Betting on Brookfield: Mitch Rudin Looks Back at First 15 Months
It’s been 15 months since former CBRE New York Tristate Region President Mitch Rudin accepted the position of president and chief executive officer of U.S. Commercial Operations at Brookfield Properties, and, since then, nobody can say it’s been a picnic.
Besides the Occupy Wall Street movement, which famously descended on Zuccotti Park shortly after he took office, Brookfield Properties has waged an aggressive campaign to market space at the World Financial Center in anticipation of new interest in lower Manhattan as a wave of ambitious development projects come to fruition over the next three years.
Mr. Rudin spoke to The Commercial Observer from the 41st floor of a building in Denver last week about his first year in office, his ambitious plans for retail at the World Financial Center, the decision to rename that famous building, and the behind-the-scenes negotiations with the city after the protesters made camp at Zuccotti Park last year.
The Commercial Observer: One of the pervasive stories in Midtown South is the wave of tech companies seeking space. Can you talk to me about what the big story is in lower Manhattan?
Mr. Rudin: The story is really the remarkable evolution we’ve seen, most dramatically in the last five years. So you’ve seen it on the residential side, where the population has more than doubled. You’ve seen the availability rate for rental apartments on the west side by us in Battery Park, about 7 percent, and I believe it’s still the lowest vacancy rate in the city.
You’ve seen, just in the last few months, the changing composition of retail, with the success that Goldman Sachs and their retailers have had at [the] north end, and especially the restaurants and their stores over there.
Then you know, for six years, the 7 million square feet of office tenants that have moved from either Midtown or Midtown South to Downtown—you know, Condé was of course the exclamation point on that, but there were so many other tenants, be it law firms, media companies, really every technology, advertising, any tenant that exists on the island of Manhattan, either is Downtown or is consider[ing] Downtown.
In the next couple of years, the Downtown market will see rising rental rates even as supply escalates with the completion of the World Trade Center towers. Is that something that you would agree with?
Yeah, what we’re seeing now is significant interest by those tenants who have lease expirations in the 16 to 18 timetable, and we’ve gone through almost a complete year where you didn’t have much movement amongst the larger tenants because so much of that had been done the year before, creating a little gap in the time period.
But now, as this next wave of tenants is coming up and they’re looking at more efficient space, they want to be in a trophy product, and they’re really looking at several alternatives. And they’re looking at new product, which is our development of Manhattan West or related sites, or the World Trade Center, or the alternative to new, which is our trophy but not new product and upgraded product at World Financial Center.
Are you still at a point where it takes convincing to get tenants to lower Manhattan?
I think, look, there’s always somebody at any point, but we’re well past that. I mean we’re even doing … nucleus—
Say that last part again?
The strong nucleus of the tenants that are down there, and I think, you know, people have always said since 9/11, this is about to happen, this is about to happen. But now you can come down and you see the superstructure for the transportation hubs. You see the structural work for our glass pavilion: it’s facing West Street. So the reality is a year or two years away, depending on what we’re talking about, and there is sufficient evidence it’s not just on a drawing board somewhere.
Are high-end retailers coming to the area? That was the assumption after Condé came.
Yeah, what we’re doing, and what the Trade Center is doing across the street, is focusing on creating the next high-end shopping district. So we’re in active discussions with the best retailers who populate Manhattan about creating it. And what’s so appealing to them is that you really have three sources of consumers and, of course, the office tenancy. You have the tourists who come down to see the Trade Center and then come over to our waterfront, which is so unique. But then you have the residential population, which is right there. And then you have not only the residential population that’s right there, but really that residential swath, which you’re a part of.
Demographics were shifted so much in this city that the portion of the population—particularly the young working family population—that lives somewhere between Brooklyn and the New Jersey waterfront has become so significant compared to what it was 10 years ago. And this is not by default. People are choosing to be there as opposed to them going there because they can’t afford Manhattan. But this is the neighborhood I want to be in, and for all the reasons you love being in Brooklyn.
