• 1-800-123-789
  • info@webriti.com

Category ArchiveSL Green Realty Corp.

Brains & Braun: SL Green’s David Schonbraun on His New York Lending Strategy

David Schonbraun may be competing for deals like everyone else, but the 40-year-old father of three is no stranger to competition. When he was a high school senior, he nursed dreams of being a professional tennis player.

Now, unlike the majority of lenders out there scrambling to deploy capital, he has an advantage: Schonbraun is charged with keeping real estate investment trust SL Green Realty Corp.’s debt business to a tidy 10 percent of its assets.

As a result, Schonbraun, the co-chief investment officer for Gotham’s largest office landlord, and his team cherry-pick the lending opportunities that are the best fit for the company, selling positions along the way to keep the book balanced. Weighing in at No. 27 on Commercial Observer’s Power 50 list (see page 42), Schonbraun had quite the year in 2017, running SL Green’s side of its and RXR’s purchase of a 49 percent stake in Worldwide Plaza. And like a lot of athletes, he has the stamina to keep going. He gave CO the low-down on which transactions have piqued his team’s interest lately.

Commercial Observer: Congratulations on being on the Power 50 list! How was 2017 for you, overall?

David Schonbraun: Our main focus is always to work to optimize our book…We maximize profit by limiting risk and, with that, run a $200-plus-million revenue business. Last year, we picked good spots for us to invest in—so projects that we really liked with very good sponsors. And one of the trademarks of our business is that we were one of the first groups to have the strategy of taking down the whole loan—or the larger piece of a loan—and then syndicating it out to enhance our yields. It’s very important for us to constantly be evolving our strategies as the market changes, especially in the debt business.


How has your strategy evolved since joining SL Green in 2002?

When we started this business within the REIT, our focus was really on buying subordinate debt. As we grew and the markets changed, we began co-originating, then originating by ourselves and syndicating. Now we’re holding whole loans more and financing them through repo facilities. We’re always trying to evolve the business to stay one step ahead because there are so many more competitors in the market now. We look to where the inefficiency is in the market, and that’s where we think we’ll make the most money.

Where do you see that inefficiency right now?

This is the most efficient market we’ve seen, unfortunately [laughs]. There’s so much capital. We’re focusing on using our relationships and being quick to get deals. We still have a big advantage with transitional assets, given our real estate background. A lot of sponsors—and it may be counterintuitive—prefer us to be in the more complicated deals with some redevelopment and leasing because as their business plans change they know they can come to us and say, “Look, we know this wasn’t on the initial plan, but as we’re looking at the market, we’ve re-evaluated, here’s how we think we should change it.” From a real estate perspective, we can understand those assets quickly and say, “That wasn’t the original plan, maybe it’s more expensive, but we think it makes sense,” or, “We understand you may have to sign a lease to less than underwriting to get the momentum in your leasing and you’ll make it up on the back end,” whereas a lot of pure lenders don’t understand that and are stuck in their model. So, I think in any real value-add real estate, I think we have a big advantage in working with clients. We view ourselves as partners with our borrowers on that.

The transitional space is extremely competitive right now.

Yes, but we’ve always been in that space. Some of the foreign capital is doing the cheap, 10-year fixed-rate [mezzanine lending], and that’s not a space we want to play in as much. Sometimes we’ll take down a mezz loan, sell pieces and lever up that way to get a yield that works for us, but otherwise we’re really looking for better yields for ourselves, and the transitional space tends to be a good fit us.

You provided a $110 million mezzanine loan on 245 Park Avenue and sold part of it. Are you looking at 245 Park again as a potential acquisition now that it’s back on the market?

We look at every asset that’s on the market, and we’re always looking to invest in a way that makes money. We always have conversations. But, for now, we’re a lender and we’re very happy being a lender.

That deal is a perfect example in terms of how we tried to buy [the property], and [HNA] paid a higher price than we were willing to. But when they lined up their financing—because we’d already done all the underwriting—we could quickly commit to doing the bottom mezzanine loan. So, early on that guaranteed us a position in the capital stack. The banks like it because they’re able to sell their bonds and their senior mezz at a lower rate with us as the anchor in the capital stack. And then, to enhance our yield, we sold a piece of our loan off. So it’s kind of a win-win for everyone; the bank that originated the loan gets a better execution with us anchoring and selling the pieces, and we were able to hold what we want, syndicate off a piece and get an above-market return.

Has barbell lending been a consistent strategy for SL Green? 

We’ve always kind of looked to run the business that way. For us, we try to have a blended yield, and in doing that we can do some higher-yielding stuff and some lower-yielding. It allows us to play where we want in each capital stack and at the right risk point. So there are a lot of deals where lenders are junior to us in the transaction, and a lot of people will view us as a first loss, and a lot of times we are. But there are a significant number of other deals where we take a more senior piece of the stack because, for us, that’s the better risk-adjusted return.

How are you choosing the “good spots” in the market and identifying potential opportunities?

Right now, we’re not growing the size of our book significantly. What that enables us to do is seek out transactions where we like the sponsor, the real estate and the basis. We do those deals and then look within our own portfolio and start selling off some other assets we’ve originated. If we can originate a loan on a new vintage at a little higher yield than something we’re selling, it makes the company a little bit more incremental money. Hopefully, we like the credit on the loans we’re [adding] a little more than those we’re selling, or they’re higher yielding but the same credit. We’re always looking to optimize the book.

Tell us about 888 Broadway. Why were you attracted to that particular financing opportunity?

It’s a great location and a great piece of real estate with two very good sponsors. We have a great relationship with Normandy [Real Estate]. They’re great guys and very good operators. We really believed in their business plan for the asset and think it’s going to be an incredibly successful project. It’s a typical transaction where there’s going to be redevelopment and a lot of lease-up, and if they have to come back and change their plans, they know that we’ll be very flexible with them.

Are there any examples of that flexibility you can give us?

For RFR on 285 Madison Avenue, as they got into the project, the scope of the project changed. We thought it was the right thing for the property, so not only did we say, “We agree with what you’re doing, but we’re also happy to upsize our loan to allow it and help fund it because we think it’s right for the project,” and we gave them additional capital to do that.

RXR has been upping its lending activities, joint venturing recently with a Canadian pension fund to do so. What’s the draw is in increasing that activity for New York City owners?

I think it’s driven by the strong desire for institutional capital to be investing in real estate right now. There’s not as much sales activity and so they use the debt space to get real estate exposure and returns.

Is the bid-ask spread still buoying sales?

I don’t think it’s so much that bid-ask spread is so wide, as much as over half the stock of New York City office buildings are owned by a handful of well-capitalized institutions. If they don’t see opportunity to reinvest their capital somewhere else, they’re not going to sell for the sake of selling and then sit on cash. We’ve sold assets to buy back stock and if we didn’t see that opportunity maybe we wouldn’t be as aggressive in selling assets. You’re also seeing some joint ventures because some people want to sell a little bit and have some need for reinvestment. I think a lot of it is driven by a lack of reinvestment opportunity.

That’s good news for the debt side, in terms of increased recapitalizations?

It is, and it isn’t. It’s good in terms of you’ll see a lot more recaps like you saw on 237 Park [Avenue] last year. One of the partners wanted to sell, but they got such attractive financing they said, “You know what, there’s really no reason to sell because this financing is so attractive it’s really not worth exiting.” We were in that loan but got paid off. So, it’s good from that perspective. But part of the spread compression is there’s so much money chasing not as many deals, and if the sales market had a little more transaction volume, you’d probably have a little more easing just because there’d be more financing.

