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LEASE BEAT 350 Park Avenue 641 Sixth Avenue, 745 Fifth Avenue

September 15, 2009

Power Broker SL Green’s Steve Durels Grows Leases

Nonprofit Leasing Reaps the Great Recession

The Weekly Newspaper of New York’s Commercial Real Estate Industry


re ie e em u pr iss

Jody and Douglas Durst on Leasing and Lending in the Downturn By Jotham Sederstrom

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Shravan Vidyarthi

Double the Durst

In This Week’s Issue 6 The Week in Real Estate By Tom Acitelli and Roland Li Tishman’s Stuy Town trouble; a fresh Atlantic Yards; a buyout at the Graybar. 8 Lease Beat By Emily Geminder • 350 Park Avenue • 641 Sixth Avenue • 156 Williams Street • 1 Penn Plaza • 412 West Broadway And dozens more of New York’s latest commercial deal 12 Commercial Breaks By Dana Rubinstein Foreign investors return; a 57th Street skyscraper struggles upward; Class A vacancies down—for now. 16 Prospective Tenants By Dana Rubinstein Booze peddler Diageo wants 50,000 feet near Grand Central. 18 Apartment-Building Sales By Dana Rubinstein How the hottest sector of the market is really doing. 19 Nonprofit Leasing By Jotham Sederstrom

Vol 1, No.1

Nonprofit leasing has jumped. But downsizing is driving the boom. 20 Building Stories: 100 Church Street By Lysandra Ohrstrom Under new management, headed for auction. 22 Power Broker: Steve Durels By Jotham Sederstrom The SL Green leasing chief talks his favorites—plus 100 Church. 24 Concrete Thoughts By Robert Knakal The coming distressed-assets wave—and why it’s not here yet. 26 The Op-Ed By Steven Spinola REBNY president on commercial taxes. 30 The Lead Indicator By Sam Chandan Fannie, Freddie and the faltering multifamily market. 30 CMBS Corner Designed by Nigel Holmes and compiled from Delinquent CMBS-backed loans in New York.

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32 The Sit-Down By Jotham Sederstrom Jody and Douglas Durst on succession and success. 34 Atlantic Yards Architect By Eliot Brown A conversation with Ratner’s new arena designer. 36 Stuy Town Irony By Eliot Brown How a court case about affordable housing benefits market-rate tenants. 40 Tweet Week By Roland Li The latest tweets from CBRE, Cushman and others. 50 The Lobby By Jotham Sederstrom A new Americas chief for CBRE; a Colliers go-to for distressed assets. 52 Calendar By Jotham Sederstrom The week ahead in events. 54 This Week’s Photos Photographed by Shravan Vidyarthi The National Realty Club’s State of the Market lunch.


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COZENCONTEMPORARY Abby Wenzel, Structured Finance Lawyer

Those who cannot evolve, languish. Individual backgrounds shape a law firm’s identity. At Cozen, our diversity gives us a unique competitive edge and the versatility to meet the future head-on. Abby M. Wenzel, Office Managing Partner 250 Park Avenue New York, New York 10177 212.883.4997 | Geoffrey D. Ferrer, Office Managing Partner 16th Floor, 45 Broadway New York, New York 10006 212.908.1201 |

For worldwide offices, visit us at

The confidence to proceed. ®

© 2009 Cozen O’Connor


September 15, 2009 | the commercial observer

A Rare Leasing Opportunity at Times Square’s Most Iconic Office Tower

Full Floors Entire 11th Floor – 32,394 rsf Entire 12th Floor – 32,394 rsf

Combined to

64,788 rsf

• New above standard installation • Move-in condition • Efficient floorplans • Great light & views of Times Square • Floors can be leased separately • Availability arranged

Building Features • On-site parking garage • On-site building management • Financially stable ownership • Walking distance to Grand Central, Penn Station & Port Authority

$40 million redevelopment program underway

Demanding Quality. Delivering Value.

• New Lobby

• New Entrances

• New Elevators

• New Restrooms

• New Corridors

• Upgraded Infrastructure

FRANK DOYLE, International Dir. 212-812-5759

CYNTHIA WASSERBERGER, Managing Dir. 212-812-5816

AMY SCHUSTEK, VP 212-216-1660

DAVID KAUFMAN, SVP, Leasing 212-356-4104

the commercial observer |

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DAVID KLEINER, SVP 212-812-5954

EDWARD DiTOLLA, SVP 212-812-5922

September 15, 2009 3

9/9/09 10:16:00 AM

Letter LeaSe Beat 350 Park avenu e 641 Sixth avenu e, 745 Fifth avenu e

September 15,


Power Brok SL Green’s Steve er Durels Grows Leases

The Weekl y NeWspaper

of NeW york’ s CommerCia

Nonprofit Leasi ng reaps the Great recession

l real esTaT

e iNdusTry


Dear Reader, Welcome to the debut issue of The Commercial Observer. I know you must be thinking: Why would a publisher start a

Double the Du rst Jody and Dou

glas Durst on

By Jotham SeDe


Leasing and Lend

ing in the Dow


weekly newspaper for a great industry under assault in the middle of an economically embattled era? Read through this issue and you’ll start to see why … I believe that if a print product can serve a targeted sector with high-quality information, then the product will thrive. The goal of this publication is to cover the leasing industry in a way that has never been accomplished. New York City is the most dynamic and competitive real estate market in the world. It features some of the smartest investors, world-class buildings and impressive tenants. While this publication cannot fix our country’s banking problem—or the fact that debt is now scarcer than Pellegrino in the Sahara—we can provide fast, reliable and valuable information on what is really going on in an ever-changing marketplace. And now, more than ever, information is key.


Our reporting team will delve deeply into the industry and convey the thoughts of its leaders and introduce you to some of the quiet stars who have not yet become household names. While we will compete every week to bring you news on the biggest and most impactful deals,


we will focus just as much attention on what I think of as the “meat and potatoes” of commer-

Brian D. Gell 212.984.8064


cial real estate. From the Class A buildings to the Class C buildings; from the 1 million–square– foot leases to the 1,000-square-foot leases; and from the prestigious law firms to the corner


bodegas, we will not rest until we have presented you a complete picture of the city’s commercial real estate market. We hope that this will be invaluable to our readers, as we aim to provide market intelligence, comparable benchmarks and prospective leads. Finally, I would like to thank the staff of The Commercial Observer, who have worked tirelessly to make this project a reality in record speed. Many have been astonished by this undertaking. We hope we can reward them by serving our community. We welcome your feedback and hope that you will work with us to ensure this newspaper fulfills its full potential.


Jared Kushner

Jared Kushner, Publisher Robyn Weiss, Associate Publisher Tom McGeveran, Editorial Director Tom Acitelli, Editor Staff Writers: Eliot Brown, Dana Rubinstein Columnists: Robert Knakal, Sam Chandan Contributing Writers: Jotham Sederstrom, Emily Geminder Nancy Butkus, Art Director Tyler Rush, Production Manager Chris Cronis, Copy Editor Peter Lettre, Photo Editor Barbara Sullivan, Design Associate Lisa Medchill, Advertising Production Christopher Barnes, President, Observer Media Group

Cover Photograph of Jody and Douglas Durst in One Bryant Park by Shravan Vidyarthi


September 15, 2009 | the commercial observer

Leadership by example

OFFICE LEASE: 636 11th Ave., N.Y.

SALE: Pascack Valley Hospital, N.J.

RETAIL LEASE: 685 Fifth Ave., N.Y.

Winner REBNY

Winner NAIOP

Winner REBNY

2009 Henry Hart Rice Most Ingenious Deal of the Year

2009 Economic Impact Deal of the Year

2009 Most Creative Retail Deal of the Year

A 564,000-SF lease to Ogilvy & Mather at 636 11th Ave.

The sale of Pascack Valley Hospital, a 425,000-SF hospital and three medical office buildings totaling 54,000 SF in Bergen County.

A 20,000-SF lease of the former Gucci flagship to Diesel at 685 Fifth Ave.

Congratulations to Mitchell Konsker, Paul Glickman, Jack Cohen and Diana Biasotti for representing the ownership, the Hakimian Organization.

Congratulations to Andrew Merin, David Bernhaut, Jose Cruz, Gary Gabriel and Kevin O’Hearn for representing the seller.

Congratulations to James Downey, Eric Le Goff and Gene Spiegelman for representing Gucci Group.

So far in 2009, our professionals have been recognized with three of the industry’s premier awards for commercial leases and sales in the New York metro region. These are just a few of the most recent examples of leadership where we believe it matters most – on behalf of our clients. Since 1917, representing New York’s leading businesses and investors...We’re There.

the commercial observer |

September 15, 2009 5

The Week in Real Estate September 7 - September 14, 2009 By Tom Acitelli and Roland Li $40 M. More for Fulton Hub A Manhattan Supreme Court justice ruled that the M.T.A. must pay $40 million to the owners of the property seized to build the under-construction Fulton Street Transit Center in downtown Manhattan, according to the New York Post. The owners include major downtown landlord Brookfield Properties. Buyout at Graybar SL Green bought out W&M Properties’ ownership stake in the Graybar Building at 420 Lexington Avenue for $7.6 million, according to the New York Post. W&M had bought the passive stake for $5.1 million.

China to Invest in Distress China’s $300 billion sovereign-wealth fund is in talks to invest in U.S. distressed assets, according to the Wall Street Journal. The fund has met with private-equity managers recently, including BlackRock, Invesco and Lone Star Funds, to discuss mortgage securities backed by distressed office buildings, hotels and other commercial real estate.

Dean Poll, operator of the Central Park Boathouse, is expected to take over Tavern on the Green’s license in 2010. Apartment Rents in the Summer Recent reports from brokerages Citi Habitats and the Real Estate Group New York show that marketrate Manhattan apartment rents in the summer either dropped up to 10 percent or stayed generally flat from the spring, depending on the apartment’s size and location.

Real Estate’s Favorite Candidates The most viable candidates for citywide offices this year have collected more than $2.5 million from the real estate industry, according to an analysis by the Gotham Gazette. City Councilwoman Melinda Katz, who chairs the Council’s land-use committee, took in more than 30 percent of that figure for her comptroller run. Comptroller William Thompson, the likely Democratic nominee for mayor, has gotten $393,000.

Stuyvesant Town.

Grubb & Ellis Tapped for Cabrini Grubb & Ellis has been appointed the broker of Cabrini Medical Center at 217 East 19th Street, for the sale or long-term lease of the Gramercy Park hospital. The 455-bed hospital contains five buildings totaling almost 400,000 square feet, plus 54,000 square feet of basement. The properties occupy a footprint of 59,183 square feet, extending through half a city block.

Stuy Town, Cooper Village Value: $2.13 B. A recent report from Realpoint, a credit-rating agency, estimates the value of Stuyvesant Town and Peter Cooper Village at $2.13 billion, according to The New York Times. That is less than half of what a partnership led by Tishman Speyer borrowed to buy the apartment complexes in 2006. Also, the owners are at “high risk” of defaulting on $4.4 billion in loans connected to the purchase. Big Apartment-Building Year In Manhattan, employers are projected to cut jobs by 2.9 percent, or 70,500 workers, in 2009, leading to an increase in the borough’s apartmentvacancy rate, according to a report from Marcus & Millichap. Vacancy in large, market-rate buildings is predicted to increase by 4 percent, while asking and effective rents are projected to decrease by 7.5 percent and 7.8 percent, respectively. In 2009, 3,180 market-rate apartments will be completed in Manhattan, the greatest increase since 2005.

