ESRT’s Fred Posniak on W. 34th Street, TOMS and Why Brick-and-Mortar Is Alive and Well
The International Council of Shopping Centers’ RECon Las Vegas was a whirlwind of activity with back-to-back meetings, long lines and a dizzying number of parties. And despite the roughly five-hour plane ride from New York City to Las Vegas, Commercial Observer spent most of its time talking to the real estate players from the Big Apple.
Our very first interview of the trip was with Fred Posniak, a senior vice president of Empire State Realty Trust, who handles all of the company’s retail leasing (along with leasing associate Shanae Ursini) which includes space at 10 Union Square East, 1010 Third Avenue, 77 West 55th Street and The Gotham at 1542 Third Avenue at 86th Street. (Posniak’s portfolio runs 720,653 square feet.)
Posniak started his career in 1976, working under real estate icons Lawrence A. Wien and Harry B. Helmsley, and 18 years later, he began working directly with members of the Malkin family.
CO enjoyed a hot beverage with Posniak at The Palazzo. He even recommended this reporter take a gondola ride along the Grand Canal and through the Grand Canal Shoppes at The Venetian hotel, which she did after concluding the interview.
Posniak, dressed in a red Ralph Lauren polo shirt, blue shorts and TOMS shoes (more on that later), talked about how some of ESRT’s properties are at the “gateway to Hudson Yards,” the tweener neighborhood between Herald Square and Times Square, and more.
Commercial Observer: There’s an Empire State Building in Las Vegas. What do you think of that?
Posniak: I guess duplication is the greatest form of compliment. I’ve driven by it. I’ve never been in it. It looks cool. It’s an international icon—ESB. It’s one of the rare buildings that you don’t need an address. You can write a letter to Fred Posniak, Empire State Building, and it will get to me.
The thing is with the ESB in Vegas is it’s shorter than the Chrysler Building.
Maybe a reporter would kind of pick that up, but I don’t think anyone really notices.
How is the Starbucks delivery concept, which opened in August 2015, working in the real Empire State Building (where there’s a big Starbucks and an express Starbucks with no seating)?
They’re happy. They’re not required to tell us what they do, but we have a great relationship with Starbucks and a great relationship with the broker [SCG Retail’s David Firestein]. We’re one of the largest landlords of Starbucks. I have Starbucks at ESB, one at 1350 Broadway, one in Union Square, one at 250 West 57th Street and one at The Gotham retail condominium that we own on 86th Street and Third Avenue. So I think they like us.
Are people into the delivery concept?
Listen, I can’t really speak [to that], but when I’m at ESB I use it.
Are you at ESB daily?
A couple days of week. I know tenants use [the delivery Starbucks]. You have two ends of the spectrum. You have certain people that want to get out of their office and go down to a bigger one. And then you have the other ones that are so busy, and it’s great—[the delivery concept is] off an app. Technology is fantastic. We’re kind of honored that they chose ESB [in which] to launch it. They were courted by many large landlords to do it there, and they chose us. I always thank David [Firestein], and I always thank the people at Starbucks for that. We’re happy with it. It’s another great amenity for the building.
You guys are moving your offices to 111 West 33rd Street. Why aren’t you in the Empire State Building?
Because we were going to go to Empire but we rented the space before we had a chance to finish our plans.
That wasn’t that long ago. But what about at the outset?
There wasn’t really a need. We weren’t public at that time, but [recently] there was a definite need to consolidate everybody onto one floor. Because our current offices at One Grand Central Place, we are on two floors. We’re on 48 and 26. And so it’s a little bit of an inconvenience to keep going back and forth so the decision was to put everybody on one floor.
How would you characterize West 34th Street, an area where ESRT has a big presence?
It’s a mass-market district, but if you look at the sales on 34th Street, it’s public knowledge that they are in excess of $2 billion and more running from Fifth Avenue to Eighth Avenue. It’s the number one Gap in the chain, the No. 1 Victoria’s Secret in the chain [and] obviously the 800-pound gorilla is Macy’s, which does in excess of a reported billion dollars in sales. H&M built a monster store right on 34th and [Avenue of the Americas], their largest in the chain. This is how I look at it—it’s almost a mall street. Think about all of the great mall tenants. So you have that. You have an insane amount of pedestrian traffic, between tourists and office. Workers…have to shop somewhere, do they not? And then think about all of the pedestrian traffic, and what we’re starting to talk about now is Hudson Yards is going to be in excess of 17 million square feet when it’s all said and done. We’re at the gateway of Hudson Yards. We’re a block away. So you’re going to have that seamless traffic running up 34th Street. We’re letting people realize that. Not many people fully understand the magnitude of Hudson Yards. They’re building a city. There will be the residential, the office workers, the hotels. What is the best thing for a retailer? Potential customers.
So you’re going to try to use Hudson Yards to sell Empire State Building?