It seems like last year was truly the year of competition.

Yes, and I think it’s even more competitive now. We’ve seen spreads come in significantly, and there are more people raising money to compete in the spaces, so it’s maybe even oversaturated right now. The pricing has come down and we have to work a little bit harder through syndications to get the yields we want.

How has the syndication side of the market evolved?

I just think the capital is much cheaper, so it used to be that you could take down a loan and there was a significant amount of room in the spread you were getting to syndicate out and get a good deal for yourself. Now, the capital stack and the pricing is so much tighter, you have to be right on top of the pricing when you’re going to sell more inventory or a mezz piece. There’s much less room for error in judging exactly where the capital markets are.

Are you seeing discipline slide anywhere in the lending market?

The only place we see a little less discipline is on refinancings on new acquisitions. When market value is pegged, I think it’s a lot clearer with refinancings when certain nondomestic or newer lenders are looking at appraised values but lending at a higher value. But, it’s still a very controlled market, and you haven’t seen as many financings where borrowers are looking to get very high leverage.

And borrowers are also being pretty disciplined, correct?

It’s a much more equitized market, which is good, as people are really stretching out financings. It leads to a few less mezz opportunities, but for a market as a whole it’s much healthier.

SL Green’s big acquisition last year was Worldwide Plaza. What appealed there?

It’s a Class-A building and we wanted a little more exposure on the West Side. We got in at a very good basis, a very good cap rate. If you look at our returns on a fee-enhanced basis, they were extremely attractive versus anything else we were seeing in the market. So, [it was] a Class-A building at a low basis and [in] an area on West Side [where] we wanted to be, with a great tenant roster. [And the fact that] we thought it was kind of an above-market attractive yield was great for us. It was also good to team up with RXR, with whom we have a great relationship.

Any specific strategy you’re working on for 2018?

We look every year to sell a couple of assets and then find the best way to redeploy that capital from a lending standpoint. We try to manage that to about 10 percent of the company’s assets but always optimizing, working on risk-adjustment return, duration and then finding the best projects and the best borrowers. So, I think that strategy stays throughout the cycle for us.

How many opportunities would you say come to your desk every year?

I would say hundreds of opportunities come across. You don’t dig deep on a lot of them. We really quickly kind of weed out the ones we think are right for us and then focus on them. One of the reasons is that we’ve underwritten almost every asset in New York already, know it and have a view. We generally already have a value on the building, so we can quickly look at it. We know exactly what we’re looking for.

Has SL Green’s debt business always been 10 percent of the company? Do you see it increasing at some point?

It’s been pretty steady for the past decade or so, so I think as a public equity REIT that’s the right level to keep it at. And, in some ways, it doesn’t force us to do transactions the way it does for other people. We have the ability to really just choose the transactions we think are best, and we aren’t forced to put out capital.

Given how busy you are, do you still have time to play tennis?

I do [laughs]. I’ve started playing much more frequently. My kids play, so I’ve started getting more into it.

So they take after you?

They do. The oldest one [9] is playing tournaments, and she’s doing really well. My little guy loves it—and is excellent for a 6-year-old—my 3-year-old has not gotten into it. Yet. What’s interesting is [Fried Frank’s] John Mechanic hosts a lot of tennis games. I’ve played with him a lot. He introduced me to a lot of people in the industry when I was just starting out, and through him, I was fortunate enough to meet a lot of people.

Do you have any career mentors?

My father was in the real estate business—he had an accounting and consulting business—so from a young age I got to learn from him. I grew up listening to his phone calls with people talking about real estate deals and how to structure things. At my first job at Credit Suisse I worked with David Genovese, who—lucky for me—took a big interest in my wellbeing. He would allow me to sit in when we were working on selling properties. I came [to SL Green] in my mid-20s and have been beyond fortunate to work for Andrew [Mathias] and Marc [Holliday]. They’re the best in the industry, and the amount they have taught me is invaluable.

Is your dad happy with your career choices?

He is. I’ve been very fortunate. I’ve worked hard but was at the right companies with the right guys, and it’s worked out pretty well.

Source: commercial

Industrious Moving HQ to Union Square From Brooklyn With 14K-SF Deal

Bye bye, Brooklyn!

Flexible office space provider Industrious has signed a 14,484-square-foot lease at SL Green Realty Corp.’s 215 Park Avenue South to relocate its headquarters to the same building where it has its only Manhattan location, Commercial Observer has learned.

The company will move to the entire 13th floor of the 20-story property between East 17th and East 18th Streets, according to a spokeswoman for Industrious. It already leased the entire 17,500-square-foot 11th and 17,255-square-foot 12th floors in the building for roughly 35,000 square feet for shared offices for its members, as CO previously reported. All told, Industrious will occupy more than 49,000 square feet of the 330,000-square-foot property.

The new transaction is for three years and the asking rent was $70 per square foot.

Industrious has been growing rapidly and the company recently landed $80 million in a Series C funding led by Fifth Wall Ventures and Riverwood Capital, as CO reported last month.  

“We’ve had a very busy year and are excited to continue our momentum coming out of our $80 milion funding news a few weeks ago,” Industrious President Justin Stewart said in a prepared statement to CO. “To date, our national team has worked out of the Industrious Brooklyn space, but at the beginning of this year we outgrew our space there.”

The majority of Industrious’ 80 employees will relocate from the headquarters at
594 Dean Street between Carlton and Vanderbilt Avenues in Prospect Heights where it has just under 2,000 square feet for its corporate offices, according to a spokeswoman for the company.

Industrious has 35 locations across the country, and recently reached a milestone with a total of 1 million square feet of space.

CBRE’s Sacha Zarba and Alice Fair handled the deal for the tenant with Katharine Lau, the director of real estate for Industrious, . A spokeswoman for the brokerage did not immediately return a request seeking comment from Zarba. Howard Tenenbaum and Gary Rosen represented SL Green in the transaction in-house.

A spokesman for the landlord did not immediately provide a comment.

Source: commercial

MIPIM: US Experts Tell World America Is Loaded With Opportunities, So Act Fast

Those that attended Commercial Observer’s panel on United States real estate investing today—the second day of the annual MIPIM (or Marché International des Professionnels d’Immobilier) property conference in Cannes, France—were told there are ample deals to be made in America.

At the event “Developing & Investing in the United States: Where, What & How?” some of the most prolific developers and lenders in the U.S. told real estate professionals not to worry about reports of rising interest rates, to expand their horizons beyond premium “gateway” markets (like New York City or San Francisco) and to act quickly or risk losing the deal.

Brookfield Property Partners Senior Managing Partner and Chairman Ric Clark opened the event by talking about the three trends his company sees affecting the U.S. real estate market: booming population growth of urban areas; the rise of millennials and increases in innovation; and technology for properties.  

Expanding on the first point, Clark said that cities around the U.S. are projected to have 350 million residents in the year 2050, up from 125 million in 1960. In 2014, he said, that figure was 258 million people. 

“Growing urban populations clearly present major challenges, but also major opportunities for those in the real estate business,” Clark told the audience. “The new city dwellers are going to need places to live and work, new schools and hospitals and a massive investment infrastructure will also be required.”

