy assets located in the prime areas of Midtown Manhattan.”
The agreement with Viacom, the owner of brands ranging from MTV Network to Paramount Pictures and Shockwave online games, was one of 57 Manhattan leases for a total of 2.3 million square feet by SL Green during the second quarter. It followed a $775 million first mortgage refinancing of 1515 Broadway by Bank of China, which replaced a previous $447 million loan.
The loan “demonstrates the strength of the relationship we have developed with Bank of China,” Mr. Mathias said. “We appreciate the bank’s confidence in us and our portfolio, and we look forward to continuing to expand this key relationship.”
The firm also closed on a 10-year, $230 million mortgage at 100 Church Street, acquired the 215,000-square-foot, mixed-use office and retail building at 304 Park Avenue South for $135 million or $628 per square foot, and renewed Random House’s 361,044 square-foot lease at 1745 Broadway.
In addition, it sold 379 West Broadway for $48.5 million, resulting in a gain of $6.5 million, and completed the previously announced sale of 1 Court Square in Long Island City for $481.1 million, including the assumption by the purchaser of $315 million of existing debt.
Now the REIT, which was founded in 1970, is poised for its first major foray into developing an office tower, a planned 1.2-million-square-foot building across the street from Grand Central Terminal. SL Green tapped Hines, the Houston-based developer, as a consultant on the project, The Wall Street Journal reported in June.
After purchasing 51 East 42nd Street, SL Green owns all of the buildings on East 42nd and East 43rd Streets bounded by Madison and Vanderbilt Avenues. The building envisioned for the one-acre site may resemble “prestigious properties” like the Burj in Dubai, Mori Tower in Tokyo, the ICC Tower in Hong Kong, the World Financial Center in Shanghai or the Petronas Tower, Edward Piccinich, a vice president of property management and construction for SL Green, said during an investor conference in December.
“Developing East Midtown will not be for the harried or the faint of heart,” Architects Newspaper reported, after the Department of City Planning went to Community Boards 5 and 6 to open the discussion on East Midtown, the yet-to-be-defined business district surrounding Grand Central. “The applicable zoning codes in the area are a paralyzing mess of contradictory allowances.”
Based on its recent run of deals, SL Green may just be able to see the project through. ✯
NEW YORK & NEW JERSEY MARKET EXECUTIVE,
BANK OF AMERICA MERRILL LYNCH
Most prized asset: My health
Most prized possession: Sheila, McCayla, John and Haley—my wife and kids!
Asset you wish you owned: Beach house
Real estate prediction for 2013: I try to avoid making predictions.
If given the choice, what tax would you abolish? Capital gains
Is LEED certification all it’s cracked up to be? Explain. Yes, if nothing else it encourage the right behaviors; in addition, I work in the Bank of America Tower, which is a Platinum building, and it is a fantastic facility in part due to many of the green characteristics.
What real estate policy should New York’s next mayor make a priority? Property tax assessments is a major issue for owners and future development.
Who will be the next president of the United States? I believe President Obama will be re-elected.
What book, piece of music or work of art has most influenced your career? None, I am not that cultured.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? Too new for me to judge, but the industry diversification it brings is a strong positive for N.Y.’s future.
How much money are you willing to allocate per square foot for tenant improvements? N/A
Best decision made in your career: Joining Fleet Bank in 2000, which became/was acquired by Bank of America in 2004
Worst mistake made in your career: I stayed too long at the Greater N.Y. Savings Bank earlier in my career.
Personal role model: My parents
Favorite vacation spot: The beach
PRESIDENT & CEO,
Most prized asset: Priorities
Most prized possession: My first chess set-—a hand-carved collection that my father bought me in Poland at a flea market in 1989
Asset you wish you owned: Time machine
Real estate prediction for 2013: Slow recovery. As long as interest rates stay low, we won’t see much volatility. Inflation, jobs and interest rates will be the determining factors. It is important to continue focusing on buying better assets in better markets as over time, the good assets will thrive. People continue to move to cities. Soho office market will continue to see unprecedented rents. Tech companies will drive growth in New York City. Nationally, we will see apartment rent growth as little new supply has been built and demand will continue to grow.
If given the choice, what tax would you abolish? Repealing FIRPTA would be a big win for the real estate industry. Personally, my problem is less with taxes and more with my taxes being spent inefficiently by our city, state and federal government.
Is LEED certification all it’s cracked up to be? Explain. No. there are too many requirements that are costly but don’t do much by way of energy efficiency. At the end of the day, most newer buildings and renovations are more energy efficient because it keeps operating costs down, which allows a landlord to be more competitive on rents. Landlords like the LEED badge, and do impractical things sometimes to get it, but it is not crucial. At the end of the day, tenants care more about rental cost than if they are in a LEED building.
What real estate policy should New York’s next mayor make a priority? Focus on keeping real estate taxes in check. Focus on making it easier to develop in NYC through a fresh review of some archaic procedures, agencies and zoning rules.
Who will be the next president of the United States? Mitt Romney
What book, piece of music or work of art has most influenced your career? John Stuart Mill’s On Liberty where he discusses the merit of a marketplace of ideas—-— basically saying that you should encourage out-of-the-box thinking and discussion as it will lead you to a better place on way or another. I always like to have people around me challenging my ideas, and its always through good conversation that we come to the right outcome.
How has Midtown South’s roster of tech start-ups and creative tenants influenced office buildings in other Manhattan markets? It has made them appreciate that amenities like bike storage and outdoor space are important to creative tenants. All companies want to act like startups today, and they are adopting more open office layouts, tighter configurations and exposed ceilings.
How much money are you willing to allocate per square foot for tenant improvements? Whatever it takes to make the right deal.
Best decision made in your career: Building in the flexibility in my 666 debt stack to release the retail at a previously agreed upon price
Worst mistake made in your career: So far, I have avoided making the same mistake twice, so all of my mistakes have been great learning experiences.
Personal role model: My grandfather Joseph Kushner
Favorite vacation spot: Torres del Paine National Park, Patagonia
Most prized asset: Soho Mews: though it’s completely sold out (save for one unit) and not much of an asset remaining, except for the retail and parking lot, which we retained and are cash-flowing, it is a condo project that I am extremely proud of and happy to have played a major role in creating.
Most prized possession: My family
Asset you wish you owned: Too many great assets to list, but I am happy and thankful with what I have.
Real estate prediction for 2013: Due to the dearth of availabilty of new condo units, any new condo developments to come on line will be absorbed quickly at strong prices. Thriving retail pockets in the city such as Soho, Fifth Avenue, Madison Avenue and Downtown Brooklyn will continue to strengthen with rising rents as retail tenants selectively expand in those areas. With the advent of the Barclays Arena coming on line, coupled with the continued resurgence of the Downtown Brooklyn retail, residential and office markets, will make the country’s fourth-largest city in Brooklyn the place to be. With interest rates at sub-4 percent, the dearth of availability and money chasing deals, prices for prime buildings will continue to rise, which might lead one to ask, are we approaching another bubble?
