C&W’s Josh Kuriloff on How He Put Together the Pfizer Deal at The Spiral
There’s something missing from Cushman & Wakefield Executive Vice Chairman Josh Kuriloff’s life for the last couple of months.
It’s the rush of nonstop calls and meetings to close a 800,000-square-foot office leasing transaction for his client, Pfizer, in April.
Kuriloff, 59, led his dozen-member C&W team to complete the deal at Tishman Speyer’s planned office skyscraper at The Spiral, at 66 Hudson Boulevard. The transaction was tricky because it required C&W to simultaneously sell the pharmaceutical conglomerate’s buildings at 219 and 235 East 42nd Street in Midtown East and lease back the space until Pfizer moves in 2022. (C&W’s Adam Spies and Josh King handled the $360 million sale of the buildings.)
“I can tell you that I have gone into withdrawal by not working on the deal, because we had two scheduled meetings every week [with consultants], we had an all-day meeting every week [with Tishman Speyer]…and I spoke to the client three, four, five times a day, and all of a sudden you close this deal,” Kuriloff said. “There were times where [an executive from] the Pfizer team said, ‘I speak to you, Josh, more than I speak to my wife.’ ”
Kuriloff, a 34-year veteran of real estate brokerage, has spent three decades at C&W following a four-year stint at Douglas Elliman Knight Frank (the brokerages had a partnership back then) in the 1980s and, before that, he was at George Washington University. He couldn’t say the Pfizer deal was the most significant deal his career as he has done even larger ones, such as the 1.2-million-square-foot renewal of 21st Century Fox and News Corp.’s offices at 1211 Avenue of the Americas in January 2017 for landlords Ivanhoé Cambridge and Callahan Capital Properties. (Kuriloff’s team handled the deal for the landlords.)
But Pfizer’s lease was certainly one of his most complex. A Jackson Heights, Queens, native who now lives in Sands Point, Long Island, and married father of two (a daughter, 28, and a son, 25), Kuriloff chatted with Commercial Observer from his office at 1290 Avenue of the Americas about completing one of the most notable office leasing deal of the year (the Pfizer one), the state of the office leasing market and why he’s stayed at C&W since the Reagan administration.
Commercial Observer: So you’ve been at Cushman & Wakefield for 30 years now, right?
Josh Kuriloff: It’s been a great journey. I feel that I’ve grown up here.
Within the past three decades has there been much change at C&W?
The big difference is just our scale and our size. So we are 48,000 people today [globally]. Our revenues are close to $7 billion. I was on an earnings call and the revenue for [the first quarter] was larger than the revenue for the entire year for Cushman & Wakefield when I first started.
The other big change is, when I first started in the business, I’d go to meetings by myself. Today I go to meetings with seven people. You need so much expertise. I’ll bring my research team and economist. I’ll bring my capital markets team. I’ll bring my strategic planning workplace strategy team. I’ll bring my property management group. And together, the integration of that diverse talent is what delivers the best execution on the business.
What makes someone stay at a firm for 30 years?
Well, obviously [laughs]. But how has C&W been loyal to you?
They have been great to me. Just being able to grow up with people in the business like [C&W Tri-State President] John Santora. I have friends here. I have people that I can trust. Despite being 48,000 people today, there’s two things that have not changed. One, we always had a culture of the client comes first. Two, we have always had an entrepreneurial spirit. And I can tell you that spirit is still at this firm. We are innovative, we are nimble, even though we are 48,000 people.
[Editor’s note: On June 20, C&W filed with the Securities and Exchange Commission to lay the groundwork for a public stock offering, but CO’s interview took place before this on May 22.] Will going public impact this culture of “client first” when your investors will think profit first?
I think it’s in our DNA whether we are private, whether we are public. No matter who we are owned by, I believe that’s the DNA of this firm. And for the senior people here, it’s something that is part of them and we will teach it to the next generation.
Pfizer wanted to sell its buildings when it signed its lease at The Spiral. How did your team handle both at the same time?