Bruce Mosler, the chairman of global brokerage at Cushman & Wakefield, moderated the first panel about developers’ thoughts on the market, which included Hines CEO of Capital Markets and the East Region Christopher Hughes; SL Green Realty Corp. co-Chief Investment Officer Isaac Zion; and Eran Polack, CEO and co-founder of HAP Investments.

Mosler informed the crowd of the reduced investment activity in New York City and other U.S. gateway markets, which resulted in a 23 percent drop to $96 billion last year from $125 billion in 2016. Comparatively, total investment in non-gateway U.S. markets dropped to $300 billion in 2017 from $339 billion in the previous year—just a 3 percent dip.

Hughes mentioned that investors need not focus only on gateway cities, because there are great opportunities elsewhere in the country.

“It’s a default to look at the gateway cities,” Hughes said. “As you start to look at the U.S. markets you should pay attention to the broader U.S. markets. You’ll make a mistake if you come to the U.S. and think there are only three cities to invest in. Follow the education [centers]; follow the underlying demand drivers.”

Zion pointed out that foreign investors need to understand that deals in the U.S. happen fast, so they need to be decisive.

“The quick ‘yes’ is always the best answer,” he said. “The quick ‘no’ is almost as good. It’s the long, long ‘maybe’ which unfortunately happens way too often. And if you are in that position you are not going to be able to act on potential opportunities.”

The second panel, moderated by Jonathan Mechanic, the chairman of the law firm real estate department at Fried Frank Harris Shriver & Jacobson, focused on lenders’ views of the U.S. market, and featured panelists Michael Shields, a managing director of ING Real Estate Finance; Christoph Donner, CEO of Allianz Real Estate of America; and Alexander Joerg, a managing director and head of real estate finance at Landesbank Baden-Württemberg.

Since capitalization rates—the expected rate of return on a project—are higher in the U.S. than in major European markets, investors can see a lot of upside, Shields said.

“You are breaking 3 [percent] caps in Paris and Berlin, so our risk guys when they see a 5 [percent cap rate], even though the base rate is higher, they like the U.S.,” Shields said. “And it’s such a big market. There are so many deals compared to [Europe]. London and Paris are the only two markers that have deal flow that compares to the U.S. So we could be a lot more selective and cherry pick a bit and figure out where we can actually compete.”

And since interest rates are climbing, now is the time to act, said Donner, who suspects that the movement in rates will boost deals.

“I think we are going to see more volume just because rising interest rates [means] it’s time now for clients to lock in rates for the long term,” he said, “because on a really long-term perspective these are ultra-low rates.”

Source: commercial

Michael Shah Talks His New Projects, Toledano and Why He ‘Loves’ This Retail Market

By now, Michael Shah’s origin story is well known in real estate circles. Twelve years ago, at the age of 28, the Harvard Law School graduate quit his gig at Midtown-based business law firm Wachtell, Lipton, Rosen & Katz after growing fed up with the demands of the job.

“I worked horrible hours, as all lawyers do,” Shah recalled. “I did not find it to be very fulfilling. You don’t get the chance to spend any of the money you’re making.” He spent the following six months “just partying in New York, going out every day and figuring out what I wanted to do.”

The Long Island native’s parents, both of whom were doctors, had invested in affordable housing properties in the city with their savings, providing Shah with some exposure to the nature of the real estate business. That, coupled with his own nous in the fields of business and law, meant that real estate proved an attractive opportunity for a smart young guy looking to reboot his professional life.

His first purchase was 1314 Seneca Avenue, a six-story affordable housing building in the Hunts Point section of the Bronx, which he bought for $6 million. “It was a true crack den, in every sense of the word—if you’ve seen New Jack City, it was the Carter building,” Shah said. Those kinds of outer-borough multifamily acquisitions represented Shah’s initial foray into the business, but in time, he began venturing into more ambitious segments of the market.

Today, the 40-year-old bachelor, who lives on Union Square West, oversees a diverse portfolio of New York City real estate assets approaching $1 billion in value, he said. His company, East Village-based Delshah Capital, owns everything from Meatpacking District retail properties, to Lower East Side apartment buildings, to a 1,100-unit federally subsidized housing complex in Staten Island.

Additionally, Delshah has established itself as a ground-up residential developer. Shah’s boutique Chelsea condo project at 221 West 17th Street, known as the Dorian, recently topped out after suffering a 2015 fire that set construction back a few years, and he’s also pursuing new high-end rental developments at 22 Chapel Street in Dumbo, Brooklyn, and 30 Morningside Drive in Morningside Heights (the latter being a conversion of five former medical buildings that Delshah acquired from Mount Sinai St. Luke’s hospital in 2016).

Shah recently spoke with Commercial Observer about those projects and more—including his firm’s venture into the Israeli bond market, his feud with troubled real estate investor Raphael Toledano and why he’s actually bullish on the retail market.

Commercial Observer: Looking at Delshah’s portfolio, you have a notably diverse array of investments in different types of properties. Do you feel that gives the firm an advantage, rather than just focusing on one asset class?

Michael Shah: It’s definitely an advantage, and there is a method to the madness. Some people just focus on certain submarkets. My personal investment philosophy is you’ve always got to remember real estate is cyclical, and depending on where the cycle is, there are different asset classes you want to be in.

At the top of the market, you want to be in debt, because people are paying more for assets than what they’re worth—so you want to be putting money out. At the bottom of the market, retail rents accelerate way more than residential rents—so if you feel like you’ve hit the bottom, you want to be heavier in retail, and office too. That’s how we pick what we’re in.

We also look at gentrifying submarkets: where people are moving, where we think they’re going to be moving, and where we think rents are going to grow.

You’ve recently increased your exposure on the Lower East Side, where you bought a walkup building at 138 Ludlow Street earlier this year for $19 million. Do you think that neighborhood still has a lot of embedded upside?

The Lower East Side is 100 percent gentrifying. I started investing there in 2007, and I’ve ridden the wave up. You have so many things happening there: Essex Crossing is coming online, and that Ludlow and Rivington corridor, where we bought 138 Ludlow, is maturing right now. I think there is additional upside.

I think the East Village still has upside. Greenwich Village and the West Village are two of the most desirable neighborhoods in Manhattan, so why wouldn’t the East Village a couple blocks over be? That’s where my friends hang out, that’s where some of the cooler bars are, that’s where people want to live.

image001 Michael Shah Talks His New Projects, Toledano and Why He ‘Loves’ This Retail Market
Rendering of Delshah’s Dorian condo project at 221 West 17th Street in Chelsea. Image: Delshah Capital

Let’s talk about some of the new projects you’re currently working on, like 30 Morningside Drive, 22 Chapel Street and the Dorian. Where do those projects stand, and what’s your investment thesis on those properties?

Thirty Morningside Drive will be a market-rate, five-building rental complex; the first two buildings are going to be delivered this time next year, and they’ll all be online by the end of 2019. The thesis is, you’ve seen SL Green do 1080 Amsterdam Avenue, Brodsky Organization [did 400 West 113th Street], and we think there’s demand for luxury product in that neighborhood that’s underserved.