If given the choice, what tax would you abolish? The estate tax, without question
What real estate policy should New York’s next mayor make a priority? 1) To make the Dept. of Buildings much more user-friendly. To empower smart people at the DOB to be fair and responsive problem solvers to reconsideration requests. The DOB is the bureaucratic Achilles’ heel to further development of this city. 2) To rezone Soho, which is still considered a manufacturing district. It is ludicrous to go through all types of zoning gymnastics (such as variances) to get a legal retail use approved for a building on Broadway.
Who will be the next president of the United States? Realistically, I think it will be Obama.
What book, piece of music or work of art has most influenced your career? How To Win Friends and Influence People by Dale Carnegie. It gives a sensible, effective approach to deal with people and sell yourself, in almost any situation. I highly recommend it to any young person coming into the business world.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? We are seeing tech and creative companies signing the overwhelming majority of our leases in the Soho office submarket.
How much money are you willing to allocate per square foot for tenant improvements? As mostly a retail and residential developer, we rarely give TIs.
Best decision made in your career: We assembled a 750,000-square-foot development site and sold it off at the height of the market, in separate parcels with multiple closings, and successfully reinvested most of the sales in multiple 1031 acquisitions.
Worst mistake made in career: Investing in several real estate and equity funds that I did not control.
Personal role model: My late father, Jack Laboz. He was smart, personable, humble and compassionate. He was a great and honorable deal-maker and had a keen instinct on reading any situation. Most importantly, he gave my brothers and I the confidence to take our business to a higher level by respecting our decisions (after vigorous debate) and letting us run with our ideas.
Favorite vacation spot: St. Bart’s
PRESIDENT & CHIEF INVESTMENT OFFICER,
L&L HOLDING COMPANY
Most prized asset: 200 Fifth Avenue
Most prized possession: My dog, Bailey
Asset you wish you owned: Lever House, 399 Park Avenue
Real estate prediction for 2013: Slow, steady growth
If given the choice, what tax would you abolish? Estate tax
Is LEED certification all it’s cracked up to be? Explain. Yes
What real estate policy should New York’s next mayor make a priority? Freeze real estate taxes.
Who will be the next president of the United States? Romney
What book, piece of music or work of art has most influenced your career? The work of the Grateful Dead
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? It highlighted the importance of a tenant experience
How much money are you willing to allocate per square foot for tenant improvements? Market- and building-specific—could be up to $75 per square foot
Best decision made in your career: Partnering with David W. Levinson
Personal role model: My father
Favorite vacation spot: Italy
CHAIRMAN & CEO,
L&L HOLDING COMPANY
Most prized asset: 200 Fifth Avenue
Most prized possession: N.Y. Yankees World Series trophy and ring
Real estate prediction for 2013: Gradual improvement
If given the choice, what tax would you abolish? Real estate taxes
Is LEED certification all it’s cracked up to be? Explain. Yes. Every reasonable effort should be made to design energy-efficient and environmentally friendly lifestyles to assure the best future for our children.
What real estate policy should New York’s next mayor make a priority? There are many “low-hanging fruit” policies that could be changed to encourage investment, some of which include reduced real estate taxes and expediting all city agency processes.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? It’s clarified the need for larger open spaces within the office that allow for collaboration and creating the opportunity for the intersection of ideas—less space for individual and more space for common usage.
Best decision made in your career: Partnering with Robert Lapidus
Worst mistake made in your career: Not starting L&L sooner
Favorite vacation spot: A yacht in the Caribbean
GROUP OF AMERICA
Most prized asset: Galleria Colonna, Rome, Italy, $250 million
Most prized possession: My son, Giulio Massimo
Asset you wish you owned: Grand Central
Real estate prediction for 2013: As usual, there are different schools of thought, and the upcoming year is no exception. We’ve heard so many times in the past years that the bottom has yet to arrive. Others have suggested there will be a big housing comeback for 2013. I, however, tend to fall in the middle, and my outlook is for moderate growth, which in my opinion makes me an optimist.
Is LEED certification all it’s cracked up to be? Explain. As a developer, my goal is to build side by side with sustainability. LEED certification should be the minimum that any developer should strive for in today’s world. Quite frankly, I want to go above and beyond that.
Who will be the next president of the United States? Obama
What book, piece of music or work of art has most influenced your career? Piece of music: Yumegi’s Theme by Shigeru Umebayashi
Best decision made in your career: Fall in love with the brick.
Worst mistake made in your career: Fall in love with the brick!
Personal role model: Julius Caesar and Mahatma Gandhi
Favorite vacation spot: Where it’s private
Most prized asset: Reputation amongst our investors and tenants for whom we work, and the lenders, brokers and service providers with whom we work. We have earned this over close to 80 years, and I never lose track of it. My wife’s grandfather fled Poland in October 1939, and then succeeded in getting his wife and three children out via Berlin, Paris, Spain, Central America. He used to say, the only thing people cannot take away from you is your reputation and your education.
Most prized possession: While they are not possessions, I prize most my relationship with my wife and our relationship with our children.
Real estate prediction for 2013: Interest rates stay low, our improved prewar office trophies, suburban office properties and well-located retail continue to outperform the market, which remains sideways for the finance and finance-dependent industries, but looks positive for well-capitalized companies which continue to innovate. Tenants look more and more for value and reliability, and landlords are viewed more and more for their ability to offer service and savings through energy efficiency.
Is LEED certification all it’s cracked up to be? Explain. LEED was a very good first mover for focusing attention on sustainability in the environment. In the end, the “scavenger hunt” for LEED points does not give landlords or tenants an indication of what return in the form of savings they will get for what investment they make. LEED in its present format will become less and less relevant as tenants and landlords focus more on investment and return on energy savings.
What real estate policy should New York’s next mayor make a priority? We are investing billions in infrastructure in the Grand Central district, yet we are encouraging development and tenant movement with zoning and incentives in locations which are not convenient to Grand Central Terminal. This policy makes no sense.
Who will be the next president of the United States? While I am not a Republican, I sure hope our next president has some business experience. We can afford to fight for social issues in a country with a functioning economy and a decent balance sheet. I have no interest in living in Europe, and that’s where we’re heading economically at present.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? As winning companies from this area mature and stabilize, they look more for well-located and configured spaces with good access to mass transportation. We have seen a lot of companies which have transitioned from “burn-rate” to “bottom line” look to move from Midtown South to our buildings between Herald and Times Square and to the Empire State Building. In the end, stable companies focus on working with upgraded, efficient spaces in buildings which can be used to attract and retain employees. They like buildings with personality, but after the startup phase, workers jammed on top of each other and working on picnic benches wears off … people don’t stay in their 20’s forever, and companies which stay in their 20s don’t stick around for long.