Property Sales Plunge Manhattan property sales fell to $509 million from a previous low of $1.7 billion in the first quarter, according to a report from Eastern Consolidated. There were no major office building sales, aside from 1330 Avenue of the Americas, which sold for $240 million. However, only 6,300 jobs were lost, down from 26,000 in the first quarter. In the second quarter, also, 13.7 percent of office space was listed as available, up from 12.9 percent in the first quarter.

JPMorgan Mulls Return JPMorgan Chases is considering a return to commercial real estate in 2010, according to Reuters. “These assets are rapidly re-pricing, there are a number of distressed sellers, there are a number of financial institutions that are overexposed, and from our past experience those sorts of things generally translate into an opportunity as you approach the bottom,” said Todd Maclin, JPMorgan’s head of commercial banking.

New Nets Arena Designs Forest City Ratner on Sept. 9 unveiled fresh designs for the New Jersey Nets arena planned as part of the

Atlantic Yards development in downtown Brooklyn. The designs were done by institutional and sports specialist Ellerbe Becket and local boutique architect SHoP, which replaced architect Frank Gehry. Forest City, led by chief executive Bruce Ratner, plans to sell $700 million in bonds to finance the entire development, which is also supposed to include more than 6,400 apartments and a commercial tower.


September 15, 2009 | the commercial observer

ShoP Architects; property shark; getty images

Tavern Files for Chapter 11 Jennifer Oz LeRoy, the license holder and chief executive of Tavern on the Green, filed the famed eatery for Chapter 11 bankruptcy protection.

ON DEADLINE: Trinity Donates Block Trinity Real Estate, manager of 6 million square feet of commercial space in Manhattan, is donating an entire city block to the Lower Manhattan Cultural Council for about three years to create an outdoor art space open to the public, according to Miriam Kreinin Souccar at Crain’s. “LentSpace, which opens Sept. 18, will feature work by eight international artists in its first exhibition, which runs until January. A press conference announcing the arrangement will be held on Thursday, Sept. 17. Executives at Trinity said the program puts a vacant site awaiting future development to good use.” The square block is bounded by Canal, Grand, Sullivan and Varick streets; it is being designed by architects Interboro Partners and curated by Adam Kleinman of the LMCC.

ON DEADLINE: Goldman vs. City and State The New York Post’s James Doran tells the story of Goldman Sachs’ wrangling with the city and state over “an expensive security agreement” surrounding the bank’s 43-story, $2.4 billion headquarters going up on Vesey Street in Battery Park City. It’s supposed to open by the end of 2009, but, according to the Post: “[T]he big move could be delayed. … [The] squabble is dealing yet another blow to the redevelopment of Ground Zero—and possibly putting taxpayers on the hook for $320 million if the Goldmangovernment accord collapses. In 2005, the state and city struck a deal with Goldman to provide the bank with $1.65 billion in tax-free Liberty Bonds, which have saved the bank at least $9 million a year in interest payments. The deal included $115 million in other tax breaks and cash grants. “One key incentive was the promise to provide Goldman with a much higher level of security than usually given to a Wall Street firm. … [T]he city pledged manpower, and the state was in charge of security infrastructure such as blockades, surveillance equipment and guard stations.” But the city has apparently told Goldman it’s going to scale back on the number of police because of budget problems and because “the higher levels are not yet necessary, given the long delays in opening office buildings at the World Trade Center site.” The city does not expect pushback from the bank, according to the Post, citing the possible bad PR that could come from a flush Wall Street house complaining about a lack of public funds. the commercial observer | 013013_NYComObserv_v5.indd

We are pleased to have represented

Rose Associates, Inc. in the renewal of their lease for 47,000 square feet at 200 Madison Avenue.

Jeffrey Rosenblatt represented Rose Associates, Inc. in this transaction.

Est. 1866 770 Lexington Avenue, New York City 212.396.8100


September 15, 2009 7 9/9/09 10:38 AM


Compiled by Emily Geminder


China’s Largest Investment Bank Opens Its First U.S. Office at 350 Park Avenue With China’s ever-expanding role in the global economy, Chinese investment banking is emerging as a force within the financial nucleus of New York. China International Capital Corporation, China’s largest investment bank, will open its first U.S. office at 350 Park Avenue. The investment bank and research services provider inked a six-year lease for the entire 28th floor—roughly 8,100 square feet—with plans to move in this November. CICC’s expansion, says the company, is intended to facilitate the trading of Chinese equities on

the U.S. market. The asking rent was $80 a square foot. CICC, 34 percent of which is owned by Morgan Stanley, is run by the son of former Chinese Premier Zhu Rongji, Levin Zhu. In July, the investment bank managed China State Construction Engineering Corporation’s initial public offering, which would turn out to be the world’s largest IPO this year, netting $7.3 billion. Greg Kraut and David Hollander of CB Richard Ellis represented CICC. Landlord Vornado Realty Trust was repped by Ron LoRusso.

641 Sixth Avenue In the wake of a series of home-furnishings collapses (think Linens ’n Things, Bombay Company and Fortunoff), the industry’s lackluster landscape might be primed for a few up-and-coming breakaways—among them Home Sweet Home, opening its third location at 641 Sixth Avenue. Signing a three-year lease for the 1,700-square-foot midtown space, the retailer will pay rent substantially below the asking price of $100 a square foot. As both purveyors of high-end home goods such as Williams-Sonoma and their more cost-minded cousins like Home Depot shed jobs earlier this year,


September 15, 2009

the conventional wisdom was that any industry related to the housing market would suffer a rough year. But though the housing bust may have taken a hit at the “home” in home furnishing, Home Sweet Home reports steady profits, according to Crain’s. The company relies heavily on the overstock inventory of major department stores, selling merchandise at discounts tempting even to recession-minded shoppers. The lease was brokered by Robert K. Futterman & Associates’ Brandon Eisenman and Ariel Schuster, who represented both the tenant and landlord Capital Management in the negotiations.

156 Williams Street The Hawthorne Foundation, a nonprofit educational institution for children and young adults with developmental disabilities, is moving into the ground floor of 156 Williams Street in the heart of the Financial District. The asking rent for the 10-year lease was a modest $38 a square foot. The deal, coming in at around 10,830 square feet, brings the 12-story building to 91 percent occupancy. Hawthorne joins a mix of nonprofit and commercial tenants, among them environmental nonprofit Earthjustice and business consultants Chrysler Borg. The building recently underwent a $7 million renovation, which, according to landlord Capstone’s managing principal Daniel Ghadamian, has attracted a growing roster of tenants. “The downtown submarket continues

to be the best performing in New York City, and 156 William Street has been well received by the brokerage community and their tenants,” he said. “We are certain that the newly renovated building serves as one of many incentives for potential tenants.” The privately run Hawthorne Foundation has served individuals with developmental disabilities, autism and behavioral disorders since 1981. It is the state of New York’s longest-practicing Applied Behavior Analysis program and provides services ranging from early intervention to vocational skills. Jeffrey Simmons of the Lawrence Group represented Hawthorne in the transaction; CB Richard Ellis team Jonathan Cope, Howard Fiddle, Bard Gerla, Evan Haskell and Michael Higgins repped Capstone.


Another Nonprofit for 156 Williams

Home Sweet Home Finds Its Place on Sixth Avenue | the commercial observer

the commercial observer |

September 15, 2009 9


Compiled by Emily Geminder

Food Court Press

The Score Brokerages that worked on the most deals in this week’s Lease Beat Leases worked on

Newmark Knight Frank


The Kaufman Organization


Ideal Properties


CB Richard Ellis


Grubb & Ellis


Savitt Partners


Cushman & Wakefield


Murray Hill Properties


For One Developer, a Terrace Was Essential 745 Fifth Avenue The demand? A terrace. The answer? Two stunning views of Central Park. Hotel and resort developer Coastal Development wanted a room with a view—a terrace, to be exact. After an exhaustive search by Peter Buckley of Colliers ABR (apparently, only 18 Manhattan office buildings feature balconies), it turned out the solution was just a block away from Coastal’s former quarters on East 57th Street. The space in the Paramount Group–owned building boasts not one but two terraces, each overlooking Central Park and one large enough to host a small party. Coastal signed a 10-year lease for the entire 18th floor—about 13,000 square feet— and plans to move in early next year, reports Crain’s. Newmark Knight Frank’s Erik Harris and Scott Klau represented landlord Paramount, along with its own vice president of leasing, Arthur Bocchi.


September 15, 2009

1 Penn Plaza The Riese Organization extended its 12,500-square-foot hold on Penn Station, where its 1 Penn Plaza food court, closed for renovation since April, reopened last week. With a litany of nationally branded franchises (Pizza Hut, Nathan’s, T.G.I. Friday’s, to list a few) and several self-developed concepts (Lindy’s, Charley O’s) to its name, Riese is the city’s largest restaurant operator, and its neon signage is stamped across high-profile locations from Times Square corners to a recent incursion into Union Square. At Penn Station, its lineup of national fast-food chains, along with its high-traffic location, secures the food court’s stature as a veritable rite of commuter-passage.

But it’s the food court’s foreign name that’s received the most attention lately: marching onto ground previously occupied by Dunkin Donuts, the Canadian coffee and donut colossus Tim Horton’s has invaded from the North. It began when the New York Post snapped a photo of a mouse nibbling a donut in a Riese-run Dunkin Donuts. One lawsuit and several years of frayed relations later, Riese’s Dunkin Donuts shut its doors and reemerged as Tim Horton’s earlier this summer. The Penn Station Tim Horton’s is the 13th to open its doors to New York City. Riese was represented in talks with landlord Amtrak by its own Mark Stempel.

Soho a Go for Sobral 412 West Broadway Soho rents, once the domain of an exorbitantly exclusive few, are, well, still exorbitant and, yes, still exclusive, but perhaps slightly less so—less enough that a few new tenants are taking the plunge. Among them is Sobral, the Brazilian jeweler who just snagged a lease at 412 West Broadway. The 10-year lease for 1,750 square feet includes 500 square feet on the ground floor, second floor and lower level, plus a 250-square-foot mezzanine. The former tenant, another jeweler, backed out of its lease in February due to diminished business and a hefty rent of $400 a square foot, according to Crain’s. These days, the area’s asking rents are a far cry from their former peaks, hovering around $280 a square foot. Doug Rice of Rice & Associates represented Sobral. Cushman & Wakefield’s Eric Le Goff and Sarah Mohr repped the landlord.


