On Top of the World: SL Green’s Steve Durels on Last Year’s Viacom Deal and the Projects Reshaping Manhattan
Al Barbarino Feb. 12, 2013, 8:30 a.m.
When Viacom pulled the trigger on its 1.6-million-square-foot renewal and expansion at 1515 Broadway last year, SL Green Realty served up a stinging rebuke to swirling rumors that the media giant would relocate.
But company executives with the city’s largest landlord were well aware that the firm’s most coveted tenant had toyed with the idea of stomping away from its 54-story Midtown playground if its needs weren’t met.
That was clear when Viacom executives called Steve Durels, SL Green’s director of leasing, in April of last year with a blunt message, setting off a series of round-the-clock meetings that would seal one of the biggest deals in Manhattan office leasing history in just seven days.
“They said, ‘We want a proposal within 24 hours, and within 72 hours of that, we’re either going to have a final term sheet and make a deal or there will be no deal,’” Mr. Durels recalled during an interview with The Commercial Observer. “It was the difference between the building going dark and 1.6 million square feet of occupancy.”
For seven straight days, bleary-eyed executives at SL Green, Viacom and CBRE, which represented Viacom, conducted meetings that lasted into the early-morning hours. The meetings even cut into dreams, but at least they prevented a nightmare that would have consisted of a 1.6-million-square-foot gaping hole.
“They were literally 24-hour meetings, with phone calls to each side’s CEO, waking them up in the middle of the night, at 2 o’clock in the morning, with new issues,” Mr. Durels said. “Then you would go back to sleep and you’d get a phone call at 6 in the morning with something else.”
“There weren’t many lighthearted moments, because everyone felt the pressure,” he went on. “But to be able to get a deal like that done in a week was one for the books.”
The 15-year deal sealed Viacom as the sole office occupant in the $1.4 billion building. In addition to that feat, SL Green completely repositioned the retail space at the building, with Viacom’s MTV studio and Aeropostale among its tenants. An old movie theatre and “a lot of dead space” was renovated to house the Best Buy and Minskoff theatres, the latter of which is home to The Lion King.
But it was just one shining example of the kind of building transformations and development projects that have planted SL Green’s unmistakable footprints across the city’s landscape.
At 3 Columbus Circle, the company swooped in like a white knight with Joe Moinian for a $100 million renovation that landed anchor tenant Young & Rubicam, which occupies 340,000 square feet in the building. It transformed 100 Park Avenue from a white, nondescript brick building into a high-profile glass gem, and now it has embarked on a joint venture with Vornado Realty Trust at 280 Park Avenue, the site of a massive $150 million redevelopment plan.
“It’s going to be like nothing else on the avenue when we’re done with it,” Mr. Durels said. “The world is going to step back and look at that building and say, ‘Wow, that’s an architectural masterpiece.’”
The renovation at 280 Park will include a full-block-long lobby, a new façade, new infrastructure and an atrium space with an indoor museum-quality fountain. And among other projects on deck, 10 East 53rd Street and 180 Maiden Lane will be renovated after Harper Collins and AIG, respectively, move out in 2014.
“In years past, we’ve stepped our toes into other submarkets surrounding the tristate area and beyond, but we’re more focused on Manhattan now than we ever have been,” Mr. Durels said.
Mr. Durels arrived at SL Green in 1997, when the company was managing 2.5 million square feet of property and had just gone public. Now the firm owns interests in 77 Manhattan properties totaling 39.3 million square feet, and last year the firm completed 258 leases covering 3.95 million square feet under Mr. Durels, a record driven by the Viacom deal.
An economics major at the University of Iowa, he studied agricultural economics but veered from that course early on.
“I went to school, and the first thing they did was give me a tour of the John Deere plant,” Mr. Durels recalled during an interview with The Commercial Observer several years ago. “It didn’t work for me.”
Today, the executive with a passion for fly fishing in the summer and skiing in the winter can hardly imagine an alternative to his day job in real estate.
“It probably would have been something like trading commodities, because it would have been something that I can relate to that is a tangible product,” he said.
“That’s the only other thing I could have seen myself doing, if not running a bar somewhere,” the 30-year industry veteran quipped.
SL Green’s office market dealings will lead it further into the Midtown and Midtown South markets—everything from Soho to Tribeca to Chelsea to Hudson Square, where the firm first started out, before a necessary migration to the large avenue glass and steel buildings, he said.
A case in point is 635 and 641 Avenue of the Americas, two contiguous but separate buildings that will be merged together as part of yet another redevelopment project. Work there will involve repositioning elevator shafts in order to combine the buildings with a shared lobby, in addition to the façade, window and infrastructure changes that have become a staple of the firm’s projects. The crown of the project is a new glass penthouse with 18-foot ceilings and a bocce court set atop a glass box.
“That’s going to be a pretty wild space,” Mr. Durels said.
One of the things that differentiates SL Green from other big owners and REITs is that the real estate behemoth seems to have the flexibility of a smaller firm, with the ability to cycle through certain assets while hanging on to those which are essential to its core.
The company, for instance, sold a 49.5 percent interest in 521 Fifth Avenue at a gross sales price of $315 million in November, which generated $84.8 million in proceeds for the company after a refinancing, according to its fourth-quarter report.
On the flip side, the company continues to expand into other markets. In retail, there’s the development of the American Eagle building in Times Square and neighboring 1552 Broadway, which is under construction and will house McDonalds and T.G.I.Friday’s.
The company has also purchased nearly 600 residential units throughout the city over the last few years, and it constructed two 24-story student housing dormitories for Pace University.
The firm’s growth in the office market will continue on, seemingly limitless.
“With some gas in the tank as far as improvement in the economy, the fundamentals are there for demand to drive pricing with a big spike in rents, and that’s what landlords live for,” Mr. Durels said, noting that he has already closed 200,000 square feet of leasing in the first five weeks of 2013. “We’re going into 2013 with a lot of momentum.”
Organizations in this story
- Best Buy
- American Eagle
- 1552 Broadway
- Young & Rubicam
- 1515 Broadway
- Joe Moinian
- Minskoff theatres
- University of Iowa
- mtv studios
- 10 East 53rd Street
- Vornado Realty Trust
- the lion king
- 180 Maiden Lane
- Pace University
- 521 Fifth Avenue
- 100 Park Avenue
- T.G.I. Friday's
- 641 Avenue of the Americas
- 3 Columbus Circle
- 635 Avenue of the Americas
- John Deere
- Harper Collins
- SL Green Realty Corp.