Best decision made in your career: Going to work out of college for someone other than my family. Getting my head kicked in by the real world taught me, toughened me up, and made me appreciate the opportunity of working with my father in the business my grandfather created.
Worst mistake made in your career: Not buying more in the mid-’90s, but we did a bunch of deals and made our investors and ourselves a lot of money.
Personal role model: My grandfather Lawrence A. Wien, and my father Peter L. Malkin. From the two of them I learned the value of hard work, innovation, responsibility, possibility and patience … o.k., I may not have learned the patience part as well as the first three.
Favorite vacation spot: Vacation? Who takes vacation? Ask anyone with whom I do business … or fight. Always on. 24/7, from anywhere. In my life, I don’t vacate!
HIMMEL + MERINGOFF PROPERTIES LLC
Most prized asset: My enduring partnership with Leslie Himmel
Most prized possession: My four daughters
Asset you wish you owned: Any of the 50 largest office buildings in Manhattan—with no debt
Real estate prediction for 2013: Flat in leasing and an increase in the number of distressed sales of Manhattan office buildings
If given the choice, what tax would you abolish? The alternative minimum tax
Is LEED certification all it’s cracked up to be? Explain. Yes, because it increases environmental awareness and helps stimulate new ways of thinking about the workplace.
What real estate policy should New York’s next mayor make a priority? Continue to attract new industries to come to NYC, increase the city’s broadband infrastructure, and put the city’s fiscal house in order.
Who will be the next president of the United States? It is the Republicans race to lose and so far they are doing so. Paul Ryan may change things.
What book, piece of music or work of art has most influenced your career? The books of Ayn Rand
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? Owners of office buildings in Midtown are rethinking the standard workletter in light of the lower cost of improvements for “creative” space.
How much money are you willing to allocate per square foot for tenant improvements? Totally depends on the rent and the creditworthiness of the tenant
Best decision made in your career: Choosing the best business partner I could have imagined
Worst mistake made in your career: Allowing ego to overcome logic and caution in an acquisition many years ago
Personal role model: Paul Newman, a talented actor and groundbreaking philanthropist who lived a life of both personal integrity and surprising humility, given his fame
Favorite vacation spot: The Mediterranean
Most prized asset: Chelsea Market
Most prized possession: Scout, my Jack Russell terrier
Asset you wish you owned: Rockefeller Center
Real estate prediction for 2013: Increased investment in the boroughs outside of Manhattan
If given the choice, what tax would you abolish? I wouldn’t abolish a tax; I would simplify the tax code.
Is LEED certification all it’s cracked up to be? Explain. Yes, if it’s used as one point of reference for sustainable initiatives in real estate—but not if it’s the only filter applied
What real estate policy should New York’s next mayor make a priority? Sustainability, as well as improvements in mass transit and infrastructure
Who will be the next president of the United States? It’s anyone’s guess.
What book, piece of music or work of art has most influenced your career? A Pattern Language by Sara Ishikawa, Christopher Alexander and Murray Silverstein; Speedboat’s Wake by Milton Avery (a painting)
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? Technology and media tenants have made buildings in all the boroughs relevant in ways they haven’t been before. Building owners need to be prepared to examine the ways existing buildings can offer the kind of work environment that is conducive to these industries.
How much money are you willing to allocate per square foot for tenant improvements? There’s no one-size-fits-all answer: It’s very specifically related to the tenant’s business, their needs and their credit. In general, Jamestown is committed to partnering with our tenants to make the best work environment.
Best decision made in your career: Choosing quality over quantity
Worst mistake made in your career: Not buying more properties surrounding my projects
Personal role model: Olin Stephens
Favorite vacation spot: Maine islands
TRINITY REAL ESTATE
Most prized asset: My family
Most prized possession: I don’t place a high value on possessions. The friends and family in my life are the things I treasure most.
Asset you wish you owned: 111 Eighth Avenue
Real estate prediction for 2013: I think we will see moderate growth, much like 2012. I believe we will continue to see strength in Midtown South and growth in creative-sector jobs. I think more expensive properties in areas like Midtown will continue to face challenges. Also, with 2012 being an election year, I believe there will be a lot of uncertainty in the market. Many big law firms and financial firms will wait to make any major moves or decisions until after the election.
If given the choice, what tax would you abolish? I wouldn’t abolish any single tax. I would abolish the tax code. I would replace it with a single line of text that says that every person and every business should pay a flat tax rate regardless of income or earnings.
Is LEED certification all it’s cracked up to be? Explain. I think that the LEED-certification process can create obstacles. It can complicate tenant and developer decision- making. There are simple, cost-effective and genuinely impactful steps that every tenant and every developer can take that contribute to sustainability but don’t necessarily count toward LEED certification. Every small step helps, so we should encourage realistic changes and sensible sustainability policies that are achievable for any business.
What real estate policy should New York’s next mayor make a priority? It would be beneficial if the process was made easier for developments to be eligible for the 421A tax credit.
Who will be the next president of the United States? Obama
What book, piece of music or work of art has most influenced your career? Tai-Pan by James Clavell.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? I am not certain that it has influenced other submarkets. Tech and creative companies were first drawn to Midtown South by the comparably affordable rents, but as more companies discovered the area they were drawn by the huge floor plates, open layouts, light, huge windows, the views and the energy created by the entrepreneurial, artistic and cutting-edge businesses in the area. Companies in these sectors continue to be drawn south and west where the building stock suits their tastes ,and I am not sure that it can be found or recreated in Midtown or other more traditional commercial sub-districts.
How much money are you willing to allocate per square foot for tenant improvements? That is very market-driven, but generally between $30 and $40 per square foot.
Best decision made in your career: Going to law school
Worst mistake made in your career: I try to think of my mistakes as learning experiences.
Personal role model: My father
Favorite vacation spot: Jackson Hole, Wyo.
CEO & CHAIRMAN,
Most prized asset: Buildings are like children … You “love” them all equally but “like” certain characteristics better in each.
Most prized possession: My family
Asset you wish you owned: The New York Giants football organization
Real estate prediction for 2013: For the NYC real estate markets it will be more of the same … a flight to quality, “idea-based” companies continuing to grow, and financial companies still trying to figure out their future.
If given the choice, what tax would you abolish? Foreign Interest in Real Property Tax (FIRPTA) … put in place to prevent foreign investors for buying up U.S. real estate as a response to the xenophobia in the early ’80s. It makes the U.S. uncompetitive and less able to attract capital from around the world to deleverage the US real estate markets.