Brokerages | the commercial observer

Thank you

to all of the tenants and Newmark Knight Frank brokers involved in these recent deals at 515 Madison

Hamilton Investment Partners, LLC Broker: Corey Horowitz

Hampton Capital Management, LLC Brokers: Daniel Madison, Josh Friedman, Neil Goldmacher

Harrier Hawk Capital Management, LLC Brokers: Daniel Madison, John Moran, Daniel Hassett

Introducing stunning new pre-built units and four new tower floors at 515 Madison Avenue As exclusive agents, we are pleased to offer the following spaces featuring beautiful outdoor terraces for lease:

Suite 14A - 5,331 RSF Lobby renovation just completed LEED Certification underway

Features: • Class A, 42-Story art deco building • Brand new above standard installation designed by TSC Architects • Gorgeous usable outdoor terrace • Complete views of Madison Avenue • Direct access to the E & V trains and multiple bus lines

Fox River Execution Technology, LLC Brokers: Rob Silver, Neil Rubin


Floor E 4th P 5th E 6th P 11th A P 11th B P 11th C P 12th P 13th A P 13th B P 13th C P 14th A P 14th B P 14th C E 15th E 24th E 32th E 34th E 41th

All prices upon request SF Available 15,680 Leased 7,720 Leased 15,727 Lease Out 1,724 Leased 2,226 Leased 1,867 Leased 3,250 Lease Out 6,692 4,641 Leased 3,655 Lease Out 5,331 3,532 Leased 2,955 Leased 11,818 3,797 Lease Out 3,794 3,794 3,794

For leasing information please contact: Eric Gural Executive Managing Director 212.372.2021

Brian Steinwurtzel Managing Director 212.372.2091

Martin McGrath Building Manager 212.688.4730

Leasing & Management Agent

Owner the commercial observer |

Corey Horowitz Associate 646.441.3718

HOLDINGS September 15, 2009 11

Commercial Breaks

Worst- and Best-Case Scenarios for Commercial Recovery 2012 is looking better all the time By Dana Rubinstein


hat is the congenitally optimistic real estate professional to do when confronted with a Moody’s report titled: “For CMBS, Recovery Appears Through a Glass, Darkly—and Slowly.” Apparently, so downcast was Moody’s senior vice president Daniel Rubock that he had to resort to poetic language—and, later on, a LeBron James metaphor!—to articulate his predictions. And his conclusion? A rebound in commercial real estate “will not be any time soon.” “Our reckoning of the best case of when a CRE recovery will emerge (what goes down eventually does come up) is late 2010 or early 2011, though this depends on the macroeconomic arc of recovery,” he wrote. In a worst-case scenario, recovery will begin in 2012. In a best-case scenario, recovery will begin in late 2010

or early 2011. Though Mr. Rubock warns that even when said recovery “begins,” it may well be an unpleasant beginning, one fraught with “anemic growth” or “volatile acceleration/deceleration.” “This much is certain: because com-

Hotels are generally thought to recover first … and office buildings last. mercial real estate has not changed its stripes, it will continue to be an economic performance dawdler, typically lagging macro trends by between four and six quarters.” And the drubbing goes on, believe it or not: “[Commercial real estate] will stagnate because of increasing unemployment rates, increasing vacancy rates,

and increasing capitalization rates. This will lead to decreasing property values and, accordingly, more formidable refinancing challenges, decreasing cash flow and thus increasing term loan defaults, and continued liquidity ordeals for both capital markets and portfolio lenders. REITS, which many times act as a herald for CRE financing, have recently been able to raise surprising amounts of capital and some debt. How long before other (more leveraged) areas of CRE finance follow is an open question.” As of July, according to Moody’s, the delinquency rate on U.S. CMBS loans was 3 percent. The delinquency rate is expected to hit somewhere between 5 percent and 6 percent by the end of 2009. Meanwhile, vacancy rates are rising and will continue to do so until the end of 2010 or the beginning of 2011. Correspondingly, property values have taken a dive off a very steep cliff by a good 35.5 percent since late 2007.

More value depreciation is anticipated. When, oh when, will the industry start to convalesce? First, there has to be job growth: “Increased employment means fuller office buildings, more crowded retail stores, more hotel beds slept in, more factories and warehouses humming with activity, and thus, more cash flowing through to all landlords.” Once that happens, hotels are generally thought to recover first … and office buildings last. New CMBS issuance will only occur after “values slowly stabilize,” and investors develop a new appetite for CMBS. Which will take a while, and which is, frankly, sobering news for a market that once saw 45 percent of its lending capacity come from commercial-mortgage-backed securities.

LeBron James.

Class A Leasing Goes From Bad to Less Bad Report pegs August vacancy rate at under 12 percent; rise on the horizon


anhattan’s high-end leasing market has gone from bad to slightly less bad. The Class A vacancy rate, for example, fell from a bad 12 percent in July to a slightly less bad 11.8 percent in August, according to a monthly report from Colliers ABR. Accordingly, average asking rents for Class A space rose a whopping 19 cents, from $64.17 per square foot in July to $64.36 in August. Don’t get too excited. “I think it might be somewhat of a temporary reprieve,” said Robert Sammons, Colliers ABR’s research managing director. “I think it’s going to get a little worse before we start to see constant, very slight improvement, because we still have some large blocks of space out there that are not in our vacancy rate numbers yet.” Among the large blocks that will, like a collagen shot to the lip, plump the vacancy rate: Macklowe Properties nearly complete new building 510 Madison Avenue, with more than 12

September 15, 2009

300,000 available square feet, and SJP Properties’ nearly complete 11 Times Square, which, unless there’s an imminent lease signing, will contribute 1.1 million square feet to the vacancy rate. By submarket, midtown and downtown outperformed midtown south in August. The Class A vacancy rate in midtown decreased from 13.6 percent in July to 13.5 percent in August. “The news would have been better except for one large block of sublet space added in the Rockefeller Center submarket—specifically 203,000sf at 1301 Avenue of the Americas from Dresdner Kleinwort Wasserstein which intends to consolidate within the portfolio of its parent firm Commerzbank,” wrote Mr. Sammons. In keeping with that meager vacancy decline, there was a meager 52-cent asking rent increase, from $68.24 in July to $68.76 in August. Downtown’s numbers were surprisingly good thanks to Goldman Sachs, believe it or not, which withdrew 200,000 square feet from the

market at One Liberty Plaza. That reduced the Class A vacancy from 8.4 percent to 8.2 percent. However, Mr. Sammons noted that Goldman still intends to place 1.5 million square feet at 85 Broad Street on the market when it relocates to its shiny new digs at 200 West Street. Unlike in midtown, downtown asking rents fell further, from $47.71 a square foot to $45.97 a square foot. Rents haven’t been that low downtown since September 2006. Meanwhile, in midtown south, the overall vacancy rate rose from 13.9 percent to 14.1 percent, “equaling the post-9/11 high set in November 2002 and the highest since the 15.2 percent in July 1995.” The vacancy rate for Class A space—which represents only a small portion of midtown south’s office market— fell from 7.2 percent to 6.9 percent, while the vacancy rate for the bulk of the largely Class B and Class C market increased. The overall average asking rent fell from $41.31 a square foot to $40.61.

510 Madison Avenue.

property shark; getty images

By Dana Rubinstein | the commercial observer

the commercial observer | TRI-1579 CommerObsvAd.indd 1

September 15, 2009 13 9/8/09 2:36:18 PM

Commercial Breaks

Foreign Investors — They’re Back! Signs point to N.Y.C. real estate as parking spot for cash now By Dana Rubinstein


n a sign that the real estate market in New York City may be nearing bottom, foreign investors have resumed buying Manhattan buildings. Robert Knakal, chairman of Massey Knakal, has in recent weeks closed two deals with foreign investors. And he’s done so without the lubrication of thirdparty financing (which is good, because the financing landscape is bone-dry). “They’re essentially parking money here,” Mr. Knakal said of the foreign investors. “Although economies worldwide have been hurt, there are some people who have money and they’re looking

for safety. And I think the U.S. is a place that is perceived to be safe.” On Aug. 27, Joe Sitt’s Thor Equities sold 901 Broadway, a 14,336-square foot, cast-iron building between 19th and 20th streets, to an unnamed Spanish investor for $24.6 million. Cash. That’s a remarkable $1,716 a square foot, at a cap rate of 5.59 percent. The building’s net operating income, according to Massey Knakal, is $1.4 million, thanks, in part, to a 2007 lease with retailer Miss Sixty, which pays $313 a square foot. When Thor purchased the building in 2006, it paid $17.4 million. Meanwhile, on July 21, in an-

On Aug. 27, Joe Sitt’s Thor Equities sold 901 Broadway, a 14,336-square-foot, castiron building between 19th and 20th streets, to an unnamed Spanish investor for $24.6 million. Cash. That’s a remarkable $1,716 a square foot, at a cap rate of 5.59 percent. other deal brokered by Massey Knakal, a certain Mr. Ito, first

901 Broadway.

name unknown, purchased the building at 115 West 57th Street, a narrow little 8,790-squarefoot building with a developable 25,275 square feet, for $5.76 million, or $656 a square foot. When seller Extell Development bought the building in 2005, it paid $5.75 million. Mr. Knakal expects we’ll see more of the same. “Others are under contract,” Mr. Knakal said. “There are probably about 20 foreign investors I’m looking for stuff now for. They’re not real estate companies, but high-net-worth individuals who want to park money. I haven’t seen this type of flow since the mid-’80s.”

57th Street Skyscraper Up in the Air Developer, gov hammering out details, including height and, um, what goes inside


developer’s vision for a stunning, hourglass-shaped skyscraper at the corner of 57th Street and Second Avenue is moving forward, albeit in an ill-defined form. The city’s Educational Construction Fund, which is working with luxury residential developer World-Wide Group on the project,

Essentially, the Department of Education would have emerged from the process with three new developerfunded school buildings, along with $325 million in rent over the course of the 75-year lease. filed plans with the Department of Buildings on Sept. 10 for the project’s first phase: an 11-story building, containing 240,549 square feet for the two public schools originally located at the development site (P.S. 59 and the High School of Art & Design) and nearly 40,000 square feet of retail space. 14

September 15, 2009

Phase one is itself an amended version of the original plan, which called for the first phase to include 70,000 square feet of retail space. A spokesman for the developer acknowledged that the reduction is an adjustment to new economic realities. Phase two remains largely in flux. The original plans, first unveiled at the close of 2006, call for a 59-story residential skyscraper to rise on the site. Both the scraper’s height and its composition are now up in the air. “In terms of rentals or condos, it is too soon to commit one way or the other,” wrote World-Wide spokesman Lee Silberstein in an email. “This goes for the size, and therefore number of units.”


he project is a complicated public-private partnership that harks back to a more optimistic time. When first announced in late 2006, The New York Sun reported that World-Wide would lease the 1.5-acre site from the City of New York for 75 years. The city would allow World-Wide to relocate P.S. 59 to a new school, to be funded and built by the developer. Then, World-Wide would demolish P.S. 59’s old digs and build a new school building in its place, adjacent to the high school. Once that building was complete,

the high school would relocate next door, and its original building would be demolished. Then construction would begin on the residential portion of the project. Essentially, the Department of Education would have emerged from the process with three new developerfunded school buildings, along with $325 million in rent over the course of the 75-year lease. For its part, the developer would be allowed to build a magnificent, Skidmore, Owings & Merrill–designed skyscraper in what was then a booming residential real estate market. Even better, the state would issue $130 million in tax-free bonds to help finance the school’s construction. At first, construction plans moved forward according to plan. In August 2008, retail brokerage Robert K. Futterman & Associates announced that Whole Foods would anchor the project’s retail, opening an outlet there in 2012. By the end of 2008, World-Wide had finished construction of the temporary 63rd Street school for P.S. 59, the city’s first green school building. Industry trade New York Construction reported in October 2008 that construction on the school was to begin that fall. Nearly a year later, construction has yet to begin. “The temporary site of PS 59 has opened and the school relocated; the

rest of the timeline is being finalized,” Mr. Silberstein wrote. The project’s second phase remains murky, but Education Fund executive director Jamie Smarr expressed confidence that the state would still issue bonds to finance its construction, and the project would still be completed largely as

planned. “The developer is still very much involved as this is [a] publicprivate venture,” Mr. Smarr said in an email. “We are moving forward with the planning of this project and, other than some redesign, it remains the same as previously announced.”