Twenty-two Chapel is my first Brooklyn ground-up project. We’re supposed to close construction financing this month. It’s a very cool building; there will be a pool on the roof, which I think will be a very nice amenity, and a fitness center and lounge. Everyone’s seen what’s happened in Brooklyn over the last five years. It’s no longer a lower-cost alternative to Manhattan; it’s where people want to be instead of Manhattan. That building is also rentals, and 25 percent of the units will be affordable. We’re doing that under the new Affordable New York Housing Program.

We just topped out the Dorian and are going to start closings this September. That building is 45 percent [in contract]; one more unit would take it to 50 percent. Right now, between Chapel Street and Morningside, we have close to 450,000 square feet under development. I think we want to finish out these projects before we look at more development.

What are your thoughts on the Affordable New York program, and how does it compare to the previous 421a tax abatement that it was designed to replace?

Honestly, as a developer, the previous plan was more favorable for developers, but what the city is trying to do is smart. I think the city solves the affordable housing problem by giving people FAR [floor area ratio] bonuses to build affordable housing. Right now the law is that you get the tax incentive if you do a partially affordable building, which I think is great and it works. But I think what would be really good would be if you get an FAR bump—that way you keep all your market-rate FAR, can build the affordable and get the tax incentive.

Delshah has a good deal of exposure to the Manhattan retail market. I don’t have to tell you that it isn’t the easiest time for that market; what are your thoughts on the current state of retail real estate, and have you felt the downturn across your own portfolio?

I love it. We’re one of the few actively investing in retail right now. It’s a market that rose crazy fast from 2012 to 2015, and people always forget that rents don’t go up forever. With that asset class, market timing is very important. People are shying away from it, but we just picked up two notes on Manhattan retail assets from Signature Bank and may pick up a third. People bought vacant retail hoping to lease it up at huge rents, and they’re not because their whole investment was based on rents in 2015.

There’s a market for retail. The thesis is, stock markets are up, people feel wealthy, tax cuts are in place, there’s more disposable income, and retail’s been beaten to shit over the last few years. A lot of the pain was built into the pricing, but [companies] were reporting earnings and this was the best holiday shopping season we’ve seen in five years. When [rents adjust], you’ll see people signing new leases. If you’re a landlord with vacancy, it’s a hot retail market—as long as you don’t need 2015 rents.

But all my shit is leased. No bankruptcies; Restoration Hardware [at 55 Gansevoort Street in the Meatpacking District] is still crushing it, and Urban Outfitters [at 58-60 Ninth Avenue in the Meatpacking District] has very little debt anyway. We have good tenants.

You mentioned Delshah’s purchase of those retail notes; the firm has been particularly active in recent years in scooping up commercial mortgages and particularly debt that is nonperforming or on properties that have slipped into bankruptcy. How did you come to enter that market?

It’s a very active part of our business plan. I think a lot of people understand that buying nonperforming debt is a good strategy. What’s unique about us is that we’re not a purely financial purchaser; some people just buy the paper, but we’re very happy to own and reposition the asset because we’re effectively a real estate operating company. We’ve had tremendous success on all of them.

But those deals have also earned you enemies like landlord Raphael Toledano, who allegedly said he would “bury you” after you bought the note on his building at 97 Second Avenue. What did you make of that? [In November 2017, a federal bankruptcy court judge dismissed a lawsuit filed by Toledano seeking to block Shah’s acquisition of the property.]

The dude was imploding, and it was pretty clear vultures were going to pick his carcass dry, and I wanted to be one of them. From the time Madison Realty Capital made the loan [a $124 million mortgage on Toledano’s acquisition of a 16-building East Village portfolio], it wasn’t a question of if he was going to default—it was when. I think [Madison co-Founder and Managing Principal Josh] Zegen is going to do really well on that [portfolio].

I don’t really know how anybody in their right mind believed [Toledano] was going to out-litigate us; he’s not very litigation-savvy. I think it was a lot of noise and press—he’s a colorful guy. Before we did the deal, we had analyzed the litigation risk and knew how a bankruptcy would end, and it played out exactly how we planned. [Note: Toledano and his firm, Brookhill Properties, could not be reached for comment.]

michaelshah 461 Michael Shah Talks His New Projects, Toledano and Why He ‘Loves’ This Retail Market
Michael Shah at Delshah Capital’s offices in the East Village. Photo: Yvonne Albinowski/For Commercial Observer

Delshah is among a select group of U.S. real estate firms to have tapped the Israeli bond market via a publicly traded bond offering on the Tel Aviv Stock Exchange [the company has raised roughly $180 million to date in Israel, including a $50-plus million issuance last August with the expressed goal of financing 30 Morningside Drive]. What’s that experience been like thus far?

When I look back, that—along with Charlie [Oshman, founder of proptech startup Reonomy] coming on to be COO—have been two of the transformative things that have led to the company’s success. To become a publicly traded entity in Israel, you have to do a lot with organizational infrastructure, and I was a good real estate investor, but organizational design wasn’t something I spent a lot of time on. Charlie came over here, and now the company operates like a company and not just a deal shop.

It’s been very important to our trajectory; having access to that market allows us to do larger deals. We did our Series C offering for 30 Morningside, and here that money would have cost a lot more. It’s a great capital market. There’s a premium you pay when you’re a first-time issuer because the market doesn’t really know you, but this company was the perfect size for that market.

Related, Extell, those companies had larger issuances, but they didn’t pay attention to the market as much. Both Moinian and we looked at it not as a one-off but as a recurring thing for future growth. We have active investor relations programs; we go back to Israel when we’re not looking to raise money, we do a quarterly call after our earnings releases. That has gotten the market more comfortable with us.

How else do you finance your projects? With the growth of the alternative, non-bank lending sector in recent years, is that a segment of the financing market you’ve taken advantage of as banks have retreated from the realm of development lending?

30 Morningside was [financed] with Square Mile—we have a great relationship with them and CapitalSource. Bank of the Ozarks is doing the senior loan on 22 Chapel, and they were the acquisition financier for 30 Morningside. We’re still getting our deals financed; it’s just about how much leverage.

I think the real estate capital markets have matured a lot since 2009; since the credit crunch, alternative capital has stepped in to fill that void. It’s good for us because we tend to do complicated things. Historically, this company has used its own balance sheet [to finance operations], and this year one of the big initiatives for this company is to launch our own credit fund. We’ll be starting to lend on any asset class that’s based in New York.

You’re very much New York City-focused. Do you plan on increasing your exposure in any real estate markets outside of the city?

I think for the immediate future, we’ll be in New York [mostly]. I did buy a building in Miami recently—a corner building just outside of the Design District. We’re turning that into a 12,000-square-foot retail building.

And outside of real estate, you’ve also established yourself as a restaurateur.

I’ve got three operating restaurants and bars: Sons of Essex [on the Lower East Side], Petaluma [on the Upper East Side] and Leave Rochelle Out of It [on the Lower East Side]. They’re all in buildings that I’ve owned. I tried to do one at 200 Allen Street, but the Lower East Side community board feels they have a saturation issue [with bars and restaurants].

What was your motivation for entering the restaurant business? I feel a lot of people get into it so they can have a place where they can bring their friends and hang out.

That was never my motivation—though my dad did do that. It’s a tough business, and you have to manage expenses. I started doing it because I had vacant retail in 2009 and 2010; the thought process was, if we can put our own operating businesses in here, it’ll help pay rent. I definitely think we’ll end up with at least one more [restaurant] opening this year.