We needed to be completely integrated. One of the complexities of the Pfizer transaction was we couldn’t sign a lease until we sold their buildings and we couldn’t sell their buildings until we signed a lease. So we had two streams going on simultaneously and they had to match up perfectly at a moment in time. That was hard unto itself, trying to manage that process.
How long did the deals take to close?
We started the process with Pfizer three years ago. But the transaction took 16 months, which based on the size of that transaction is a relatively quick period of time.
What kind of office was Pfizer looking for?
Their current buildings are 55 years old. They were candidly outdated. And they, with Cushman & Wakefield, saw a moment in their journey to do something once in a generation, which was to curate a new building in New York for their business and their clients and their employees.
Why is it once in a generation?
They are currently on the East Side of Manhattan in the Grand Central District, as you know. They were keenly focused and very comfortable in staying in the East Side of Manhattan. They were very focused with that geography as they have been there for 55 years. And, respectfully, I suggested to them that we not only explore Midtown Manhattan and the East Side, but we also explore Hudson Yards and Downtown. Because effectively that’s where the new buildings are.
What was Pfizer’s initial impression of the Hudson Yards area?
When we went to Hudson Yards, one of the Pfizer senior people came to me and looked me in the eye and said, “What is Midtown Manhattan going to do to compete with Hudson Yards?”
Hudson Yards is a brand new subdistrict, but it really is a combination of green space, state-of-the-art office buildings, a $2 billion new 7 train [station] and it’s completely amentized and it is about placemaking—it is a mixed-community completely master planned. And they were very excited about having their employees and stakeholders have that kind of experience that they witnessed at Hudson Yards.
Did they have any trepidation about being pioneers in Hudson Yards?
Well, first you have to have vision. Pfizer wanted to do something transformative for their workplace so they viewed it as an opportunity and what was very clear when we toured the various buildings in Hudson Yards was they actually wanted to curate and be the anchor tenant of a new building. They wanted to create what we refer to in the industry as a “building within a building.” They wanted to have an exclusive lobby experience. They wanted to have escalators go to a sky lobby [on the mezzanine level]. They wanted to have their own exclusive elevators so that when you came into the building, you felt that you were coming into the Pfizer building. And that’s what we curated for them with Gensler, with Tishman Speyer, [and] with the Pfizer design and construction teams.
So Tishman Speyer had no problem with building a completely separate lobby and elevator bank just for Pfizer?
It was a pretty intense negotiation, and then who pays for it was an intense negotiation.
But [Tishman] wanted to collaborate. They actually came up with great ideas, of how to accomplish this, like how to help create the experience with the sky lobby. We had issues with it because the escalators go to a mezzanine level and there were all kinds of issues with slab heights and we changed the design of [Tishman’s] lobby by creating the sky lobby.
How challenging is it to execute a lease on spec?
The complexity of doing a lease with a building that doesn’t exist—that you can’t walk into—you are in the major leagues. You’re dealing with hoist impact issues. You’re dealing with penalties or late delivery. You’re dealing with liquidated damages—all of those issues you don’t deal with in a normal lease. There’s two documents in a new building. There’s the lease, and then there is the work letter, and then you’ve got to review what are called DD [Design Development] drawings to make sure that you understand what you are getting, because it’s all on paper.
What kinds of issues did you encounter in the planning stages?
Pfizer wanted their own emergency day care center. Day care centers have zoning issues. So we worked on that for four months.
Are they getting a daycare center?
They are getting their daycare center.
How does this deal stack up against all of the other deals that you have done in your career?
It’s not the largest transaction I’ve ever done. But I can tell you it was the most fun [and] most inspirational—being able to anchor a new building with a quality developer like Tishman Speyer and one of the largest companies in the world after being in their home for 55 years.
Was it your best deal ever?