Rendering of the Skidmore, Owings & Merrill–designed skyscraper.

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Creating Value one SteP at a tiMe. September 15, 2009 15

Commercial Breaks Prospective Tenants

Booze Giant Diageo Wants 50K Feet 530 Fifth sublease expires next August; looking in Grand Central area


iageo, the London-based maker of all spirits Smirnoff, Johnnie Walker, Guinness, Baileys, Cuervo, Tanqueray, J&B and Captain Morgan—and a firm that has human nature’s self-medicating tendencies to thank for its ability to weather the recession with relative aplomb—is scouring the Manhattan office market for new digs. (For what it’s worth: According to the firm’s Web site, “The word Diageo comes from the Latin for day (dia) and the Greek for world (geo). Tenant: Diageo Current Address: 530 Fifth Avenue Looking at: 50,000 feet in Grand Central area

We take this to mean every day, everywhere, people celebrate with our brands.”) Diageo’s real estate consultant, the Tampa-based CLW Real Estate, is working with Newmark Knight Frank principal and executive vice president Scott Klau to find about 50,000 square feet of Manhattan office space. The firm’s sublease from Time Inc. for similarly sized offices at 530 Fifth Avenue expires in August 2010. Diageo signed its existing fiveyear sublease in order to give its marketing team a foothold in New Broker: CLW Real Estate and Newmark Knight Frank Likelihood They’ll Move:

York City (the firm’s U.S. operations are based in Connecticut). Now that said foothold is secure, the firm wants to explore its housing options in what is undeniably a tenant’s market. Mr. Klau wouldn’t comment for this story. But sources say the firm is looking primarily in the vicinity of Grand Central Terminal.

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Apartment Building Sales a Real Walk-Up Downtown volume up; everywhere else, not so much; UWS prices increase


he multifamily sector of the New York real estate market is often described as the healthiest of the commercial bunch. Insomuch as there is, in fact, the occasional transaction, that description holds water. Especially when compared to the office-building market, which, as CB Richard Ellis recently reported, saw a measly three transactions of greater than $30 million in the first half of 2009. But comparatively healthy is in no way synonymous with healthy, as an August report by Marcus & Millic-

Downtown, the only area to see transaction volume grow, had 18 multifamily sales in the first half of ’09, up from 13 such sales in the second half of last year. hap’s Peter Von Der Ahe, a vice president for investment sales, makes abundantly clear. Per usual, the report focuses on buildings with at least four apartments and that are valued at less than $100 million (though in this market, under $50 million is more accurate). Anyway, the overall finding: Sales are down. Way down. “It’s very low,” Mr. Von Der Ahe said. He attributes that, in part, to the demise of Lehman Brothers on Sept. 15, 2008. Most of the building transactions that would have closed 18

September 15, 2009

in the first half of 2009 would have gone into contract in the second half of 2008. Lehman’s fall put the kibosh on much of that. On the upside, despite the continued dearth of financing, Mr. Von Der Ahe expects multifamily sales to increase during this second half of 2009. “The activity was so low the first half of the year that even a slight increase is going to look like a lot more activity,” he noted. “One thing that you’re seeing, though, is that sellers in the marketplace have become a lot more realistic with pricing. … You’re also starting to see some strategic moves from owners looking to sell, and maybe they’re not going to get as much for a property as they would have a year or two ago, but they’re electing to sell, get the cash in their pockets now, to get prepared to take advantage of opportunities that they think will be coming up in the next year or two. It’s opportunistic. That’s positive.” Here, by submarket, are Mr. Von Der Ahe’s findings (you might want to fortify yourself with a stiff drink first):

Midtown East Only four multifamily buildings sold in midtown east in the first half of 2009, compared to seven sales in the second half of last year. Buyers paid an average of $420 per square foot, down from an average of $887 a square foot in the second half of 2008. The average price per unit came to $339,045, down from $1,025,269 in the second half of 2008.

Midtown West Only three multifamily buildings have traded in midtown west in 2009, in contrast to six in the second half of ’08. They traded for an average price of $356 a square foot, down from $513 a square foot in the second half of ’08. Average price per unit: $253,568, down from $382,877 last year.

Upper East Side Ten multifamilies traded on the Upper East Side in the first half of this year, down only slightly from 11 in the second half of 2008. But the average price per square foot … my, oh my! Buyers paid $332 a square foot this year, compared to $627 in 2008. They paid an average of $217,951 per unit this year, down from $619,367 last year.

Upper West Side There were six multifamily building sales this year, down from 18 during the second half of 2008. These may just be aberrations, but both the

Upper West Side and Downtown (see below), saw prices increase, with the average price per square foot on the Upper West Side rising from $578 to $603, and the average price per unit rising from $429,642 to $585,856.

2 East Second Street, a five-unit building that sold this year for $1.7 million, or about $259 a square foot.


Downtown Downtown, the only area to see transaction volume grow, had 18 multifamily sales in the first half of ’09, up from 13 such sales in the second half of last year. This year, they traded at an average of $628 a square foot, up from $465 last year, and the units traded at an average of $762,039, up dramatically from $371,001 in the second half of 2008. “But I wouldn’t necessarily say the market is moving up in those neighborhoods,” warned Mr. Von Der Ahe. “What we’ve seen across the market is that the better-quality buildings and locations are holding their value, as opposed to the lesser-quality buildings. When the market was really hot, you saw pricing become very compressed, and now that’s stretching out.”

Harlem saw eight multifamily transactions, down from 14 in the second half of last year. The buildings traded for an average price per square foot of $169, down from $251 last year. The units were valued at an average of $116,820, down from $154,220 last year.

Washington Heights and Inwood These neighborhoods saw eight multifamily sales, down just slightly from nine during the second half of 2008. The price per square foot shrank from $167 to $127, and the average price per unit shrank from $118,354 to $95,240. | the commercial observer

Property shark

By Dana Rubinstein

Nonprofit? No Problem!

Dicier market means more options; contractions driving deals By Jotham Sederstrom


rustees from the Associated Medical Schools of New York got a rude awakening last summer when the nonprofit began making the rounds of its most reliable big-name donors. Private endowments that in more bountiful years could be counted on to contribute north of $100,000 annually were now pledging just a fraction of that sum—or, worse, nothing at all. “It’s been a little nerve-racking,” said the medical consortium’s executive director, Jo Wiederhorn, of the nonprofit’s dramatic endowment plunge. For Ms. Wiederhorn and dozens of other nonprofits across the city, the response to such recessionary cuts has

this year, the American Lung Association signed a 10-year lease in January at 14 Wall Street, effectively reducing its square footage from a full floor at 61 Broadway to just 9,000 square feet. “Corporate donations are down and budgetary constraints are on everybody’s mind,” said Jarod Stern, an associate director at tenant advisory firm Studley, which represented the American Lung Association in the transaction. “Sometimes in this market you can do far better by doing less.” Associated Medical Schools, meanwhile, inked a five-year lease in June for 3,304 square feet at 1270 Sixth Avenue, a move that changed

As of July, 950,850 square feet of nonprofit space has been leased in Manhattan, compared to 1.3 million feet in all of 2008. been to reevaluate real estate costs, often the second most expensive budgetary constraint next to staffing. Indeed, leasing activity among nonprofits is on track to surpass last year’s figures as organizations across the city take advantage of rent drops and a bevy of landlords eager to fill vacancies. As of July, 950,850 square feet of nonprofit space has been leased in Manhattan, compared to 1.3 million feet in all of 2008, according to figures provided by FirstService Williams, a real estate services firm. More tellingly, the nonprofit sector has ballooned since January and now represents 10 percent of all commercial transactions in Manhattan, up from just 5.4 percent last year, according to the industrywide data. “It’s probably right now one of the largest sectors of activity that we’ve found this year, and it’s only September,” said Perry Mesmer, a nonprofit specialist at FirstService. Real estate experts said most of the activity among an estimated 40 lease transactions this year have been contractions, as cash-strapped organizations look to downsize. City University of New York, the New York City Housing Authority and the New York Organ Donor Network are a few of the high-profile nonprofits to have signed new leases this year, said Mr. Mesmer, adding that many inked deals for smaller spaces. “Some of them are just moving to save money, which still generates a transaction,” said Mr. Mesmer. “They need the same space or smaller space, or they want to reduce their overhead.” In one of the largest nonprofit deals the commercial observer |

its square footage by 200 feet while also freeing them from a sublease they shared with another nonprofit. Associated Medical Schools will receive seven months paid rent at space valued at $50 per square foot, Ms. Wiederhorn said. “Nonprofits are long-term players in New York City and they don’t disappear in hard times,” said Suzanne Sunshine of S. Sunshine & Associates, which brokered the deal. “They tend to be counter-cyclical and they tend to be very cost-sensitive, so when prices fall they become more aggressive in looking for space in the real estate market,” added Ms. Sunshine, who has brokered three

deals for nonprofit groups since late June. The increased activity is a far cry from a year or so ago, when landlords had the ability to be more discerning, said Ms. Sunshine, who opened her doors to the nonprofit sector in June to take advantage of the economic downturn. While previously a broker for CB Richard Elllis, Ms. Sunshine said she struggled to find adequate commercial space for a Lower Manhattan nonprofit that mentors at-risk young adults. “It was very difficult to place them because many landlords said their certificate of occupancy wouldn’t al-

Suzanne Sunshine: ‘Nonprofits are long-term players in New York City.’

low for the traffic, or they’d say their infrastructure couldn’t handle it, or simply that they didn’t want these types of young adults coming into the buildings,” said Ms. Sunshine, adding that the group, which she declined to name, eventually pulled out of the market after a series of setbacks. “There were a million excuses,” Ms. Sunshine added. “But not anymore. The doors are open.”

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September 15, 2009 19

BUILDING STories: 100 Church Holy Cow! Downtown’s Biggest Leasing Challenge SL Green seizes reins at 100 Church; 650K feet empty; private auction planned


ust as workers were milling about 100 Church Street’s famously gaudy lobby at lunch hour on Aug. 26, an official from the Department of Buildings began plastering two violation notices in the windows of Bank of America on the ground floor. The citation faulted “signage,” in this case a racy advertisement for a teenage television series stretching around the corner of Church Street onto Park Place. The violation was a minor incident compared to the problems that 100 Church has encountered since the autumn of 2001. But it was a fitting end to a particularly bleak week for a building that has been plagued with bad luck. The day before the DOB’s ill-timed citation, The Observer broke the news that the Sapir Organization had handed over to one of its creditors, SL Green, the management and leasing duties of the 21-story office tower. Later that afternoon, Crain’s reported that SL Green was foreclosing on 100 Church and had scheduled a private auction for Oct. 15. In 2009,

THE VITALS Year Built: 1959 Landlord: SL Green controls it. Auction scheduled for Oct. 15 Square Footage: Total: 918,240 Office: 905,074 Retail: 13,166 Lot: 53,354 Total Rental Income*: $9,555,939 Total Rental Expenses*: $5,973,697 City’s Tentative Net Assessed Value 2009/10: $34,065,000 *As of 2008 —


September 15, 2009

SL Green and Gramercy Capital purchased the bulk of the building’s $85 million mezzanine debt from Sapir’s primary lender, Wachovia. (The Sapir Organization declined to comment for this article and SL Green declined to answer questions about the auction.) Sapir is not the first developer to default on its loan payments this year, nor is 100 Church the only building to be put on the auction block. But few other commercial properties have such a fraught history.