Is LEED certification all it’s cracked up to be? Explain. I believe a focus on sustainability is important, but am not sure that LEED certification is the best measure to achieve same.
What real estate policy should New York’s next mayor make a priority? A continued focus on investing in infrastructure, quality of life and making NYC attractive to the most talented workers from around the world.
Who will be the next president of the United States? Too close to call.
What book, piece of music or work of art has most influenced your career? When I first got into the business, my Dad gave me the biography of the visionary developer William Zeckendorf. It taught me that the real estate business cannot just be about being good at the “bricks and mortar” part; it is equally important to be good at managing your balance sheet.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? Midtown South used to be a place where tenants went when Midtown rents got too expensive for them. Today it is its own distinct market with strong demand from the growing creative class tenant base, rents that rival Midtown and the lowest vacancy rates in the country. It is likely that tenants will start to look to Lower Manhattan as the lower cost alternative in the future.
How much money are you willing to allocate per square foot for tenant improvements? In today’s economic climate, more tenants are looking for the landlord to invest more capital to offset their relocation costs rather than come out of pocket. We are here to service the tenants needs, and are willing to uniquely structure each deal to so. If tenant improvements are important to a tenant, we will accommodate that need within the deal’s overall economics.
Best decision made in your career: Selling our public company in January 2007 … a very tough decision but in retrospect the right decision!
Worst mistake made in your career: Giving N.Y. real estate reporters my cell number!
Personal role model: Too many to list. The real estate industry and New York have and have had so many incredibly talented and philanthropic people in it that have served as great role models for me over the years.
Favorite vacation spot:Lake Powell, Utah, where my family and I have gone camping every summer for over 20 years. Sleeping under the stars, removed from the hustle and bustle and making unforgettable memories with the people I love!
JACK RESNICK & SONS
Most prized asset: They are all of equal importance to our firm, our investors and our partners
Most prized possession: All you own is your time here. Everything else is borrowed.
Asset you wish you owned: Thou shalt not covet.
Real estate prediction for 2013: Similar to 2012, flatlining
If given the choice, what tax would you abolish? I’d increase some (like the cigarette tax) and rework others (like estate taxes, property taxes).
Is LEED certification all it’s cracked up to be? Explain. It may be losing its appeal, but the real impetus is a cleaner environment, better buildings and happier, healthier and more productive building occupants. That being said, we have two LEED-certified buildings and two more registered for certification, and we are very proud of those achievements.
Who will be the next president of the United States? If I knew that, I would not be sitting here filling out this questionnaire.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? It has made some other submarkets look like comparative “bargains.”
How much money are you willing to allocate per square foot for tenant improvements? Many tenants obviously look for turn-key work or 100 percent of their fitout cost. It’s deal-specific … depends on the building, size of the lease, term … etc.
Best decision made in your career: Leaving the cable news industry
Worst mistake made in career: Not leaving sooner
Personal role model: My father, Burt, obviously
Favorite vacation spot: Any ski area with snow
CEO & CHAIRMAN, THE RELATED COMPANIES
Stephen M, Ross, the 72-year-old chairman and chief executive officer of the Related Companies, is focused on New York’s last frontiers for development.
To the west is Hudson Yards, where groundbreaking is scheduled for October for the first building in a $44 billion development, at a site where the city had proposed a stadium in its failed bid to attract the Olympics. To the east, in an area sometimes referred to as the “valley of ashes,” Related is planning 5 million square feet of development at a contaminated site near Citi Field.
Related is the largest owner of luxury residential rental properties in New York, with more than 5,000 units in its portfolio, and is known for mixed-use projects such as the Time Warner Center. The new projects fit in this mixed-use mold, and both are proceeding with heavy backing from the city.
“The Hudson Yards represents the future growth corridor for New York and the opportunity to create a mixed-use community with grand public spaces, great cultural amenities, an extraordinary destination retail center, hotels, thousands of new apartments and the modern, green, high-tech office space our city needs,” Ross said in a written statement. “The Willets Point development will transform a 23-acre dilapidated area into a stunning new mixed-use neighborhood.”
Hudson Yards’ first building, set to open in 2015, is a $1.3 billion, 46-floor tower with a glass atrium next to the High Line, The Associated Press reported in August. Almost half of the building will be occupied by Coach Inc., and Ross told the news wire he may announce other tenants by year’s end. By 2017, the developer plans a second office tower, nine residential buildings, a retail complex and a hotel at the site between 10th and 12th Avenues and West 30th and 33rd Streets. Plans also include a riverfront park and a cultural center.
The project benefits from $106 million in property-tax exemptions for the first office tower and retail areas, the AP reported. The developers are counting on an extension of the No. 7 subway line to 11th Avenue, which the Metropolitan Transportation Authority now says is on schedule—after several delays—to open in mid-2014 and to be fully completed at the end of 2015. The developers are leasing air rights to the property from the MTA.
The Willets Point development site, at the other end of the same subway line, is currently occupied by a jumble of auto-repair shops. The name “valley of ashes” comes from F. Scott Fitzgerald’s “The Great Gatsby,” describing a dump that used to exist in the vicinity along the route from Manhattan to the title character’s estate.
“Today the ‘valley of ashes’ is well on its way to becoming the site of historic private investment, major job creation and unprecedented environmental remediation,” Mayor Michael Bloomberg said in June as he announced the first phase of the project, including a $3 billion investment by the joint venture of Related and Sterling Equities Inc. Ultimately, the plan will unlock over 5 million square feet of new development, including retail, hotel and commercial spaces, and 2,500 housing units, of which 875 units will be in the “affordable” category. ✯
Battling to build investor confidence, Steven Roth is beefing up Vornado Realty Trust’s holdings in Manhattan retail and residential property while shedding non-core assets in Washington, Boston and Los Angeles.
Since Mr. Roth’s vow in April to restore “luster” to shares that have trailed the broader market for REITs for the past three years, Vornado said it would spend about $707 million to acquire retail space at 666 Fifth Avenue in Manhattan, bought a 50 percent stake in two Upper West Side residential buildings in a deal that values the properties at more than $100 million, and agreed to a 20-year lease on the shops at the Marriott Marquis Times Square hotel that enables Vornado to purchase the retail space from Host Hotels and Resorts Inc. at a price based on future cash flow.
At the same time, Vornado, which controls 19.4 million square feet of office space and 2.2 million square feet of retail space in New York, is in the midst of selling as much as $1 billion in non-core assets. The day it announced the purchase at 666 Fifth Avenue, Vornado also said it was selling properties including the Washington Design Center, the Boston Design Center and the L.A. Mart, plus an office building in Washington, for net proceeds of $330 million.