In what buildings in your portfolio do you have that availability for retail?
That’s going to be the Financial Center. And we’re going through a $275 million retail renovation project, so when we bring in high-end retail, the marketplace, the dining place, we will have a series of gourmet food operators; best hamburgers, best pizza.
And people will be out there all day. You’ll see classes of young mothers doing yoga with their baby carriages, so you have that rare interaction of residential and office that comes together. It will come together there for the city. There’s nothing like that.
You took the reins as president of Brookfield Properties in July 2011. It’s been a little more than a year, so now is as good a time as any to review your past 12 months in office.
Yeah, it’s been terrific. I mean one of the primary reasons, in addition to the company and the people who are running it, it was the opportunity to work on two projects that are going be part of transforming the city. And it’s proven to be that way with the redevelopment of the Financial Center and the development site at Manhattan West.
Tell me about Brookfield’s decision to rename the World Financial Center.
We’re gonna be naming it. We have used the name Brookfield Place in other locations for a complex that is absolutely unique, and offers not just highest-quality office space, but retail amenities and an arts program. And we’re going to be rebranding it the Financial Center at Brookfield Place. We’re going to be doing it over a period of time, so, in fact, there will be an ad first—it’ll be coming out soon—with the name World Financial Center at Brookfield Place. And over time, the Financial Center name will drop away.
We’re doing it because of the caliber of the real estate and in addition … the nature of the tenants we’re seeing, which, of course, still continues to include financial tenants and law firms, but also those tenants that have otherwise committed here more recently: media, advertising, consumer products. We felt it was important to come up with a name that was more encompassing.
What is the benefit of diversifying the tenant roster at the building?
You’re meeting demand for the tenants that are existing in our city. If you elected to preclude yourself, either by choice or otherwise, you’d have smaller populations, so, you know, this is a primary focus on technology, media, consumer products and advertising, in addition to finance. Whereas, in the past, when you look, when it was the World Financial Center, you were looking to fill it with just financial sector tenants.
As Midtown South gets tighter, are you seeing more tech companies look Downtown?
Oh yeah, the Alliance for New York City Business has put together a committee to capture that. We are an active member of that. And the economics of Downtown are such that we’ve got terrific product, of course, and much more cost-effective. They could be at $15 to $20 [per] square [foot] less than some of the Midtown South alternatives.
Now that there’s been a little bit of distance, talk to me about Occupy Wall Street. Were you personally dealing with the city and other authorities when the movement descended upon Zuccotti Park?
Yeah, I was one of the people dealing with that.
What was the situation like from the inside?
I was relatively new, but it really showed tremendous maturity from the organization on how to deal with a crisis, because this really was a crisis. And I’ve been told it was a crisis where people didn’t have experience in it. You know, there were areas that you could draw analogies to: it was, of course, very helpful to have someone like John Zuccotti being there to act as counsel, but the collaboration that we had with the mayor’s office and the police department, our internal decision-making, it really led to an orderly approach to a problem that turned out to be absolutely right—and also was one in which people didn’t get hurt.
What was the worst-case scenario going through your mind that could have happened?
Look, as a business we were being impacted. It was remarkable how so much of the media ignored the residences and the businesses—and you know, one business did close down—and how they were being impacted, but our greatest fear was that someone would get hurt in that park … our greatest fear was that someone would really get hurt or somebody would get killed.
Would Brookfield have been liable in any way if someone had been hurt in the park?
I don’t believe so, but it wasn’t the liability. It was the moral sense of it. And the week before the police department evacuated the park, there were two people that were killed in other parks around the country. And it wasn’t because of police—it was just, you had a lot of bad element in there. So the people who were behind the movement were the ones doing the press, but the people that were populating the park and preying on them were people with a whole range of social issues and were there preying on people.
We were very concerned that through no fault of ours, we were doing everything we could to help the city or the police department, that someone could’ve been killed in there or die of a drug overdose, you know, that kind of thing.