big, boxy, glassy structure that occupies one square block of the Financial District, 100 Church was designed by the prestigious firm Emery, Roth & Sons and finished in 1959. Sapir, led by father and son Tamir and Alex Sapir, bought the 1 million–square–foot building in 1997 for $55 million, according to CoStar. Its previous owner, the Church Madison Corporation, filed for bankruptcy in 1994, according to city records. Since the tower fetched nearly twice that in 1984, it looked like a good deal for the Sapirs. The New York Times reported in August 1984 that Larry Silverstein’s former brother-in-law and partner, Bernard H. Mendik, paid $116.5 million for 100 Church in a joint venture with the Equitable Life Assurance Society of the United States and the investment banking firm of Allen & Company. Mr. Mendik told The Times that he’d be able to spruce up the shabby tower in three months. “If I have the opportunity to convince tenants that a used Rolls is better than a new Cadillac, I’ll get them,” he said. At first it looked like the Sapirs’ gamble might pay off. In 1998, Bank of America signed a $65 million lease for six floors. Then came Sept. 11, 2001. The building was only a few blocks north of the World Trade Center, and the attacks triggered an exodus from 100 Church. Only three tenants returned after 9/11—one of these, the Jewish Émigré Association, is rumored to be occupying the 16th floor “by the grace of Tamir Sapir himself,” according to an Observer story from March 2009—and the building has remained about 50 percent vacant. Along the way, brokers have come and gone and prospective tenants have balked. In 2005, a group of toy companies walked, followed by the Omnicom Group in 2007, and Newsweek in 2008. In 2006, the Sapirs flirted with the idea of a residential conversion, but opted to remodel the inte-

Alex Sapir.

rior instead in the hopes that their prospects would rise along with the then-booming commercial market. They hired Cushman & Wakefield to re-market the building in 2006, and dropped them for CB Richard Ellis a year later. Neither a new broker nor crystal chandeliers and fountains in the lobby have attracted new tenants. Lawsuits filed by CBRE and Newmark Knight Frank brokers over lost compensation have also done little to enhance the building’s reputation. In the spring of 2008, the Sapir Organization announced a major facade makeover that would replace the building’s dated blue brick exterior with black granite, as well as update its 50-year-old window panes. It proclaimed the face-lift part of “the re-birth of Downtown New York.” Of course, Sapir’s financial troubles go back further than 2001. Sapir took out a $24.175 million mortgage with Fleet in December 2000, and was released from the agreement less than three years later after failing to make scheduled payments, according to the termination document filed with the city registrar in March 2003. Salomon Brothers Realty released Sapir from a $10.5 million mortgage in 2001, after it failed to make scheduled payments. In October 2007, the Sapirs refinanced their $145 million mortgage with Wachovia with a $255 million loan. This winter it looked like the Sapirs’ luck might be turning when the Claremont Preparatory School and a data management compa-

ny announced two new leases at 100 Church. Claremont’s parent, MetSchools Inc., however, refused Sapir’s request for an extension in April and forfeited more than $150,000 in lawyers and architects’ fees related to the 255,000 square feet it had planned to take, according to a source with knowledge of the negotiations. In August, Sapir filed a suit against SL Green and Gramercy Capital for allegedly delaying their approval of Claremont’s lease to prevent Sapir from qualifying for a loan extension.

Tungsten Properties is still advertising 150- to 3,000-square-foot, ‘fully-furnished’ office suites for $500 a month at 100 Church. The suit was dropped in mid-August. “I’m not sure what the sticking point was with the lender,” the source said. “I’m not pointing fingers, but their side couldn’t deliver on the lease agreement they signed. It’s unfortunate that [Alex Sapir] really didn’t own the building, the bank owned the building.”


L Green’s executive vice president and leasing director, Steve Durels, told The Observ-

er in the last week of August that the firm was hunting for a broker to market the building’s 12 unoccupied floors. “We’ve got about 650,000 square feet to lease up,” he said, though adding that SL Green is not marketing just yet. “Right now we’re getting our arms around the details of the building … and interviewing respective agents in the brokerage community.” Despite the changing of the guard, Tungsten Properties is still advertising 150- to 3,000-square-foot, “fully-furnished” office suites for $500 a month at 100 Church on its Web site. The listing promises “no credit check.” The broker confirmed that the space was still on the market, though the asking rent has recently risen to $1,000. Huge “For Rent” banners still hang in the window of the vacant ground-floor retail space on Barclay Street, too. The Winick Realty broker marketing the listing declined to comment on anything related to 100 Church. The building’s current tenants appeared oblivious to the trouble. One employee who has worked at 100 Church since 2001 said she has never noticed a management transition. “Aside from the crystal balls, it’s actually a really nice building,” she said, during a smoke break in late August in front of the non-regulation signage. “Seriously?,” her companion said. “Have you seen the lobby? They are Swarovski crystal.” | the commercial observer

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POWER BROKER: Steve Durels

Steve Durels started at SL Green in 1997, right before the firm went public.

The Cultivator By Jotham Sederstrom


istening to Steve Durels ponder the challenges of renovating a distressed building, you could hardly be chided for mistaking the SL Green leasing director for an interior decorator. The out-of-place lobby chandeliers, the dreary old windows, the demolished floors, the bathrooms in disrepair: It was no wonder the beleaguered office tower to which he was referring has had such difficulty drawing tenants. Mr. Durels sighed. “At the end of the day this will be an exercise in correcting those things about the building that were done … imperfectly,” Mr. Durels said rather artfully earlier this month, while in the conference room of the SL Green Realty Corp. offices at 485 Lexington. The building in such need of resuscitation, of course, is 100 Church Street, the 21-story tower that SL Green took control of in August after the Sapir Organization defaulted on loan payments to the real estate investment trust. Among real estate insiders, it’s one of the most closely watched properties in a portfolio of 30 New York City buildings current-


September 15, 2009

ly managed by SL Green, touted as Manhattan’s biggest owner of office buildings. With 650,000 square feet of vacant office space and a long decade of leasing challenges—Curbed dubbed it “The Office Building Nobody Wants”—the 1.13 million– square–foot 100 Church could represent a daunting challenge for Mr. Durels, who helms nearly 300 transactions each year for SL Green. “I can tell you already we’ve got a half-dozen prospects who are looking at space for everything from 75,000 square feet to 250,000 square feet solely because of our involvement, and that’s after two weeks,” said Mr. Durels, who has made a career out of identifying distressed properties and determining how to refurbish them.


hat career, however, might have taken a different path had it not been for the stark reality of a tractor. An economics major at the University of Iowa, Mr. Durels deigned to study the business of agriculture in the Midwest, but veered from that course early on. “It was a different lifestyle,” said Mr. Durels, the father of a 19-year-

old daughter and husband to Elizabeth Durels, who works in advertising. “The goal was agricultural economics, so it was the business side of it—but I went to school, and the first thing they did was give me a tour of the John Deere plant. It

Perhaps most near and dear to Mr. Durels’ heart, however, is 100 Park Avenue, which, after a $72 million glass-and-steel renovation, stepped out as the city’s first existing building to receive LEED certification. didn’t work for me.” Mr. Durels rose as the director of leasing for Helmsley-Spear Inc., where he managed 2.5 million square feet of Harry Helmsley’s personal assets. When he arrived at SL Green in 1997, the company was managing 2.5 million square feet of property and had just gone public, Mr. Durels said.

SL Green now represents 24.5 million square feet in the five boroughs in addition to 5 million square feet in Westchester and Fairfield counties. “It’s a radically different company than it was then,” said Mr. Durels, 49 and an avid fly fisherman who owns a summer home in Idaho. “The structure of the organization, the size of the company, the quality of the portfolio—in many respects, we started off as a small company.” Since then, Mr. Durels has been responsible for some of the most complicated leasing transactions in the company’s history, including ones involving the 1.4 million– square–foot 919 Third Avenue and the 2.6 million–square–foot building at 1221 Avenue of Americas, which is 95 percent occupied.


ooking forward, Mr. Durels is now discussing lease possibilities at 1515 Broadway, the home of Viacom and, more conspicuously, the glass-paneled MTV studio space known primarily for the hordes of squealing teenagers once drawn to its Total Request Live show. Viacom announced last month that it would seek new space for the MTV studio, freeing up 24,250 square feet on two floors as well as $2.5 million

in billboard space. Mr. Durels said that after a renovation that would connect the floors by escalator, the space would trade at $200 a square foot. “We’ve sat down with half a dozen people and had really solid conversations,” said Mr. Durels of the television studios, entertainment conglomerates and retail outfits that have expressed interest in the location. “Times Square is one of those submarkets that, despite what’s going on in the rest of the world, it’s still on everybody’s radar as a place to be.” Perhaps most near and dear to Mr. Durels’ heart, however, is 100 Park Avenue, which, after a $72 million glass-and-steel renovation, stepped out as the city’s first existing building to receive LEED certification. More importantly, rent at 100 Park Avenue has doubled from its pre-renovation highs of $32 per square foot at the base and $50 per square foot for the top floors, Mr. Durels said. “That fired on all cylinders,” Mr. Durels said. “Everybody was very proud of what it looks like and we’re very proud of what we achieved on the economics side. I’m proud of that.” | the commercial observer

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Steve Durels, SL Green’s leasing chief, grows tenants for gems like 1515 Broadway, 100 Park

the commercial observer |

September 15, 2009 23

concrete thoughts

A Rolling Loan Gathers No Moss What to expect from distressed assets (hint: not much, at least for now)


The distressed assets that are coming to market in the greatest numbers are stalled development projects and properties owned by investors using OPM.

have remained active throughout the credit crisis, particularly in the multifamily sector. Unfortunately, the shadow banking system has evaporated, causing significant stress in the debt markets for larger assets. The CMBS market, for example, produced $230 billion of transactions in 2007. Since July of 2008, this number has been $0. This drop in value, accompanied by extraordinarily low levels of volume and weak debt markets, has created dynamics from which a tsunami of distressed assets is anticipated to wash over the market. In 24

September 15, 2009


here are three main reasons why the available supply of these distressed assets on the open market has been so low. Banks simply do not want to realize the losses that are so clearly imbedded in their balance sheets. The Fed has encouraged banks to make loans and to simultaneously shore up their capital ratios—two opposing objectives. TARP money was given to banks so it could be deployed into the market, but given all of the strings the government attached to the money, not surprisingly, the banks did not lend the money. They have simply been trying to shovel it back to the Fed as quickly as possible: another well-intended government program, implemented by too many cooks in the kitchen, that missed the mark. The result is that banks have focused on keeping their capital ratios healthy, and the last thing they want to acknowledge are these losses.

In June, the federal government allowed 10 banks to repay TARP loans.