“Capital wants to invest in our home markets of New York and Washington more than anywhere else in the United States—and that’s a good thing,” Mr. Roth, who is chairman of the board, wrote in April in the company’s annual report. He also promised to hold quarterly conference calls with analysts, beginning with Vornado’s second-quarter earnings report.
The initial reaction to the plan was positive. “The tone has changed,” Alexander Goldfarb, a managing director at Sandler O’Neill & Partners, told The New York Times. “Rather than being very defensive, there was much more receptiveness.”
The shares jumped from $79.33 on April 10 to $88.07 on May 8.
Second-quarter results disappointed some investors, however, as the company recognized a $58.7 million loss on its derivative position in retailer JCPenney and funds from operations fell to 89 cents a share from $1.27 a year earlier.
“It’s not very awe-inspiring,” Richard Imperiale, president of Uniplan Investment Counsel Inc. told Reuters. The shares dropped 15 percent in the four days after the announcement.
“We’ve done retail investments of this nature a dozen times before over the last large number of years,” Mr. Roth said when analysts pressed him on Vornado’s investments in JCPenney and Toys “R” Us during the company’s maiden earnings conference call.
“The JCPenney investment is an investment that we’re committed to,” he said, noting that he is also a director at the retailer.
Michael Fascitelli, president and chief executive officer, said the quarter marked “substantial progress on simplifying the company,” and that Vornado will benefit from a strong property market in its hometown. “The safety and resiliency of New York City continues to draw a significant investor interest in this borrowing world,” he said. “Asset values have recovered to near peak levels.” ✯
PRESIDENT, RUDIN MANAGEMENT COMPANY
For William Rudin, 2012 has been the year the redevelopment of St. Vincent’s Hospital shook off the shackles of community opposition and moved forward. The City Council approved a revised plan for the project in March. Meanwhile, all 42 luxury condo units in 130 West 12th Street, a former St. Vincent’s building that Rudin Management Company had acquired outside the hospital’s bankruptcy, were sold within eight months of going on the market, for an average of about $2,100 a square foot.
It’s also been the year when a fourth generation—his son Michael Rudin and daughter Samantha Rudin Earls—took a bigger role in the family business, Mr. Rudin said.
Getting the St. Vincent’s project off the ground had preoccupied Rudin Management since 2008. Last year, a federal bankruptcy judge signed off on the $260 million sale to Rudin and the North Shore-Long Island Jewish Health System. Rudin concluded an equity partnership agreement with Global Holdings Inc., chaired by shipping heir Eyal Ofer. The company also got an acquisition and construction loan from a bank group for more than $500 million—“a significant accomplishment” in the midst of the European and U.S. debt crises, Mr. Rudin said.
In the deal, which was approved in March, Rudin agreed to cut the number of apartments to 350 from 450 and the number of underground parking spaces to 95 from 152, The New York Times reported. The company agreed to preserve a building that would have been torn down and to make donations of $1 million to the arts program at three Village elementary schools and another $1 million toward affordable housing. The project includes a free-standing emergency room to be run by Lenox Hill Hospital and a 16,500-square-foot neighborhood park, about one-tenth of whose space will be devoted to an HIV/AIDS Memorial.
Mr. Rudin told the Times he expects the $900 million project to be finished in 2015.
Other major initiatives included the purchase of the Rose family’s half interest in 1 Battery Park Plaza for $80 million, which gave Rudin full ownership of the 800,000-square-foot office building. Dentsu Network, a subsidiary of Tokyo-based Dentsu Inc., added 33,000 square feet to its offices in Rudin’s building at 32 Avenue of the Americas, bringing the total to 183,000 square feet. And as part of a renovation on the Upper East Side, Rudin removed the white brick exterior from a 660 unit apartment building at 215 East 68th Street and replaced it a with white terra-cotta screen wall.
“It saves on energy, lasts longer and is less invasive in terms of impact on tenants,” Mr. Rudin said.
William Rudin is chief executive officer and co-vice chairman of the family business; his uncle Jack is chairman and his cousin Eric Rudin president and co-vice chairman. His sister, Beth Rudin DeWoody, is an executive vice president whose artwork was on display in the model apartments, helping to market 130 West 12th Street.
Mr. Rudin’s son and daughter not only serve as vice presidents in the family business, they’re following in a family tradition of philanthropy, he said, with Samantha serving on the board of the Big Apple Circus and Michael on the board of The First Tee of Metropolitan New York.
Now the 57-year-old Mr. Rudin says a fifth generation may be waiting its turn. This summer he became a grandfather with the birth of Samantha’s daughter, Elle Rudin Earls. ✯
PRESIDENT AND CEO, U.S. COMMERCIAL OPERATIONS
BROOKFIELD OFFICE PROPERTIES
Most prized asset: The World Financial Center; the land held for development of Manhattan West project
Most prized possession: My family
Asset you wish you owned: The next one we pursue
Real estate prediction for 2013:Fundamentals should improve at a slow and steady pace; leasing velocity will accelerate in the fourth quarter resulting from decisions from large-scale expiries and consolidation needs.
If given the choice, what tax would you abolish? The commercial rent tax in NYC, which adds to tenants’ occupancy costs
What real estate policy should New York’s next mayor make a priority? To further Mayor Bloomberg’s initiative to attract and retain education- and research-based institutions like Cornell-Technion to create a more diverse economy in NYC
Who will be the next president of the United States? Mitt Romney
What book, piece of music or work of art has most influenced your career? Anton Myrer’s Once an Eagle and Charles Demuth’s My Egypt
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? The success of Midtown South will benefit other submarkets in Manhattan, particularly downtown, as space tightens and tech and creative firms seek high-quality office space at lower rents in proximity to so many of their workers.
How much money are you willing to allocate per square foot for tenant improvements? In New York we’re currently between $55 to $65 per square foot depending on building and submarket.
Best decision made in your career: Willingness to embrace change
Worst mistake made in your career: Relying on an individual whose reliability I questioned to do something important
Personal role model: Theodore Roosevelt
Favorite vacation spot: Amagansett
ABS PARTNERS REAL ESTATE
Most prized asset: One of the first deals I was able to put together was an ownership interest in the Flatiron Building. While my group has a small ownership interest, I am delighted to be affiliated with this world-renowned iconic property.
Most prized possession: Clearly not a possession, however I am very proud of the team of professionals we have organized at ABS Partners Real Estate.
Asset you wish you owned: The Empire State Building
Real estate prediction for 2013: Manhattan will continue to be one of the most sought-after and desirable alternatives for investment. Sophisticated executives will continue to understand the desirability of Manhattan and seek to locate and expand their businesses in NYC.