No, not really. We don’t just own Empire State Building. We have retail at 112 West 34th Street as you may or may not know. The original Foot Locker lease at 112 West 34th Street expired at the end of April. We were fortunate enough we re-casted Foot Locker into some space. Sephora is going to be opening up their large new design in the building in part of the old Foot Locker space. Foot Locker took about 2,000 square feet on the ground, the entire second floor which is about 35,000 or 36,000 square feet, and then Sephora took ground-floor space, about 12,000 square feet that will run through from 34th to 33rd Streets. We’re now in the market where we have 7,700 square feet remaining on the ground floor on 33rd Street through to 34th Street, and it faces the Manhattan Mall. And we have a 32,000-square-foot lower level that we’re connecting it to. So you have a 40,000-square-foot piece of retail. We’re now in the process of demolishing it, and we’re going to white-box the space and take it to the market. It really is a great piece of retail, and think about it, it’s right across the street from Macy’s.
That’s your new big piece?
That’s the biggest piece that we’re marketing right now. I’m very excited about it because it has 17-foot ceiling heights, a dedicated loading dock on 33rd Street, the ground floor has a 16-foot ceiling height—I mean [it has] everything a retailer can want. There really is nothing that can compete with it on 34th Street. It’s right across the street from Macy’s, and you’ll have the best view of the Macy’s Day Parade.
What’s the story that hasn’t been told that needs to be?
It’s a story that’s been told, but it has not been told as thoroughly or as much as it should be that online stores are now opening brick-and-mortar stores. Amazon (AMZN) leased the entire building across the street from Empire [State Building], 7 West 34th Street, to move their offices there. And part of that is Amazon is going to open up a retail store on 34th Street. Where people say that brick and mortar is dead, that’s not true. People still like to go in and enjoy the experience. I don’t shop online. I still like to walk in. The only thing I do buy online is my TOMS.
From TOMS. We have made a run at them. I want to open it up as a retail store. I have a selfish motive.
Do they have a New York store?
No, not yet.
You’re trying to work on them?
Yeah. That’s one of the things I’m doing while I’m here [in Las Vegas].
And you have to wear them when you see them.
Of course. But what I’m going to do is I’m going to wear two different ones, a left one and a right one, two different pairs, to tell them that I own more than one pair.
How many pairs do you own?
What are the retail trends now?
You’re seeing some tenants are starting to think outside the box, in terms of their design. Years ago retailers used to just build their cookie-cutter [space] and roll them out. Now they kind of realize, it’s not just about the brand: It’s about the consumer.
You need to compel shoppers to come in.
You do, and you want to make the experience as seamless and as enjoyable as possible. You have to have a product, don’t get me wrong. Okay, but if you have the basis of a good product and you make the experience very enjoyable, you have knowledgeable sales people and you have a clean, efficient store, you’ll go back a second time.
Who do you think does it well?
Urban Outfitters does a spectacular job. They’re actually a tenant of ours at 1333 Broadway on the corner of 35th [Street]. They built a 65,000-square-foot three-level lifestyle center. I’m not an Urban customer. I go into look. You’re enjoying the experience. And if you’re enjoying the experience and you spend more time within the store, there’s a good chance you’re going to buy something.
So it’s a successful store.
It’s doing very well. That whole concept helped kick-start Broadway. And I can talk a little bit about that because we’re seeing the fruits of our labor now, which is great. When you used to come in to Macy’s, when you’d come out onto Broadway, there was never a reason to make a left to go between Broadway and 35th to 41st Streets. You had some food users. There was nothing exciting, so we were fortunate enough to do Urban Outfitters [in 2013]. It replaced Conway, which was a terrible discounter. Now, when you walk out of Macy’s, you’ll make the left and almost the way I envision it, it extends the 34th Street shopping corridor. So after we did Urban, the next deal we did on 36th Street and Broadway was for Shake Shack, which just opened this week to a crushing open. It was insane how crowded they were.
And then what we did was we put in a company out of London, a small cosmetics shop called Rituals. We had three mall retailers, open on Broadway, Shake Shack, Rituals and then at 1359 Broadway Papyrus opened on the next block. They all opened last week. Good timing, huh? This is one of the last remaining areas that doesn’t have great retail. We’re trying to convert because we own 1333 Broadway, 1350 Broadway, 1359 Broadway and 1400 Broadway. The garment industry doesn’t exist anymore. So it’s all now TAMI [or technology, advertising, media and information] tenants, and great high-income individuals are now having their offices there so the last thing to be converted is the retail from Broadway and 35th Street working its way north to 40th Street or 41st Street. Think about it, you have Times Square to the north. You have Herald Square, 34th Street, to the south. So this is that void that’s there now, and we’re going to change that. And it started now between Urban, Papyrus, Rituals and Shake Shack.
What’s the next hot neighborhood?
Broadway and 35th [Street]. I’m telling you. It has all of the ingredients. Let’s make an appointment to sit next year at ICSC [in Las Vegas] and talk about it.
What do you think you’ll be telling me next year at this time?
I’ll show you everything that we have accomplished. We’ve already started the inroads where some of the mall tenants have discovered it. There are going to be more. You have a lot of availabilities on Broadway. 1407 is redoing their retail, 1411 is redoing their retail, 1384 is redoing their retail. All of the owners are really following [suit].
So the story is how it’s a tweener neighborhood.
It’s a tweener now, but it’s not going to be. Our fiduciary responsibility is to educate the retailers in terms of what is there. We do that now. We talk to brokers. We talk to tenants. We take five-hour plane rides from New York to ICSC.