For this reason, new phrases have become part of our daily vernacular, such as “extend and pretend,” “a rolling loan gathers no loss” and “kicking the can down the street.” The fact is that many are just walking around the can altogether. The second reason for the lack of distressed-asset supply is the various temporary beneficial components of some loans that have been allowing owners to hang on by a fingernail even though the light at the end of the tunnel is a freight train headed directly at them. Interestonly periods and interest reserves have succeeded in keeping some properties afloat, but these benefits are generally not for the duration of a loan. As soon as amortization kicks in or the interest reserve dries up, reality must be faced. Similarly, some properties are on life support aided only by a mortgage rate floating over three-month LIBOR, which closed Friday afternoon at a mere 30 basis points. Those loans are probably carrying interest rates of 2.5 percent to 3 percent, well below today’s average rate of just over 6 percent. Lastly, because many lenders do not want to publicly expose their problems, they have opted to restructure loans with the existing borrowers. While achieving a quiet

solution, this approach often produces sub-optimal results for the lender. This is something not being ignored by equity research analysts or shareholders.


ecently, the flow of distressed assets has been increasing ever so slightly. Banks are well into the foreclosure process, and this is starting to result in REO listings coming to market. Additionally, many lenders are realizing that investor demand for distressed notes is extensive. On each of the notes that we have sold this year, we have had in excess of 50 offers. Interestingly, these bidders consisted not only of the high-net-worth individuals and old-line families that have dominated the landscape since the summer of 2007, but also institutional investors who have returned to the market after forming distressed acquisition funds solely for this purpose. Thus far, the distressed assets that are coming to market in the greatest numbers are stalled development projects and properties owned by investors using OPM. A surprising percentage of prominent investors inject very little of their own capital into transactions and essential-

ly manage other people’s money in their real estate investments. When a property’s performance starts to go sideways, the passive equity partners are the first to shut off the capital valve, which results in delinquencies and foreclosures. We expect distressed assets to be prevalent in our marketplace for years to come as our increasing unemployment rate will continue to degrade our fundamentals. Many economists expect unemployment to remain at elevated levels through 2010. Additionally, 2006 and 2007 vintage loans maturing in 2011 and 2012 will find refinancing a big challenge, adding to the number of sellers, either lenders or owners, who have no choice but to sell. Our current conditions present pronounced opportunities for brokers and investors alike as we expect the flow of distressed assets to increase substantially over the coming quarters. Robert Knakal is the chairman and founding partner of Massey Knakal Realty Services and has brokered the sale of more than 1,000 properties in his career. | the commercial observer

Getty images

or nearly 18 months now, one 2005, 2006 and 2007, there were a of the hottest topics of discus- total of $109 billion of investment sion in commercial real estate property sales in New York City. has been the status of delinquent We have estimated, based upon the loans and distressed properties. In composition of those sales, that apthe New York City investment sales proximately $80 billion of that total market, we have seen both prop- was invested in about 6,000 property values and the volume of sales erties that currently have negative plummet from their equity balances. If we add peaks. In terms of value, to this an estimate of the we have observed innumber of property owncreases in average capers that took advantage italization rates of as of cheap debt available at little as 110 basis points high loan-to-value ratios, for multifamily properthis total grows to 15,000 ties to as much as 325 investment properties that basis points for office likely have negative equity and retail properties. today. These cap rate increases Clearly, not all of these correspond to price reproperties will come to Robert Knakal the market in the form of ductions of between 20 percent and 60 percent, distressed notes or foreColumnist depending on product closure sales, as there are type. a number of owners who If we look at the volhave the ability to carry ume of sales, activity in 2009 is off their debt and have the desire to its peak by over 75 percent in terms hold the assets long-term. Notof the number of properties sold withstanding this fact, thousands and down over 90 percent in terms of these properties will trade hands of aggregate sales price. The differ- in the distressed market. For nearly ence between these two percentag- 100 lenders and special servicers, es shows that the trend has been to- we have analyzed nearly 1,000 ward smaller transactions, as those properties that serve as collateral are more likely to obtain financing. for their loans. This should present Community and regional banks investors with tremendous opportunities, but thus far, this massive pipeline of distress has only been trickling into the market.

345_jr.FINAL NYObser 9/10/09 2:36 PM Page 1

Rudin Management Company is pleased to announce

Loeb & Loeb LLP has leased

155,000 SF for 20 years at

345 PA R K AV E N U E Brian Gell, Lewis Miller and Kenneth Rapp of CB Richard Ellis represented Loeb & Loeb LLP in this transaction.

300,000 Contiguous SF Available in One of New York’s Premiere Office Buildings FEATURES AND AMENITIES INCLUDE: Steps from Grand Central Terminal and Rockefeller Center Newly renovated plaza with garden and sculpture Open floor plans • On-site owner/management On-site 150-car garage • 24/7 building access Impressive tenant roster includes: Blackstone Group, Bristol-Myers Co, Duetsche Bank, KPMG and Wafra Investment Advisory Group, Inc. FOR LEASING INFORMATION, PLEASE CONTACT:

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the commercial observer |

September 15, 2009 25

the op-ed page Get out from under workout, restructurinG, bankruptcy, and dealmakinG.

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September 15, 2009

A New Lease for Job Growth REBNY president calls for an end to commercial rent tax


he Bloomberg administration and Albany, with the support of the Alliance for Downtown New York and the Real Estate Board of New York, passed extensions on two pivotal economic incentive programs for Lower Manhattan. These actions sent a strong, clear message about the importance of the revitalization of Lower Manhattan. However, even though this is an essential first step, this is not the only area that requires attention and assistance. To retain and attract businesses to Manhattan and the other boroughs, broadly based and fiscally responsible incentives and reforms are vital and need to be addressed, especially in a time of economic strain. The recession that Steven Spinola began in the beginning Guest of 2008, and worsened significantly by the end Columnist of that year, has resulted in a loss of 93,000 jobs and nearly a doubling of the city’s unemployment rate to 9.8 percent. This sudden and severe economic downturn has had a dramatic impact on the demand for office space in New York. Over the past year, the vacancy rate for Class A space in the city spiked to 12.1 percent from 6.7 percent and asking rents dropped more than 26 percent per square foot, according to a recent market report. With the extension of the commercial rent tax (CRT) provisions of the Lower Manhattan Plan, as well as the CRT and sales tax provisions of the Lower Manhattan New Commercial Incentive program, the city has taken reasonable measures to provide needed tax relief for tenants downtown in today’s challenging economy. Initially enacted in 1995, in the midst of a severe recession, the Lower Manhattan Plan provides a real property tax abatement of $2.50 per square foot for new, renewal and expansion leases for space below Murray Street. Tenants eligible for this tax abatement are also eligible for a five-year reduction in their CRT. This CRT benefit was expanded in 2005 to include the area north of Murray and south of Canal streets. The CRT benefit for the entire area was extended for four years until June 30, 2013. The Lower Manhattan New Commercial Incentive program was enacted in 2005 as a catalyst for the redevelopment of the World Trade Center site and the adjacent World Financial Center and Battery Park City. The Legislature also extended the CRT benefits under this program until June 30, 2013. This program also included a sales tax savings on build-out and furniture and equipment for new and renewal leases. This sales tax exemption was also extended until Sept. 1, 2015.

Elsewhere in Lower Manhattan, in the area south of Frankfort and Murray streets, there is a sales tax exemption for build-out only (not furniture and equipment). This sales tax exemption was extended until Sept. 1, 2013.


e urge the city to build on these initiatives in two ways: phase out the commercial rent tax (CRT), and create a leasing incentive program in the city’s business districts for small to midsize firms. The CRT is a cost of doing business that is particularly troublesome in attracting new tenants and in retaining existing businesses. The tax on the occupancy of commercial space puts a strain on local businesses and deters new tenants and businesses from moving into the area. If the commercial space market is going to remain a strong player in the commercial leasing market, we must not give our regional competitors the advantage, and must eliminate the CRT. During the recession in the mid-1990s, the city removed the CRT in most parts of the city. In the remaining location, Manhattan south of 96th Street, the CRT rate was lowered from 6 percent to 3.9 percent. Now is the time to finish what we started in the city’s last serious recession and initiate a fiscally prudent plan. The current recession has impacted the demand for office space throughout the city, compared to the 1990s, when the impact was more concentrated in Lower Manhattan. Accordingly, we need to extend the Lower Manhattan mod-

The CRT is a cost of doing business that is particularly troublesome in attracting new tenants and in retaining existing businesses. el to small and midsize firms throughout the city’s major business districts. As with the Lower Manhattan plan, a lease incentive program should be as-of-right and available for two years. It should include a reasonable capital expenditure requirement and be contingent on a new or renewing lease for a minimum term. Also, such a program should have tiered benefits. For example, benefits for downtown would be deeper than those for midtown, and the outer boroughs would have more incentives than downtown, therefore sparking activity in the different markets. These proposals would show that the city understands the economic challenges businesses are facing and that it is prepared to help lower occupancy costs for these businesses that make a commitment to stay in New York. Steven Spinola is the president of the Real Estate Board of New York. | the commercial observer

james hamilton

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September 15, 2009 27

09-0672 NYO_double_Layout 1 9/11/09 10:55 AM Page 1

THE SUN HAS BEEN SHINING ON OUR PORTFOLIO THIS SUMMER We would like to thank our tenants and brokers for the following transactions:

Showtime Networks • Centerview Partners, LLC • TD Securities • Coastal Development • Cornwall Securities • Pan American Capital Donald J. Pliner • Trimaran Capital • Burnham Securities • Raine Group • Assured Guaranty • Griffon Corp. • Premium Point Elliott Associates • O-Cap Management • Merlin Group Holdings • Rudman Capital • Flexis Capital • Silver Ghost • Condor Securities Inc. Hudson Securities • KDC Merger • Carl Marks • GZA Environmental

Total of 507,728 SF Special thanks to: CBRE • Colliers ABR • Cushman & Wakefield • FirstService Williams • Grubb & Ellis Helmsley Spear • Jones Lang LaSalle • Murray Hill Properties • NAI BT • Newmark Knight Frank Nicholas Gilman Realty • Studley • Washington Realty



September 15, 2009 | the commercial observer

the commercial observer |

September 15, 2009 29


Whither Fannie Mae? Government-backed changes could shock multifamily market


n New York City and across the Known commonly for their shared country, multifamily and commer- role in facilitating single-family hocial real estate investment activ- meownership, both Fannie Mae and ity has plummeted since the onset of Freddie Mac are also crucial sources the credit crisis. The absence of an in- of liquidity for the multifamily mardependently functioning securitiza- ket. Through programs including tion market and banks’ unremitting Fannie Mae’s Delegated Underwrittightening of lending standards have ing and Servicing, private lenders robbed investors of low-cost are able to make mortgages credit’s vital spark. In their in risk-sharing partnership stead, a paucity of credit has with the larger enterprises. sundered buyers’ and sellAs of the second quarter, ers’ gauges of value. Fannie Mae’s multifamily The bid-offer spread that book of business was $177 can narrow almost instantly billion, up 12 percent from in a liquid securities market a year earlier. The serious has resisted closing in the delinquency rate for Fannie less efficient arena of comMae’s multifamily loans was mercial real estate. Real just 0.5 percent; Freddie Sam Chandan Capital Analytics reports Mac reported a multifamily that, amid this environment delinquency rate of just 0.2 Columnist of patient buyers and willful percent. As other sources of sellers, transaction volumes credit have vanished, these have fallen to their lowest levels in 18 quasi-governmental institutions years and are rising only gradually have evolved into the keystones of from the trough earlier this year. In apartment mortgage financing. Tothe face of the market’s cooling, delin- gether, the GSEs accounted for 34 quencies and defaults have necessar- percent of multifamily activity in ily grown in number and severity. 2006. In 2008, that share had grown While private capital flows to com- to 84 percent. mercial real estate have ebbed, the Notwithstanding their importance, resulting strains on apartment inves- Fannie Mae’s and Freddie Mac’s contors have been tempered by the inter- tinued participation in the multifamcession of the government-sponsored ily market is not assured. Rather, the enterprises (GSEs) Fannie Mae and old consensus around the fundamenFreddie Mac. tal role of the GSEs in the nation’s

mortgage markets has been upended by the housing crisis. In the minds of many policy makers and politicians, both firms are culpable, at least in part, for the inflation of the housing bubble and its painful aftermath. But it is at the intersection of policy and politics that the future of these institutions will be determined, as

Together, Fannie and Freddie accounted for 34 percent of multifamily activity in 2006. In 2008, that share had grown to 84 percent. both now operate under the full purview of the government. The Department of the Treasury and the Federal Housing Finance Agency (FHFA) announced last September that Fannie Mae and Freddie Mac were being placed under the conservatorship of the FHFA. The FHFA’s assumption of operational control of the GSEs followed a protracted period of stress in secondary mortgage markets and a government review of both institutions’ prospective financial health.