If given the choice, what tax would you abolish? Gambling is a regressive tax and often brings about the lowest common denominator. Therefore, I would not permit gambling in the great state of N.Y.
I would reinstate the commuter tax, and bring reform to the municipal worker pension system. During the Pataki Administration, both of these items were modified toathe detriment of N.Y.
Is Leed-certification all it’s cracked up to be? Explain. It is very important for companies to be aware, and control their carbon footprint. As the world population grows exponentially—presently at 8 billion (1 billion in the 1920s), soon to be 16/32/64 billion—we must find ways to use our natural resources more wisely.
What real estate policy should New York’s next mayor make a priority? To follow through with the great work done by Mayor Bloomberg in all respects. More specifically, the focus on rezoning areas of NYC to be more consistent with present-day uses, potential uses and appropriate density.
Who will be the next president of the United States? Winston Churchill said democracy is the worst form of government except for all those others that have been tried. It seems to me we have reached a point where reform in government is essential, particularly related to campaign-finance laws.
What book, piece of music or work of art has most influenced your career? The Fountainhead by Ayn Rand, The Man in the Arena by Theodore Roosevelt and If by Rudyard Kipling.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? As Midtown South and Soho become highly sought after and costly, other neighborhoods become more attractive on a relative cost basis, such as Midtown south of 42nd Street and Lower Manhattan east of Broadway.
How much money are you willing to allocate per square foot for tenant improvements? In most cases, 50 percent of cost, not to exceed $50 per square foot
Best decision made in your career: To work hard
Worst mistake made in your career: Not trying for a larger share of equity ownership earlier in my career
Personal role model: My father-in-law Leonard Baron, and my longtime business partner and mentor, Earle S. Altman
Favorite vacation spot: Palm Beach
PRINCIPAL & CEO,
Most prized asset: 55 Gansevoort Street
Most prized possession: I try not to prize possessions, since they are often transient.
Asset you wish you owned: Flatiron Building
Real estate prediction for 2013: Overheated market with record values
If given the choice, what tax would you abolish? Capital gains
Is LEED certification all it’s cracked up to be? Explain. No. Energy efficieny is all about behavior and active management. Good boiler/heat management software makes so much more difference than if a building is LEED-certified.
What real estate policy should New York’s next mayor make a priority? Reinstating the 421a
Who will be the next president of the United States? Obama will be re-elected.
What book, piece of music or work of art has most influenced your career? The Count of Monte Cristo. It teaches you to never get too complacent because someone is likely plotting against you.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? I think office owners are starting to realize that trendy buildings with some quality design is more valuable than plain white boxes.
How much money are you willing to allocate per square foot for tenant improvements? Three to six months rent
Best decision made in your career: Refinancing the affordable housing portfolio to go buy distressed debt right after the start of the recession
Worst mistake made in your career: Using too much leverage pre-recession
Personal role model: Steve Cohen, partner at Wachtell Lipton Rosen & Katz. That guy can finger out the angles on any situation.
Favorite vacation spot: Why go somewhere when you’re in the center of it all in New York City?
PRESIDENT & CO-CEO, SILVERSTEIN PROPERTIES
With 7 World Trade Center now fully leased and a second of his four planned towers at the site topping out at 72 stories in June, Larry Silverstein is looking to export his company’s hard-won expertise in bringing huge projects to market.
Silverstein Properties has an acquisition and development team stationed in Warsaw, where it’s purchased three buildings as part of a joint venture with Poland’s richest man, Yan Kulczyk. The company also plans to open an office in Shanghai in October or November, said Marty Burger, the 81-year-old Mr. Silverstein’s co-CEO and heir apparent.
“We have incredible talent in this firm in building large projects,” and China is one of the few markets with the demand to support them, Mr. Burger said.
7 World Trade Center was the first building to reopen at the site of the twin towers, which were destroyed in the 2001 terrorist attacks shortly after Silverstein acquired them. 4 World Trade Center, which topped out in June, is just over 50 percent leased to the city and the Port Authority, and the company expects the building to be open and operating next year, Mr. Burger said.
Of the two remaining structures, 3 World Trade Center has been built up to seven of its planned 80 floors and 2 Word Trade Center up to two floors of an eventual 79. Construction will proceed once tenants can be lined up, under an agreement that sets targets to trigger financing from the Port Authority. Mr. Burger said he’s confident tenants will come.
“It’s going to be a mixed bag, not all dependent on the financial industry,” he said. 7 World Trade Center has drawn from the advertising and entertainment industries, as well as nonprofits and technology firms, among others. Contrary to expectations after the terrorist attack, the neighborhood has gained in appeal as a residential area, more than doubling in population to over 60,000, as lower Manhattan became the richest ZIP code in the nation, he said.
Among Silverstein’s other projects in the city are a residential and hotel tower at 99 Church Street—now called 30 Park Place—where Moody’s Investors Service was located before moving to 7 World Trade Center. Mr. Burger said he expects construction to begin next year.
A Four Seasons Hotel will occupy the first 22 floors of the 80-story tower, which will also include a specialty restaurant operated by the hotel chain. The upper floors will be devoted to apartments as large as 6,500 square feet.
Mr. Silverstein, who pioneered residential development near the west end of 42nd Street, is planning another project near his 921-unit River Place and 1,359-unit Silver Towers. The company is working with Mercedes-Benz on what Mr. Burger said is likely to be a mixed-use development on the site of the German automaker’s former showroom on 11th Avenue between 40th and 41st Streets.
Mr. Burger, who calls himself “part of the solution for the future” at Silverstein Properties, previously worked at Goldman Sachs’s Whitehall real estate investment fund, at Blackstone and, later, at the Related Companies, where he became one of Steve Ross’s top deputies.
When he was searching for candidates to succeed him, Mr. Silverstein liked Mr. Burger’s energy and persistence as a negotiator. “He reminds me a lot of myself as a younger man,” Mr. Silverstein told The Commercial Observer. ✯
PRESIDENT & CO-CEO, TISHMAN SPEYER
Tishman Speyer’s expansion outside the country helped land Rob Speyer a leadership post in his hometown when he was named the next chairman of the Real Estate Board of New York. Mr. Speyer, the president and co-CEO of the real estate investment firm, will take the position in January when the current chairwoman, Mary Ann Tighe, steps down.
“We respected his global perspective,” Ms. Tighe said when the appointment was announced in July. “A great focus for REBNY is keeping New York City competitive in a global marketplace.”