That’s like asking you who is your favorite child. There’s no favorite child. I love the Pfizer transaction, but last year we closed the News Corp. lease for Ivanhoé Cambridge and Callahan Properties for 1.2 million square feet. [Also,] one of the more interesting transactions in my career was renaming the Sears Tower to Willis Tower in Chicago [after leasing 140,000 square feet in the building to Willis Group Holdings and acquiring the naming rights for the former Sears Tower]. That was pretty cool. We were dealing with issues we normally don’t deal with, like trademarks. Who owns the name “Willis Tower”? We had trademark attorneys. First time in my career. [Kuriloff’s team represented Willis Group.]
Were there any major conflicts that came up that could have put the Pfizer deal in jeopardy?
We had several curve balls. Things that happened unexpectedly. Nothing that I can talk about.
C’mon, let’s hear at least one. Can you talk about it without being too specific?
I’ll give you one. The Pfizer team was so excited about the opportunity, three-quarters of the way through negotiations they wanted to approach Tishman Speyer to actually speed up the construction of the building. And Tishman Speyer went to work and came up with two strategies of ways to do it. One would cost a lot of money to speed up the process, one would not cost [as much] money to speed up the process, and we picked the one that didn’t cost a lot of money.
Let me just say there were many sleepless nights. Many. And I can tell you that this team of 12 people, we worked over last Memorial Day Weekend, and to pitch the business, we worked over Thanksgiving [in 2016]. That’s how important winning this assignment was to us.
Why did you skip Thanksgiving with your family to work on the deal?
Before we got the assignment, there was a request for proposals due right after Thanksgiving, and we thought it was prudent to come in over Thanksgiving break and get everybody together, so we could put our best foot forward.
How’s office leasing going at Manhattan West?
We’ve leased 3 million square feet at Manhattan West.
Recently, your team has leased office spaces to large firms like EY, Amazon and Accenture at Manhattan West. How are you able to convince them to come to Hudson Yards?
When I started in the business I used to say, “location, location, location.” Today, I say, “amenities, amenities, amenities.” It’s about the millennial generation. It’s about the war for talent. Your workplace has to be an asset to help you recruit and retain talent. And that is what master-planned communities like Hudson Yards has created. That’s what Brookfield have created at Manhattan West.
Many tenants don’t want all-glass buildings like those in Hudson Yards. They want the lofty spaces of Soho or the classic New York architecture found in Midtown South. So why are Hudson Yards’ glass buildings so attractive?
I think it depends on the industry [and] it depends on the client. For example, a certain technology company said to us that they would never go into a new glass curtain wall building, but at the same time, for Accenture or EY or a major law firm, a glass curtain wall building is what they want. They want that exact image. There is enough diversity and that is the beauty of New York right now.
In regards to the Pfizer deal, what specific developments did your team examine?
We were looking at the [World] Trade Center, we were looking at Hudson Yards [and] we were looking at One Vanderbilt. We were just looking at new construction in the city. They were very honed in on the benefits of new construction.
Was 2 World Trade Center not good enough for them? Why not move them there?
We explored [the World Trade Center] for Pfizer, and their decision was they felt Hudson Yards really met all of their objectives.
They could have met all of their objectives with One Vanderbilt and not even leave Midtown East. Why not there?
They were really wowed by the Hudson Yards master plan community. Again the amentization, the retail—they thought that their clients, key stakeholders and employee experience was really going to be unique and special at Hudson Yards.
The office leasing market is very hot now. How long do you think it will last?
If you can tell me when we are going to be in a recession, I’ll let you know. I think I heard, come September, this will be the longest [economic] expansion in U.S. history. What I can tell you is that I do believe in cycles; I think we have a few more years for this expansion, personally. When you look at the metrics right now they’re all looking positive. We have low unemployment, wages are starting to increase, corporate earnings are extremely strong, so the new tax bill should be a little bit of a stimulus to the economy, so I think we have a few more years.
But we will be in a recession in the next three to five years, I can predict that. And real estate is a cyclical business, I can predict that. But the next 24 months still look pretty strong.