In explaining the decision to assume control, former Treasury Secretary Henry Paulson and the former director of FHFA, James Lockhart, cited the impact of deteriorating mortgage performance on the GSEs’ earnings, capital and capacities to meet their policy goals, as well as threats to broader economic and financial market stability stemming from the potential for additional losses at the two firms. These losses have been prodigious. On account of their net worth deficits, both Fannie Mae and Freddie Mac have received billions of dollars in funds from Treasury to avoid receivership. The future of the GSEs is unclear. For the time being, they are playing a vital policy role in stabilizing singlefamily and multifamily housing markets. Administrators have offered assurances that the multifamily lines of business remain integral to Fannie Mae’s and Freddie Mac’s missions. In a July 30 address before the National Press Club, Mr. Lockhart said that the GSEs must “continue to buy and guarantee single-family and multifamily mortgages in a safe and sound manner. … The Enterprises are working to stabilize the multifamily market by keeping it liquid, supporting affordable rental housing, and keeping to clear and consistent credit principles.” But he added that “the old hybrid model of private, for-

profit ownership underwritten by an implicit government guarantee” was no longer tenable. Any substantive effort to alter the relationship of the GSEs to its regulator and guarantor implies that fundamental reform is in the offing. The White House has indicated that it will address the issue of Fannie Mae’s and Freddie Mac’s future structure with the next fiscal year budget proposal to Congress in February 2010. In the meantime, what shape the GSEs will take and what their role in the multifamily market will be are unknowns. The U.S. Government Accountability Office issued its options assessments on Sept. 10. One option presented in the report “would abolish the enterprises in their current form and disperse mortgage lending and risk management throughout the private sector.” While uncertainties abound in the current environment, we can be sure that an abrupt withdrawal of the GSEs from the multifamily market will constitute a destabilizing shock to liquidity. Sam Chandan, Ph.D., is president and chief economist of Real Estate Econometrics and an adjunct professor of real estate at the Wharton School.



September 15, 2009 | the commercial observer

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the commercial observer |

September 15, 2009 31


The Cousins Durst Douglas and Jody on the financials of green and the Great Recession The Durst Organization, one of the city’s oldest family-run real estate concerns, is in a state of transition. Co-president and chairman Douglas Durst, 64, who took the reins from his father, Seymour Durst, in 1995, intends to cede his presidency to cousin and 53-year-old copresident Jody Durst later this year. The two co-presidents sat down with The Commercial Observer to talk about the transition, future development projects and their mutual appreciation for environmentally friendly green buildings. Commercial Observer: What have you been up to since stepping down as co-president? Douglas Durst: I’m starting to step away and attend less meetings and come in a little later and that’s been terrific. My father taught me that you go for cocktails and then you have somebody say, ‘I just saw him over there,’ and then you sneak out. That hasn’t changed. Do you expect to have more free time? 32

September 15, 2009

Douglas Durst: I certainly hope so. People ask me that, and I don’t think that’s much of an issue. There’s lots of things I like to do and certainly I have a whole stack of books I’m looking forward to reading. I have my bicycle that’s missing me.

at interminable meetings, certainly. It’s like being a grandparent: I get all the pleasure and then when things get tough, I hand my grandson over to my daughter and say, ‘Change ’em.’

What added responsibilities will you have, Jody?

Give me an overview of what’s happening at One Bryant Park?

Jody Durst: Just being more discriminating with my time because there’s more to do.

Is there anything you won’t miss about the job, Douglas?

Douglas Durst: We have still about 40,000 feet, I think. We’re in discussions for about 20,000 of that so out of 2.1 million that’s pretty good. Jody is still trying to get the building completed as quickly as possible. I don’t know if you noticed, but after a very lengthy struggle, we’ve got our window-washing rigs approved and we’re starting to clean the building and replace the broken panels. This weekend we’ll be installing our living sculptures in the urban garden room off the lobby. When you go out, you’ll see them working in there. These are gigantic, the largest Chia Pets ever. And basically they’ll be finishing getting the windows in.

Douglas Durst: I’m not going to miss sitting

Jody Durst: There are two or three partial

And how has that been going? Douglas Durst: Last night we had a brokers’ party, and he had to stay for the whole thing. Jody Durst: Douglas’ typical philosophy is the sooner you show up, the sooner you can leave. I told him the other evening that I was surprised to still be seeing him.

Jody Durst: Get the wipes!

floors that we’re building out now and they should be ready by November. Has there been a slowdown at the Durst Organization because of the recession? Douglas Durst: Oh, yes, a marked slowdown in activity. Was that to be expected? Douglas Durst: After last September, it’s about what I expected. A year and a half ago, no, it wasn’t the way we thought things were going to go. We thought we’d see a gradual slow down, but the collapse, the bankruptcy of Lehman, was just like somebody turned off the spigot. How has the recession affected leasing at your buildings this year? Douglas Durst: When things start to look very dark, tenants just stop leasing because tenants don’t know what’s going to happen, but after a while they have to do something—their leases are expiring, the space is getting old. The other | the commercial observer


By Jotham Sederstrom

thing that happens is the big-space users throw all their shadow space on the market, space that they’re keeping for future expansion, and so you have people not renting space. But now they’re starting to pull that space off the market, the sublease space. That’s the case with [Durst tenant] Bank of America. Eight or nine months ago, they put the entire building on the market, 500,000 square feet, and about four weeks ago, they took it off the market. They’re looking at moving people into the building. They haven’t decided yet, but the space is no longer available for sublease. With Condé Nast tightening the belt, do you expect their lease to change at 4 Times Square? Douglas Durst: I don’t think you really have to worry about Condé Nast. They’ve had a tremendous loss in ads, but they have a huge cash flow, and I don’t think it’s a worry. They’re cutting, which is probably something they should have done a while ago. I was up there the other day, and they were complaining about not having a receptionist on every floor, which I think most people eliminated 10 years ago. So I think they’re fine. And at 4 Times Square they have a very nice rent they negotiated back in 1996. Their lease goes to 2018 or 2019. You had mentioned last year plans to invest $300 million in distressed assets?

‘I’ve always been concerned about having these mortgages outstanding, even though I don’t think we’ve ever gone above 40 percent leverage, but they’re still big numbers and they’ve always scared me.’ —Jody Durst Douglas Durst: We’re still getting ready. There’s nothing available. You talk to everybody and there’s nothing being offered for sale. We were very much in favor of relaxing the market requirements, and that has just had the wrong consequence for everybody—because the banks and the financial institutions have not been forced to get rid of these bad assets. They’re still holding them on their books, but that also means they can’t do any new projects because they’re weighted down with bad assets, so nothing’s being sold and there’s no financing even if you wanted to buy something.

standing, even though I don’t think we’ve ever gone above 40 percent leverage, but they’re still big numbers and they’ve always scared me. Any new projects on the horizon? Douglas Durst: We have two projects starting and a third which will start in the spring. We just closed on a building at 102nd Street and Fifth Avenue where we’re going to be renovating a building into condos and working with Mount Sinai to develop an 80/20 building for them. Mount Sinai owns it and it’s a rental building. This is being done through our partnership with Sidney Fetner, and Durst-Fetner will be the developer. And we’ve just agreed to be the developer for the New School on a building on Fifth Avenue and 14th Street. We should sign it any moment. As I recall, it’s 300,000 feet. Jody Durst: There are two components. One is a dormitory and one is an academic facility. The academic facility is about 220,000 square feet, and the dorm is somewhere around 110 or 120,000 square feet. And that sits on top of the academic facility.

Jody, do you share Douglas’ views on the environment? Jody Durst: I don’t have any water running at my house.

Douglas Durst: We’re talking about our Plan B right now. What’s Plan B?

Are you wearing your green socks, Douglas?

Douglas Durst: We’re still talking about it. It would be investing in our own assets. Shortterm money these days is earning under 50 points and we have mortgages that are 6 percent or 7 percent, so it might make sense to just pay them down.

Douglas Durst: Always.

Jody Durst: Depending on whether we stick with Plan A or go to Plan B really dictates what the future holds. Douglas is talking about a more conservative approach where we won’t have discretionary funds to invest if and when opportunities come about. I’ve always been concerned about having these mortgages outthe commercial observer |

And you, Jody? Jody Durst: No. Douglas Durst: That’s where we differ. I mean, how do you prove to people you’re an environmentalist, Jody? Jody Durst: I tell them about my room temperature.

REBNY brokers are bound by a Code of Ethics that serves the client’s best interests.

of retail information for Manhattan.

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about laws, regulations and other public policies affecting real estate because of the Board’s Government Affairs programs, special bulletins and publications.

Tell me about the environmentally friendly amenities you have at buildings like the Helena and 4 Times Square. Are they financially sound decisions? Jody Durst: Some components of each building were done as sort of a demonstration in order to make the technology more viable. For example, incorporating the photovoltaic and the curtain wall of the building at 4 Times Square was a demonstration of the use of photovoltaic, not only on a building, but also to replace a portion of the curtain wall so that you’re saving the cost of the curtain wall and getting the benefit of the energy production of the photovoltaic. But we’ve come to realize that the energy requirements at a high-rise building are so dense compared to what a photovoltaic can provide. It’s really a demonstration that the technology works, but it’s not necessarily the right application for it.


Reasons 2. REBNY brokers have exclusive access to the most comprehensive computerized New why you York City property data file and the largest reference library of any realty association in should the city. insist on 3. The Commercial Listing Exchange (CLE) pera REBNY mits REBNY broker and owner members to exchange their exclusive New York City comBroker mercial space listings weekly. for your Retail Report, with the cooperation of commercial 4. The New York City retail brokers and owners of store space, is the most authoritative source Property

Douglas Durst: We’re also working again with [former Vanity Fair editor] Chris Whittle on a school midblock on 57th Street. I think the entity is called Avenues.

Douglas Durst: That’s a joke, but the fact that you don’t have any air-conditioning is something. When Jody first moved here from California, his house was never heated more than 66 degrees. His wife convinced him that maybe they could turn it up a little bit.

Is it a waiting game at this point?