Tishman Speyer is perhaps best known as the owner of Rockefeller Center and the Chrysler and MetLife buildings in Midtown Manhattan—and for a failed $5.4 billion investment in Stuyvesant Town and Peter Cooper Village that exploded with the housing bubble. It also has interests in Belgium, Brazil, England, France, Germany, India and Italy. The firm’s biggest transactions this year were in China: it announced plans for a 600,000-square-foot campus for Nike in Shanghai and raised the equivalent of about $190 million from Chinese investors for a fund that will develop a 1.23-million-square-foot complex of luxury residences, offices and retail space in Suzhou.
At home, Mr. Speyer wields considerable influence. He was a founding member of the Committee to Save New York, which raised more than $12 million from just 20 donors last year to support the agenda of Gov. Andrew Cuomo, The New York Times reported in May. The group financed advertising that neutralized the labor unions’ clout in Albany and that advocated passage of Mr. Cuomo’s budget proposal and his plan to cap increases in local property taxes, the Times said.
He was also among the leaders of a fund-raising drive for a $177 million renovation of St. Patrick’s Cathedral.
“Rockefeller Center has surely benefited over the years from its link to St. Patrick’s Cathedral,” Mr. Speyer told the Times. “I’m Jewish. We are neighbors. This is not about church politics. This is about restoring one of the city’s most important landmarks.”
Among Tishman Speyer’s nagging problems has been the vacant Rainbow Room atop Rockefeller Center, which was the subject of a landmark-designation hearing on Sept. 11. The real estate company once considered converting the space into offices, and turned the 64th floor kitchen over to Lazard, which was looking to expand. The 65th floor would probably require renovations to accommodate a new kitchen, which may explain the eagerness of the commission to protect the space.
Tishman Speyer was among those who spoke in favor in a hearing earlier this month, although there was no vote.
“Tishman Speyer continues its planning process for the Rainbow Room, which is an icon loved by New Yorkers and visitors from around the world,” a spokesperson wrote in an email to The Commercial Observer.
Ms. Tighe said Mr. Speyer would have to confront aggressive landmarking in the city and a rising tax burden on the real estate industry, while also helping the industry voice its input in the city’s sweeping plan to permit larger buildings on and around Park Avenue.
Mr. Speyer, who turns 43 in October, will be the 117-year old Real Estate Board’s youngest chairman ever. His appointment marks the first three-generation dynastic succession in the organization’s history. Both Mr. Speyer’s father, Jerry Speyer, who is a co-CEO of Tishman Speyer with him, and Robert Tishman, Mr. Speyer’s grandfather, were past chairmen. ✯
CEO, MURRAY HILL PROPERTIES
Most prized asset: Murray Hill Properties
Most prized possession: My family
Asset you wish you owned: The Chrysler Building
Real estate prediction for 2013: Higher per-square-foot pricing for existing Manhattan buildings
If given the choice, what tax would you abolish? FIRPTA—the foreign investment in real property tax act
Is LEED certification all it’s cracked up to be? Explain. Yes, tenants appreciate it and it’s good for the environment.
What real estate policy should New York’s next mayor make a priority? Abolish rent controls.
Who will be the next president of the United States? I leave it to the people of our great nation.
What book, piece of music or work of art has most influenced your career? I greatly appreciate art, but it did not have an influence on my career, economics did.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? More innovation, more open collaborative space, less vacancy
How much money are you willing to allocate per square foot for tenant improvements? Up to the average rental income price per foot
Best decision made in your career: I left the world of finance to start a real estate company.
Worst mistake made in your career: I can think of a building or two that, in hindsight, I wish that we had not sold.
Personal role model: Edward Breger Esq. was my mentor for 20 years and perhaps the most prolific real estate attorney in New York in the ’80s and ’90s.
Favorite vacation spot: St. Martin ✯
SENIOR MANAGING DIRECTOR,
NEW YORK TRISTATE REGION, HINES
Most prized asset: My family
Most prized possession: My farmette in Vermont
Asset you wish you owned: Any and all Hines future developments
Real estate prediction for 2013: Continued westward tenant migration
If given the choice, what tax would you abolish? Long-term capital gains
Is LEED certification all it’s cracked up to be? Explain. Hines is the No. 1 LEED developer in the world, and we believe that high-performance buildings make better investments.
What real estate policy should New York’s next mayor make a priority? Lower and more predictable real estate taxes for new development
Who will be the next president of the United States? Up to the Electoral College
What book, piece of music or work of art has most influenced your career? The Last Lion by William Manchester
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? We are designing new buildings with sufficiently robust infrastructure to accommodate both traditional tenancy as well as tech/creative open plan environments.
How much money are you willing to allocate per square foot for tenant improvements? Along with CBRE, we are identifying anchor tenant possibilities for 7 Bryant Park and for the right tenant, we will be flexible in designing a mutually agreeable economic package.
Best decision made in your career: Joining Hines 30 years ago, when I graduated from Columbia Business School
Worst mistake made in your career: Not buying 399 Park Avenue
Personal role model: The people I’ve worked for: David Lawrence, Ken Hubbard and Chris Hughes
Favorite vacation spot: Block Island
CHAIRMAN & PRESIDENT,
THE TRUMP ORGANIZATION
Most prized asset: There are many to choose from, but I’d have to go with Trump Tower, as it was the first building with my name on it in Manhattan. It’s also become one of the top tourist sites in NYC and remains a very beautiful and iconic building.
Most prized possession: Mar-a-Lago in Palm Beach. It is a historic site and spectacularly beautiful, equal or superior to any of the palazzos in Venice. I have turned it into a great club.
Asset you wish you owned: Versailles would be nice!
Real estate prediction for 2013: It will remain a buyers market, and will even out eventually.
If given the choice, what tax would you abolish? All of them!
Is LEED certification all it’s cracked up to be? Explain. It is highly over-rated and certainly not good for tenants.
What real estate policy should New York’s next mayor make a priority? Always crime, education and general cleanliness.
Who will be the next president of the United States? If we are fortunate, it will be Mitt Romney.
What book, piece of music or work of art has most influenced your career? As a young man, I read Norman Vincent Peale’s book, The Power of Positive Thinking, as he was a friend of my father, Fred C. Trump. It had a lasting effect and was a good influence on my way of thinking and working.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? I think it’s been a positive addition to the business landscape. The diversity of energies has always been a Manhattan strong point and that dynamic keeps it that way. Competition is good.
How much money are you willing to allocate per square foot for tenant improvements? Whatever it takes—for instance, I am giving a lot at the great 40 Wall Street.
Best decision made in your career: To go into real estate. I had thought about attending USC to study film, but decided on real estate.
Worst mistake made in your career: Buying a yacht. I never used it and couldn’t wait to sell it.
Personal role model: My father. He was a tremendous example, both personally and professionally. I learned a great deal from him.
Favorite vacation spot: Mar-a-Lago in Palm Beach, Florida—there is no place in the world that even comes close. By the way, Doral in Miami, which I just bought, will be right up there in two years after I work the magic.