Lastly, do you still work out with Hamid Castro? [Castro, a personal trainer, was the subject of a 2016 New York Post article headlined “I Train Fat Rich Guys and Then Get Them Laid.” Shah featured prominently in the article, noting that he began training with Castro after hitting “a low point in my life.”]

Hamid and I are still good friends, though he’s not my trainer anymore.

Is exercise still a big part of your life?

Yeah, it’s basically my hour to myself every day to get into the mindset for what I’m trying to do at work. It’s a good way to start the day. And not being fat anymore is also a huge perk.

Source: commercial

It’s MIPIM Time: Why You Should Be Excited for the Cannes Conference

Once again, it’s that time of the year for real estate professionals across the globe to head to Cannes, France.

Just two months ahead of the invitation-only Cannes Film Festival, where movie stars will take to the sandy city on the French Riviera and no doubt trade Harvey Weinstein horror stories, tens of thousands of men and women in business suits carrying briefcases and card holders will storm the streets of Cannes hunting deals during the annual MIPIM (or Marché International des Professionnels d’Immobilier) conference on March 13 through March 16.

The bulk of the events, which is organized by Reed Exhibitions subsidiary Reed MIDEM, will be held at the Palais des Festivals et des Congrès, a massive conference center on the Cannes waterfront.

MIPIM’s theme for the 29th annual conference is “Mapping World Urbanity,” and the event’s programming will try to address issues like, How will we live in cities in 2030 and 2050? And, what are the best strategies for building future cities in a globalized world?

There are plenty of reasons to be excited for MIPIM, but to approach a conference as big as this (with more than 24,000 people), a roadmap might prove useful. We talked with a few MIPIM-goers from the U.S. to get an idea of what the sophisticated attendant should look out for this year.

Networking (duh)

With approximately 24,200 expected participants from over 100 countries, it’s more than possible to find the right person to talk to at MIPIM, whatever your needs may be.

Of the attendees, there will be 5,000 investors and financial institutions, 4,500 developers, and 3,800 CEOs and chairpeople scrambling around the waterfront and in the Palais des Festivals. And there will be more than 3,100 exhibiting companies.  

And in case the conference center isn’t your scene to swap business cards, networking parties will take over the swanky hotels, luxury yachts and the beach.

pim17 0550 Its MIPIM Time: Why You Should Be Excited for the Cannes Conference
With an array of events and booths, there’s ample opportunities for networking at MIPIM. Photo: MIPIM

“The most important thing for me is the networking,” said Susan Greenfield of Brown Harris Stevens, who has been to the event for 28 consecutive years and has already booked her flight for No. 29. “I go every year because it’s the one place in the entire year where I see almost everyone I know from around the global at the same time.”

She added, “The thing that is so important about this event is you get so many decision-makers. One day I was walking down the street [in Cannes] and who could be facing me walking the other direction? Harry Macklowe. I said, ‘What are you doing here?’ He said, ‘I’m here to look for money, what are you doing here?’ ”

City and country exhibitions

If you’re thinking global and want to know what investment opportunities there are in cities abroad, this is the event for you.

The European cities put on a show at MIPIM, bringing large-scale panoramas of entire cities and models of megaprojects to dedicated pavilions. Last year, London and Istanbul had massive jaw-dropping displays.

“Some of the models and booths are off the charts,” said Jay Olshonsky, the president of NAI Global, who has gone to MIPIM for seven consecutive years and is returning this year. “Some people told me some of the models there are million-dollar [displays]. I always leave two or three hours for myself to walk around because you always see something you’ve never seen before.”  

“Le Grand Paris,” the name for the pavilion dedicated to the City of Lights, will feature 19 exhibitions and events each day. Belgium’s pavilion will feature experts and models of Flanders, Brussels and Wallonia, while Holland’s space will be dedicated to Amsterdam, Rotterdam, Utrecht and The Hague.

pim17 0688 Its MIPIM Time: Why You Should Be Excited for the Cannes Conference
Model displays of cities and large developments are popular in MIPIM, such as this one of London last year. Photo: MIPIM

On top of these, there will be booths dedicated to countries from Asia, Africa and North America. Not that the models and displays of cities are there just to be pretty or promote specific projects and the companies that are developing them; more than 370 political leaders and 500 representatives from cities will be in attendance to talk about development in their cities, attract developers and get investments in their locales. (We’ve already heard from the Moscow delegation!)

“If you go to ICSC in Vegas, which is by far a bigger show [with 37,000 attendees], it’s more about the displays about the companies [not cities],” Olshonsky said. “New York City doesn’t come and display at ICSC like Paris does in MIPIM.”

Panel events and keynote speeches

It’s not all deal-making and networking—MIPIM is also a place to learn about development trends across the globe. The event will feature more than 360 keynote speeches and well over 120 panels, sessions, workshops and networking socials covering a wide variety of topics—from Asia and Europe to sustainability and logistics.

And those events will also serve to gather experts across the globe and offer opportunities to get someone’s ear.

“[After networking,] the second thing that I find very valuable is attending these program and panels because I learn so much,” Greenfield said. “You never stop learning and real estate is always changing. If you don’t stay ahead, if you don’t stay involved, if you don’t stay knowledgeable, then you are going to miss out.”

Some panels to look out for include “Self-Driving Cars: Bringing a New Face to our Cities,” “Smart Housing: What Millennials Expect,” “Belt and Road Initiative: Capturing Opportunities Through Hong Kong” and “Urban Logistics: the Next Challenge for Cities.”

pim17 0360 Its MIPIM Time: Why You Should Be Excited for the Cannes Conference
The comprehensive panels with world-class experts are plentiful at MIPIM. Photo: MIPIM

And even Commercial Observer is getting in on the action, co-organizing the U.S.-focused two-panel event entitled “Developing and Investing in the United States: Where, What & How?” on the morning of March 14 at The Ruby Room in Palais des Festivals.

Ric Clark, Brookfield Property Group’s senior managing director and chairman, will deliver the keynote address and Jonathan Mechanic, the chairman of Fried Frank Harris Shriver & Jacobson’s real estate department, will moderate the panels. Cushman & Wakefield’s Bruce Mosler, SL Green Realty Corp.’s Isaac Zion, Hines’ Christopher Hughes, Hap Investments’ Eran Polack and Allianz’ Christoph Donner are just some of the panelists. (You can find us there!)

Tech

Come for the drinks and deals, but stay for the tech!

For the past couple of years, the presence of property technology companies has grown at MIPIM. As the sector is becoming a force in the industry—making more investors curious about what’s next to come—MIPIM has stepped up to provide some answers.

There will be a PropTech Lab event at MIPIM for the first time on March 15, where  invite-only real estate executives and tech leaders will meet and talk about the increased impact of technology on real estate.  

“MIPIM events and conferences will be great opportunities for members of the REBNYTech team to meet with industry leaders of tomorrow,” Ryan Baxter, a Real Estate Board of New York vice president for management services and government affairs, who is heading to MIPIM this year again and is a member of the advisory board of MIPIM PropTech, said in a statement. “We’re looking forward to learning more about smart cities and human-centric innovation efforts from around the world.”  

MIPIM also serves as the final leg of the third-annual MIPIM Startup Competition, an international tech competition in partnership with MetaProp NYC, a real estate tech accelerator. Nine finalists at the nexus of tech and real estate were selected from three previous events, MIPIM U.K., MIPIM Asia and MIPIM PropTech (in Manhattan), and those companies will face off in Cannes to determine the best of the lot on March 14.

The competitors from New York City’s MIPIM PropTech that are heading to Cannes are Real Atom, the first online marketplace for commercial real estate debt financing; PlanRadar, a digital software that facilitates project management for construction companies; and Acasa, an app that helps individuals manage household bills.

The winner will receive three passes to both MIPIM U.K. and MIPIM Asia 2018, four passes to MIPIM 2019 (again in Cannes), an automatic selection as a finalist for MetaProp NYC’s 2018 accelerator program as well as brand exposure and coaching at this year’s MIPIM.

And take in Cannes, for goodness sake!

“If you think about it, if you have got to go somewhere 6,000 miles away—for you and I, it’s not too shabby to go to the south of France,” Olshonsky said.  

Cannes is packed with bars, restaurants, hotels and historic buildings all within walking distance of the beach. For those looking to notch Michelin stars on their belts, there are plenty of options. La Palme d’Or, Villa Archange, Paloma and L’Oasis all hold multiple stars.

There are luxury hotels all around the beach area of Cannes. Some leading contenders are Hotel Barrière Le Majestic Cannes, InterContinental Carlton Cannes Hotel and Grand Hyatt Cannes Hôtel Martinez thanks to their astounding architecture and rich history.

And speaking of history, while you’re in town for a real estate expo, why not do a little sightseeing? Cannes is home to Eglise Notre Dame d’Espérance, a 17th century gothic church set atop a hill that overlooks the port area and it provides some amazing views. And there is also the Musée de la Castre, a museum that is set in a castle built by 11th-century monks.

Also just like the Hollywood Walk of Fame, Cannes is known for Allée des Étoiles du Cinéma, where stars leave their handprints. Finally, don’t forget to talk a stroll along the Promenade de la Croisette if you didn’t already do so on your way to and from the convention center.

Source: commercial

Packing a Punch: Mike Maturo Talks RXR’s New JV and Worldwide Plaza

Deal-making is bloodsport.

Thankfully, Mike Maturo, the president and CFO of RXR Realty, has come prepared.

“On Saturdays, I box,” Maturo, 56, told Commercial Observer from his office at 75 Rockefeller Plaza. “I train with a professional mixed martial arts fighter, and once a week I go into the ring, which is fun as long as I don’t go too far down in the age group. Because when I fight the younger guys, it gets a little rough.”

That’s on top of the Pilates he does three times per week. Oh, and the basketball he plays on Sundays before church. (Maturo has a license to marry people. He already has one ceremony under his belt and another in the pipeline.) Finally, a Peloton bike is his latest personal acquisition, and he’s gearing up to compete against Scott Rechler, RXR’s founder and CEO, in online classes.

And that’s just what he does in his free time.

By day, it’s a different kind of competition, as he makes sure to dot all the i’s and cross all the t’s as the finance head of a multibillion dollar real estate empire.

Right now, RXR has what Maturo describes as, “big things in our pockets.” One of those big things is a new joint venture with a Canadian pension fund (Maturo wasn’t at liberty to name it quite yet), adding even more capital power to the real estate powerhouse that is RXR.

Commercial Observer: What can you tell us about this new joint venture?

Mike Maturo: We’ve been actively lending, but I think you’ll see us penetrate the market far more deeply in that respect soon. We have partnered with a Canadian pension fund and formed a joint venture, which will seek opportunities for structured finance investments in the New York metro region. It’s starting with $300 million of equity—with the ability to expand over time—and will invest in a cross section of real estate including office, residential, industrial and retail.

Where in the capital stack will you play?

The joint venture will generally make mezzanine debt and preferred equity investments. Most will involve complex capital structures where we can use our business and real estate skillsets to mitigate risk.

Why is now the right time to increase your lending activities?

The investment market still has this bid-ask gap so we see it as a good opportunity to participate in the lending market. There are good developers and sponsors out there who are smaller players but have a good history in their respective markets and have difficulty accessing both equity and debt capital. We can play into their situations.

We can also write large checks; our size goes from $50 [million] to $500 million. Our deal with [Extell Development Company’s] Gary Barnett [for One Manhattan Square in 2016] was $465 million, and so we don’t shy away from that [size of loan]. We have a big appetite not only in this venture that I’m referring to but from our broad base of investors to do co-investment in these types of transactions. So I think that’s another competitive advantage for us.

If the investment activity on the acquisition side starts to heat up you’ll see us actively playing here. That could also be in combination with banks and other players. It’s going to be active and diverse and on the lending side you’ll see us play across multiple products.

More so than previously?

When we were a public company [prior to 2007] we were very pigeonholed in one sector and that never made sense to us because we’re so deep in this region. We have over 1,500 tenants so think about how many companies we’re touching on a daily basis. We all live here, we raise our kids here, we participate in the community here. We’re really ingrained in these markets. We see a lot across multiple sectors so it makes sense for us to participate. We understand what tenants and customers want, so it’s easy for us to underwrite the market and the economics.

How would you describe your lending appetite?

We have a pretty wide view and we don’t restrict ourselves. Would we do hotels? Probably not. But if we found something we really liked—because we have underwritten hotels in the past—we wouldn’t shy away. But, I think you’ll see us lend more on residential, office, mixed-use and industrial properties.

And you’ll continue to target the New York metro area?

Yes, but we’ll be casting a wider net. We’re looking at a lot of opportunities in the boroughs. We have one deal in Westchester, [N.Y.] where we’re providing construction financing to a developer who is building a St. Regis-flagged gated super luxury condominium community. The project is very similar to our very successful Ritz Carlton Residences project on Long Island. We are lending  both the senior loan and the mezzanine loan. The developer selected RXR because of our experience developing the Ritz Carlton project and determined RXR could be value-add to the development. We are also providing recapitalization financing in the form of preferred equity to a three-property portfolio located in Manhattan and Long Island City.

How busy a year was 2017 for you?

We had over $5 billion in new financings last year so we were very active on that side of the business. On the investment side we weren’t so busy in terms of actual transaction closings, but we bought Worldwide Plaza with SL Green [The duo purchased a 48.7 percent stake in the trophy asset with an agreed-upon property value of $1.73 billion], which is obviously a very big transaction. We underwrote probably $30 billion in transactions but in the market there’s a reasonable bid-ask gap that’s been there for the past 18 months or so. So while we were active looking at deals, we only transacted on buying One Worldwide Plaza.

We’ve been very active on the development and redevelopment side, including this building at 75 Rock. We continue to work on Pier 57, which is a redevelopment of the site for Google and in Brooklyn we have a big redevelopment in the Navy Yard. That will be a primary focus this year, in terms of getting the redevelopment up and running. We also have a residential portfolio that was very active last year. We finished one project in downtown Stamford, [Conn.], that we’ve started to lease, and we have major projects in [other parts of New York including] Westchester, Downtown New Rochelle, Downtown Yonkers and Glen Cove in Long Island. Plus we’re developing the second phase of our North Hills Ritz Carlton Residences project. The first phase sold out last year. So, we’ve been very active across the board.

How did the Worldwide Plaza acquisition come about last October? And why was it the right time for the deal?