LEE & ASSOCIATES NYC
Most prized asset: My business partners and my employees
Most prized possession: My kindle, tennis racket
and commuter bike
Asset you wish you owned: The entire island of Manhattan
Real estate prediction for 2013: A foreign-money land-grab in New York City fueled by European uncertainties and the cooling off of China
If given the choice, what tax would you abolish? Taxes I can deal with, it is the burdensome regulations and host of regulatory agencies that make conducting business in New York City so difficult and time-consuming that I would reduce and streamline. There isn’t one regulation in particular that I would eliminate. It’s more like being bitten to death by a duck. It’s not one thing in particular that is so awful, it’s just everything that adds up.
Is LEED certification all it’s cracked up to be? Explain. Too soon to tell. While it sounds great in theory, I’m not too sure how it is working in practice.
What real estate policy should New York’s next mayor make a priority? Creating a competitive business climate that encourages rather than punishes companies for locating to New York. While not directly a real estate policy, this would help create a healthy business climate that would be a tremendous benefit to the real estate market.
Who will be the next president of the United States? As long as unemployment remains above 8 percent, Mitt Romney
What book, piece of music or work of art has most influenced your career? The Fountainhead and The Power Broker.
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? While it certainly caused a bit of a rent bubble in Midtown South, I don’t think it has had much of an influence outside of that market.
How much money are you willing to allocate per square foot for tenant improvements? Depends upon the condition of the particular unit, the rent being paid by the new tenant and the new tenant’s credit worthiness.
Best decision made in your career: I had been a successful, practicing attorney for eight years with a very well-known real estate firm when, in 1989, I decided to leave the practice of law and join a small real estate company known as Sierra Realty Corp.
Worst mistake made in your career: Not purchasing several Class B office buildings in the early 1990s when these properties were being sold for $30 a square foot!
Personal role model: I have two: The first is a former attorney with whom I worked. He was my mentor and wise man. I admired his honesty, wisdom and personal integrity. The second is Miles Davis. Throughout his 50-plus-year career he was always constantly innovating and pushing the element. No matter what artistic success he achieved, he never rested on his laurels and continued to take chances with his music. I have great admiration for those who are never satisfied and are always reaching to do more.
Favorite vacation spot: Central Park. If I ever need to feel rejuvenated, I spent several hours walking through the park and appreciating the scenery, the brilliance of its design and the huge variety of people that you come across.
ZAR PROPERTY NY
Most prized asset: JPMorgan Chase building at the corner of 5th Avenue & 34th Street in Manhattan
Most prized possession: Hebrew manuscript passed down to me by my late grandfather
Asset you wish you owned: 666 Fifth Avenue
Real estate prediction for 2013: Manhattan will continue to thrive, with international buyers and retailers entering the market and taking advantage of the favorable exchange rates. Brooklyn values, especially those that are waterfront and near transportation, will continue to surge, with multiple projects due to be completed.
If given the choice, what tax would you abolish? Transfer tax, to offset capital gains tax that are scheduled to increase next year
Is LEED certification all it’s cracked up to be? Explain. We have never undergone a project with LEED certification.
What real estate policy should New York’s next mayor make a priority? Maintaining affordable housing in a manner that’s fair to both landlords and tenants
Who will be the next president of the United States? Barack Hussein Obama, unfortunately
How has Midtown South’s roster of tech startups and creative tenants influenced office buildings in other Manhattan markets? It’s created a positive ripple effect and revitalized the surrounding neighborhoods. It has also created a positive absorption in vacancy overall.
How much money are you willing to allocate per square foot for tenant improvements? Not one penny.
Best decision made in your career: To buy during the recession.
Worst mistake made in your career: Not buying enough during the recession.
Personal role model: Dario Zar, President of Zar Property NY
Favorite vacation spot: Any warm climate without cellular/BlackBerry service.
CO-FOUNDER & CHAIRMAN, BOSTON PROPERTIES
Mid-year found Boston Properties Chairman Mort Zuckerman grousing over the country’s “distressing” unemployment trends and lack of leadership—and ready to take the opportunity to expand his real estate empire.
“Generally speaking, in America, we boo the loser, but this is an administration that boos the winner,” he said during the company’s second-quarter conference call with analysts.
Zuckerman, who’s also the publisher of the Daily News, supported Barack Obama in 2008, but earlier this year he predicted that “an Obama election [would] undoubtedly suppress some of the willingness of American business to invest, to renew, to add space.”
Even with U.S. unemployment stuck above eight percent and the financial and legal industries shrinking, Boston Properties was able to boost funds from operations to $1.37 a share in the quarter from $1.23 a share a year earlier.
The company benefited from tight supply of office space in its main markets—New York, Boston, Washington, San Francisco and Princeton, N.J.—and increasing demand from technology and life sciences firms. It completed a $1 billion bond sale and raised $137.9 million selling stock.
“We have both credibility and financial strength to make additional acquisitions—we’re looking for those opportunities,” Zuckerman said.
In the Washington market, “the unknown impact of the deficit reductions and spending changes, as well as the presidential election, have really created a pretty soft demand environment,” Boston Properties President Douglas Linde said during the conference call.
In the event that Congress fails to act and automatic budget cuts go into effect, “it would have a severe negative impact on the D.C. economy,” he said. “But I think there’s consensus that we’re not, hopefully, going to get to that point.”
In New York, Boston Properties reports occupancy of almost 96 percent in its eight “in-service” office buildings, which encompass 8.6 million square feet of space.
The company’s six office buildings under construction nationwide include the only one being built in Midtown Manhattan, at 250 West 55th street. Morrison & Foerster signed up last year for 180,000 square feet in the building, which is scheduled to open in the second quarter of 2014, and this year agreed to take an additional 24,000 square feet.
“The big news is that we are negotiating a lease with a second law firm for an additional 266,000 square feet in the low rise of the building, which will mean that 250 West 55th will be just under 48 percent leased with all of the remaining space concentrated on floors 25 to 38, the top of the tower,” Mr. Linde said. The company completed additional leasing at 510 Madison Avenue, bringing occupancy of that 356,000-square-foot building to 55 percent, Mr. Linde said.
Boston Properties previously took advantage of a weakening economy to buy the John Hancock Tower in Boston and three office properties in New York, including the 1.8-million-square-foot GM Building.
Analyst Jeffrey Spector of Bank of America/Merrill Lynch pressed for more detail on the possibility that the current economic climate will create more opportunities.
“There are a lot of families in New York that own a lot of real estate,” Mr. Zuckerman said. “When they move, they move slowly at first and then very quickly. Our whole effort will be to be around and be a part of those discussions when they move.”✯