It’s a long story and somewhat complex, but we actually had the contract on that building when it originally sold to NYRT [New York REIT] and through a whole confluence of events it didn’t go our way. But we had significant interest in the building for a long time. When NYRT got into its issues [its gradual winding down via a liquidation plan] I think their plan was more geared toward a liquidation than having an ongoing business. We were a natural player to step in and work through the acquisition with them because we had a very good understanding of the asset. We had actually looked to work with SL Green on a potentially broader purchase of assets in the NYRT portfolio beyond just Worldwide Plaza, and that’s how the relationship with SL Green with respect to the property came about.

What was the property’s biggest selling point?

It’s a great asset and one that would be very difficult to build again—the bones of the building are very strong. The West Side of Manhattan continues to flourish—it’s not part of Hudson Yards, but it’s coordinated into that West Side area that’s getting more popular and more populated on both the residential and office sides. We think as a long-term asset there’s potential there with some of the tenant base that may want to extend and renew, and there’s also potential with the retail. So there’s opportunity to create value, and honestly we’re buying at a good price per foot. We bought it in the upper $800s per square foot, and when you look at pricing in New York and the replacement value for a building of that nature, it feels like a solid deal. It was attractive in terms of what our investors are looking for: a good current yield with potential for upside in an iconic building. So, we checked a lot of boxes.

Was there a lot of competition for the $1.2 billion refinance of Worldwide Plaza?  

We went out to a small crowd because in the [commercial mortgage-backed securities] world the pricing isn’t that different, everyone prices off the same model. So we went to our relationships—a handful of CMBS players we knew could execute quickly. Everyone had a strong relationship with Goldman Sachs, so it came together pretty fast, as opposed to 1330 Avenue of the Americas where we went out and had a distribution through a brokerage process. It wasn’t that complex a deal, the building is fully leased long-term and NYRT had some timing requirements that we needed to meet so I think we were done within 60 days—in today’s world that’s quick.

Why was CMBS the best execution?

At that particular time, the bid in the CMBS market was very strong and it’s a very large loan. So, in order to execute that size of loan, the CMBS market tends to be more favorable for that. That being said, we’ve done billion-dollar loans in the bank market, too. But it just seemed right. And remember we had three parties—RXR, SL Green and NYRT—everyone had to agree on CMBS as the best execution.

Are you eyeing any other key acquisitions?

We have our fingers in the mix of a bunch of things but we look for opportunity. Scott [Rechler] and my other partners are always out in the market speaking to people. I don’t want to name any specific buildings [laughs], but we keep a good chart of what’s going on out there and where there could be potential for trading.

Are sellers becoming more realistic in terms of the prices they’ll sell at?

It’s interesting. If you look at it, we’ve already had a five to 10 percent reduction in valuations in New York City. But what you saw last year was a lot of refinancings. On 237 Park [Avenue] we surveyed the market and once we put New York Presbyterian Hospital in there we did the [$850 million June 2017] refinancing because we didn’t really like what we saw in terms of the market for investment sales. But if you look through to the valuations that underlie the refinancings, you can see that valuations that were done for these refinancings reflect that decrease in value. If I had to guess, I’d say that sellers will move more toward those values than the buyers moving up to the higher values. But, we’ll see what happens.

You refinanced 1330 Avenue of the Americas earlier this year with a $285 million loan from DekaBank. What was Deka’s competitive edge?

We saw a very strong bid for that deal; it’s a very strong asset that places well on Sixth Avenue, and it’s the type of asset that—in today’s market—lenders are attracted to. They see upside in terms of the [net operating income], and it’s a solid building that always performs well. Deka came in a little ahead of the pack. It’s interesting, in deals like this there’s always someone who has a feel for the building. Deka is actually in the building, and I think that makes a difference because they see how the building is operating on a day-to-day basis. So, they were pretty aggressive on the deal.

Did the competition for that financing include many foreign capital sources?

Yes, it was really across the board. Even alternative, private equity lenders are bidding into assets of that nature. We had foreign banks, we had foreign lenders, and we had the big U.S. banks. I think—particularly in today’s market—it’s desirable for a lender to get an asset like that in their portfolio. It was an easy deal to get done from an attraction standpoint.

And the Starrett-Lehigh Building’s debt refinance will be coming up soon, right?

The loan is due in June, and we’re in the early stages of the process. We will be looking at both floating-rate and fixed-rate options. We’ll be exploring floating-rate CMBS as well as a bank deal and we’ll likely look for five to seven years of term. That will be a very large loan, probably $1 billion-plus.

20180130 michael maturo 083 Packing a Punch: Mike Maturo Talks RXRs New JV and Worldwide Plaza
Mike Maturo. Photo: Sasha Maslov/ For Commercial Observer

Google is reportedly in talks to lease a substantial amount of space at Starrett-Lehigh. How are those talks going?

They’re going. It’s very exciting. If you look at what Google is doing, it makes sense. They’re building up their presence, and that building has a great personality for them.

It’s a pretty good time to be a borrower, right?

Yes, and I think one thing that’s interesting is the presence of the alternative lenders that are in the market right now. That continues to be an expansive group, and we have used them. We borrowed $5 billion last year, and that’s probably split $3 billion to $4 billion in refinancings and $500 [million] to $600 million in construction financings and transition financings. You’re seeing those transitional lenders be really active in those markets because they understand the real estate markets and mechanics of development properties a lot better than more traditional lenders. The market has gotten very competitive, and spreads have come in with those alternative lenders who historically looked to value add-type construction of redevelopment projects.

The construction side is a little more difficult. Big banks and alternative lenders and insurance companies are looking to make those type of investments but more with sponsors that have a track record of execution and that they have relationships with. We’re fortunate enough to be in that group and we have terrific access to ground-up construction financing.

Has your construction financing primarily come from traditional or nontraditional lenders?

We were very active on the construction borrowing side and used a combination of both traditional and alternative lenders for our New Rochelle, Yonkers and [Garvies Point Long Island] projects as well as the second phase of our Ritz Carlton Residences North Hills project [in Long Island]. I think alternative lenders are still credit-metric focused and maintain that discipline, but they understand the complexities and can focus more on the real estate side of the project.

Additionally, foreign capital is much more willing [to invest] than it previously was and finds lending more attractive from the standpoint of risk benefit metrics. The alternative lenders are benefiting from foreign capital looking to get into lending and investments.

In addition to your New York City presence, RXR is betting on the suburbs.

Our business is New York City-centric but regional in scope, so we look to the suburbs strategically. On the residential side there is an affordability issue in Manhattan, and the notion of trying to solve that in New York City is difficult—foolhardy, even—because there’s just not enough space and it’s not efficient enough to create housing that people can afford. So we think the solution is regional. The suburbs are going through a period of transition and the suburban market of the 1980s and 1990s is slowly becoming a relic in terms of office parks and malls. There’s a re-urbanization not only in New York but across the entire country, and the suburbs really need to wake up and understand that. Unless they change their complexion in terms of their real estate and in terms of office, retail and residential they will continue to lose out to the cities, which has been happening over the last 10 years.

So, you have an interesting combination of the cities—which can’t solve their issues with the housing they can produce—with the suburbs that now need to recreate the housing produced. It’s no longer white picket fences; more densification is needed in downtown developments.

So, we’ve combined those two. We’ve put a lot of effort into working with municipalities and helping them create revitalization programs. What’s interesting is if you go back to the 1960s and 1970s, these downtowns were bustling commercial centers. So the streetscapes and the architecture are already there; they just were abandoned and need to be refigured and revamped.

How’s your Long Island University Brooklyn campus project coming along?

We’re helping LIU with their future plans to redevelop their campus, and that will include some housing options. That will be market housing, but we’re also thinking through some plans to have creative-type shared houses in there. We’ve finished our development agreement and are now in our planning stages.

Are you on the hunt for construction financing yet?

Not yet, but we will be. It’s a pretty major project. I’ve been out whispering about it but—particularly where there is some complexity to it—you want to go through your predevelopment process and have your budgets done so you know what things will cost before you go out and talk construction financing.

So, is it just nonstop action at RXR?

We’re 24/7 here. I say that half-joking, but all weekend long we’re all connected—whether through email or texts—there’s constant collaboration and a flow of ideas. We’re a tight group of people. We worked hard to get to this point, but people come to us for solutions, and they see how we can take a property and recreate it. It’s a good place to be.

Source: commercial

Coworking Company Industrious Grows Union Square Digs to 35K SF

Brooklyn-based Industrious, a coworking space provider with locations around the country, is doubling the size of its lone Manhattan offices, Commercial Observer has learned.

The company, which offers shared work spaces and private suites, signed an early renewal and expansion of its lease at SL Green Realty Corp.’s 215 Park Avenue South, expanding its footprint to 34,755 square feet just a year after it opened the Union Square outpost.

Industrious already occupies the entire 17,255-square-foot 12th floor of the building and will add the 17,500-square-foot 11th floor of the tower between East 17th and East 18th Streets. The new lease is for 15 years, according to a spokeswoman for the company. The asking rent for space in the building is $70 per square foot, according to a spokeswoman for the landlord.

Since opening last year, the location has been very successful, according to Katharine Lau, the company’s director of real estate.

“Manhattan has been a fantastic market for Industrious,” Lau said in a prepared statement. “Many of our members have increased employee headcount, some four to five times, since working from our workspace on the 12th floor.”

Industrious opened its first New York City location in the Prospect Heights section of Brooklyn at 594 Dean Street between Carlton and Vanderbilt Avenues in 2015. The company maintains just two locations in the city. It has 25 active locations around the country. 

Industrious’ in-house real estate team represented the company in the transaction, while an SL Green team of Howard Tenenbaum and Gary Rosen handled the negotiations for the landlord.

A representative from SL Green did not immediately return a request seeking comment via a spokesman.

Source: commercial

Greenberg Traurig Taking Four Floors at SL Green’s One Vanderbilt

Powerhouse law firm Greenberg Traurig is the latest tenant to commit to space at SL Green Realty Corp.’s massive One Vanderbilt office development, having reportedly inked a lease for between 130,000 and 140,000 square feet.

Greenberg Traurig has agreed a 15-year deal for four contiguous floors at the planned 58-story, 1.7-million-square-foot property encompassing the entire block bound by East 42nd and East 43rd Streets and Madison and Vanderbilt Avenues, adjacent to Grand Central Terminal.

The law firm is slated to move from its current offices nearby at the MetLife Building at 200 Park Avenue, where it occupies around 200,000 square feet on a lease that’s due to expire in 2021, according to the New York Post, which first reported news of the lease.

The 1,401 feet tall, the Kohn Pedersen Fox Associates-designed One Vanderbilt is scheduled to open in 2020 and has already secured lease commitments from the likes of TD Bank, which nabbed 200,000 square feet, and German financial services giant DZ Bank, which leased more than 35,000 square feet. Celebrity chef Daniel Boulud will also be opening an 11,000-square-foot restaurant at the building.

Asking rent in the Greenberg Traurig deal was not disclosed, though they were reportedly $135 per square foot in the DZ Bank deal, the Post noted. Barry Gosin and Moshe Sukenik of Newmark Knight Frank represented Greenberg Traurig, while a CBRE team of Ryan Alexander, Emily Jones, Sarah Pontius and Robert Alexander represented the landlord.

In a statement announcing the lease, Marc Holliday, SL Green’s chief executive officer, said the law firm “could have gone anywhere in New York and made a major statement by choosing to stay in East Midtown, reflecting the incredible demand we’re seeing for new construction in the most commuter-friendly location in the city.

Richard Rosenbaum, Greenberg Traurig’s executive chairman, added in a statement that the firm’s new One Vanderbilt offices will function “in concert with a combination of alternative nearby locations to create an office campus which will collectively provide the most efficient and effective overall solution for our clients and talent alike.”

Representatives for NKF and CBRE did not immediately provide comment.

Source: commercial

Investment Adviser and Consulting Firm Together Sign 70K-SF at 485 Lex

Landlord SL Green Realty Corp. has inked two new office leases totalling nearly 70,000 square feet at 485 Lexington Avenue in Midtown East, the company announced in a quarterly earnings release yesterday.

Columbia Management Investment Advisors signed a 38,651-square-foot deal for 11 years at the 32-story office building between East 46th and East 47th Streets. The Boston-based company, which is also known as Columbia Threadneedle Investments, currently has offices at 100 Park Avenue, another SL Green property nearby. It plans to relocate to 485 Lexington by the end of 2018, according to the firm’s spokesman.

The city’s largest office landlord also hammered out a deal with Ankura Consulting Group for 29,574 square feet on a lease that will run for nearly 16 years. The firm advises clients on corporate restructuring, litigation, corporate investigation, bankruptcy and other kinds of financial and legal challenges. It will relocate its New York offices from the 28th floor of 750 Third Avenue, another SL Green building just one block to the east.

An SL Green spokesman didn’t disclose asking rent in either transaction. It also wasn’t clear which brokers represented the tenants in the deals.

During today’s fourth-quarter earnings call, SL Green executives noted that the company’s leasing pipeline was healthy and that tenant concessions were declining.

“Face rents have increased over the past 12 months,” said SL Green’s director of leasing, Steven Durels. “I think there’s even been a little bit of a pullback on some of the free rent demands. Hopefully we’re at the point where the concession demands are over.”

In the fourth quarter of 2017, the landlord signed 47 office leases in Manhattan totalling 358,135 square feet. Over the course of the entire year, it inked 191 office leases for a total of 1.5 million square feet. The average lease term for deals signed last year was eight years, with average tenant concessions of nearly five months of free rent and an average tenant improvement allowance of $56.48 per rentable square foot.

Source: commercial

Title Insurance Company Renews in Midtown East

Chicago Title Insurance Company recently hammered out a deal to stay in its longtime office space at SL Green Realty Corp.’s 711 Third Avenue, according to a release from CBRE.

The 160-year-old company renewed its 30,035 square feet on part of the fifth floor in the office building between East 44th and East 45th Streets, near Grand Central Terminal. The length of the lease and asking rent weren’t immediately available. The national firm first moved into the building in 1999.

Gary Rosen and Howard Tenenbaum handled the transaction in-house for SL Green. And CBRE’s Joseph Fabrizi and Arkady Smolyansky represented Chicago Title Insurance. Neither CBRE nor SL Green responded to requests for comment.

Other tenants in the 1956 office tower include information services firm Informa, consulting company McKinsey & Co., Ricoh USA, Ackman-Ziff Real Estate Group and Schlesinger Associates, as Commercial Observer has previously reported.

SL Green purchased the 19-story, half-million-square-foot commercial property for an undisclosed amount in 1998 and spent several million dollars renovating the 1956 building in 2010.

Source: commercial