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September 15, 2009 33

New Atlantic Yards Architect Talks SHoP Gregg Pasquarelli’s firm got Ratner nod for arena; how to do lower-cost design


n the 13 years it’s been around, the still-young SHoP Architects has emerged as one of the city’s most oft-discussed names in avant-garde architecture. Attracting the eye of more than just small-time clients— they’ve done major projects for the City of New York, Google, General Growth Properties and Brookfield Properties—the Lower Manhattan– based group is a boutique designer for the big developers (though with a payroll of 60-plus people, it’s hardly a boutique). Last week, it was publicly announced that SHoP has added one more name to its client list: Bruce Ratner. Working with the sports facility specialist firm Ellerbe Becket, SHoP is designing the planned $800 million Nets arena in Brooklyn, part of the giant planned Atlantic Yards

‘It’s not just to make a beautiful object and figure out how to build it.’ —Gregg Pasquarelli project being developed by Mr. Ratner’s Forest City Ratner. After the unveiling of the arena designs, we caught up with SHoP co-founder Gregg Pasquarelli, still beaming from the announcement of his firm’s involvement in the Brooklyn development (he had been working on the project in secret for three months). The firm is led by, as he put it, “two husbands and wives, and then the identical twin brother of one of the husbands—so it’s a very unusu-

al family tree.” He and his co-principals—Jonathan Mallie; Kimberly Holden; and William, Christopher and Coren Sharples—are leaders of a firm now embraced by big developers that typically opt for more conservative design. We asked Mr. Pasquarelli how SHoP got to this point. “I think we took a lot of advantage of emerging technologies and invested all of our research into emerging technologies to help us build these avant-garde buildings using techniques in construction that control the cost,” he said. “We can both do evocative design and know how to put it together.” The key to lower-cost design, he said, lies in looking at the process of construction. “The magic is in using the kind of techniques and methods of production as one of the parameters of design itself,” he said. “So it’s not just to make a beautiful object and figure out how to build it. It’s have a kind of proto-form; figure out how you’re going to build it; and use the constraints of the building technology to drive the form itself.” Among SHoP’s notable projects: the planned esplanade along the East River in Lower Manhattan that recently started construction; a planned new headquarters for Google in California; the proposed remake of the South Street Seaport; and 290 Mulberry Street, an apartment building on Houston Street marked by an undulating brick exterior. With regard to Atlantic Yards, we asked how his firm was brought on to the project, which received strongly negative reviews when preliminary designs of an arena were viewed by city officials and The New York Times’ architecture critic in June.

Mr. Pasquarelli is a cofounding principal at SHoP.

“We just got a call from Bruce one day,” he said. “I think Bruce said, ‘I’d like to come visit your office. I’ve talked to a lot of people around the city, and they told me you might be the firm that could figure out a great design and figure out something that could be built, and could do it really fast.’ “And so he came over, and we had a great conversation, and that’s how it started.”


e acknowledged that the passionate, unyielding criticism of the Atlantic Yards project from some quarters gave him pause before he accepted the gig. “We gave serious consideration as to whether we wanted to do it,” he

said. “And I think the thing that convinced us was, after speaking with Bruce, we were convinced he really wanted to make a great building. … And even knowing that the project was going to have its critics no matter what we designed, we felt like it’s our role as New Yorkers to try to make it as good as we could.” Asked generally about the ability to complete projects with highcaliber design in New York City, Mr. Pasquarelli took the opportunity to criticize contextual zoning. The Bloomberg administration has rezoned many a neighborhood in this fashion in order to restrict out-ofcharacter development (particularly in residential blocks), limiting heights and adding other restrictions

(often to applause from residents). Mr. Pasquarelli called it, bluntly, “a mistake.” “The ever-tightening zoning envelopes, since contextualism became a word that people knew, and the sort of tightening of the zoning envelope against the FAR [floor area ratio—or density] that needs to be built in order to afford the land, leaves you very little room for creativity,” he said. “It’s a thing I call ‘zoning spread,’ which is the spread between the full FAR and the zoning envelope; and the tighter it gets, which is what contextual zoning tries to do, the less ability you have to make interesting buildings. “And that’s been a mistake.”

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West Side Property Development

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Representation of the New York Yankees in the development of the new Yankee Stadium in the Bronx, NY

Representation of Brookfield Properties Corporation in connection with the development and financing of the ‘superblock’ at West 33rd Street and 9th Avenue in New York, NY

Representation of Ashkenazy/Carlyle in connection with the lease of space at 650 Madison Avenue in New York, NY to Polo Ralph Lauren

GM Building

1615 L Street

Representation of Macklowe Properties in connection with the sale of the General Motors building and three other office towers in New York, NY

Representation of Broadway Partners in the sale of a 418,000 square-foot office building at 1615 L Street in Washington, DC to a company controlled by Bernard Spitzer

Atlantic Yards Representing Forest City Ratner Companies in the US$4b mixed-use development project of Atlantic Yards in Brooklyn, NY

Chicago Mercantile Exchange Represented Tishman Speyer Properties in the acquisition and leasing of the Chicago Mercantile Exchange Center

Columbia University


Representing Columbia University as environmental counsel in connection with the approvals for the creation of a new 17-acre campus in West Harlem in New York, NY

Representation of the Gucci Group in connection with their lease in Trump Tower at the corner of Fifth Avenue and 57th Street in New York, NY, one of the best retail spaces in the world

West Side Rail Yards

Attorney Advertising.

the commercial observer |

Representation of The Related Companies in connection with the development of West Side Rail Yards in New York, NY

September 15, 2009 35

The Irony of Stuy Town Biggest court winners could be market-rate tenants; landlords may owe $1 B. by Eliot Brown


he extraordinarily significant Stuyvesant Town lawsuit now pending in New York State’s highest court has been quick to galvanize opinion along a familiar divide, pitting advocates of affordable housing against rent-hungry landlords. With the fate of rent regulation rules at stake in the 13,000-unit apartment complex, many elected officials have publicly backed the tenants’ position—hailing an earlier court ruling in their favor as “a victory for the City”—and all the landlord groups have been loudly supporting their members. Both sides have dumped amicus friend of the court briefs on the Court of Appeals, which last week heard arguments in the case, with each offering many a justification for their respective side. And for good reason: If an appellate court ruling is upheld, it could mean landlord Tishman Speyer would suddenly owe an estimated $200 million–plus in back rent, reregulating more than 3,000 marketrate apartments at substantially lower rents. Other landlords, too, would owe back rent, estimated by one landlord

group at a total of $1 billion. But underlying this fight is an irony too large to ignore: The biggest beneficiaries of a landlord defeat would be people who apparently don’t need affordable housing at all. The hundreds of millions in back rent would go to tenants paying market-rate rents—the $3,300–for– a–two-bedroom renters who came in after their previously rent-stabilized apartments were deregulated. Subsequently, all of those 3,000 or so units would stay rent-stabilized, guaranteeing a major decrease in rent to those who had previously been forking out the big bucks (depending on the apartment, it would mean hundreds of dollars, if not more than $1,000 off). Of course, this isn’t a point that’s all that relevant to the arguments of the case, which is not about the morality of regulated rents. Rather, the suit, Roberts v. Tishman Speyer Properties, is a question of whether a landlord is allowed to deregulate apartments. The lawyer for the tenants, Alex Schmidt, argues that the landlord was, by law, barred from taking any units out of the rent-stabilization program while it received

a modest subsidy to encourage renovations. Tishman Speyer and other landlords in the J-51 renovation program had been taking units out of rent stabilization for years (and received guidance from the state to do so), so the reverberations of a tenant

Tenants would pay less, but the most immediate beneficiaries would clearly be all of those market-rate renters who await their unexpected checks in the mail. victory would be enormous. An appellate court ruled unanimously for the tenants in March.


n fairness to the tenants, it’s not as though there’s no reason for affordability advocates to cheer them on in the suit. The various elected officials backing them— Manhattan Borough President Scott Stringer, State Senator Liz Krueger, Councilman Dan Garodnick, Council

Speaker Christine Quinn, to name a few—have long decried the rapid rate of apartment deregulation at Stuyvesant Town and other complexes, and a victory for the tenants would definitely halt the rise of market-rate apartments in the complex. (Manhattan landlords can generally deregulate apartments in the rentstabilization program, which restricts annual rent increases, when the units go vacant.) If upheld in favor of the tenants, the ruling would be a return to a relic of years past for Stuy Town: Apartments, once again, would presumably be available to anyone moving in at prices that are far more affordable (leased at rentstabilized rates). No doubt: Tenants would pay less (at the landlord’s expense), but the most immediate beneficiaries would clearly be all of those market-rate renters who await their unexpected checks in the mail. This irony has not been lost on the landlords, and they don’t seem amused. In an amicus brief, the Rent Stabilization Association criticized the prospect of what the organization’s attorneys called an “extraordinary

windfall to undeserving tenants.” Here are a few lines from the group’s brief, in which the attorneys at Rosenberg & Estis estimated that between Tishman Speyer and other landlords, about $1 billion would be owed in back rent to tenants who have been paying market-rate rents for years. “It would be difficult to imagine less deserving recipients of this billion dollar windfall,” the attorneys wrote. The brief went on to give the example of David and Annmarie Hunter—plaintiffs on the suit—who pay, according to the brief, $2,595 per month. “An affirmance would mean that the Hunters, and thousands of similarly situated tenants, will (1) have their rents reduced by hundreds of dollars per month; (2) receive thousands of dollars in ‘refunds,’ (3) obtain a rent stabilized status they never expected to have, and (4) have their future rent increases limited to stabilization guidelines,” the lawyers wrote, before adding, acerbically: “These tenants do not need [or] deserve such generosity.”

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The hiring of a lawyer is an important decision and should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and our experience. Prior results do not guarantee a similar outcome. Greenberg Traurig is a service mark and trade name of Greenberg Traurig, LLP and Greenberg Traurig, P.A. ©2009 Greenberg Traurig, LLP. Attorneys at Law. All rights reserved. Contact: Robert J. Ivanhoe in New York at 212.801.9200. °These 8449 numbers are subject to fluctuation. §Greenberg Traurig was selected by Chambers and Partners as USA Law Firm of the Year, 2007. *Operates as Greenberg Traurig Maher LLP.

the commercial observer |

September 15, 2009 37



5:10 PM

Page 1


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Michael J. Campbell, Partner WASHINGTON, DC



September 15, 2009 39

9/11/09 4:34 PM



veryone’s on Twitter. The phenomenally popular Web site, which limits updates to 140-character “tweets,” has been embraced by some of the most powerful brokerages in New York. Here’s what they’ve been buzzing about recently. Jones Lang LaSalle (@JLLJobs) uses Twitter as a job listing. The firm has almost 300 listings, including some openings in New York City. Opening: Asst. Facility Managers: Detroit, Orange County, NYC & Cranford, NJ to complete facility inspections. 1:12 PM Aug 28th from web Opening: Asst. Facilities Man-

ager - NYC to oversee the delivery of maintenance and repair services. 12:36 PM Aug 19th from web Cushman & Wakefield (@CushWakeNYC) shares some light reading in its feed. RT @CushWake - Bank of China Provides $120M Loan On NYTimes Blding. Cushman & Wakefield Sonnenblick Goldman advises 11:18 AM Sep 11th from web Bad news for the NYC hotel market, good news for travelers- http:// 5:45 AM Aug 19th from web Are Hamptons pop-up shops in it for the long haul? http://tinyurl.

com/r29tn9 6:41 AM Aug 17th from web CB Richard Ellis (@cbrenyc) is proud of its new consultant service and leasing assignment with the Healthcare Trust of America and its new ad. Business is good! RT @cbrecorp: CBRE strengthens Valuation & Advisory platform w/ addition of property & environmental assessment services http:// 9:15 AM Sep 14th from TweetDeck Healthcare Trust of America awards CBRE management & leasing assignment for medical office building portfolio 8:43 AM Sep 10th from Tweet-

Deck RT @cbrecorp: Check out our ad in today’s Wall Street Journal and New York Times 12:04 PM Sep 9th from TweetDeck The Real Estate Board of New York (@rebny) has been busy appointing its first female chair and hosting a designation course. Apparently, discussing distressed properties is “amazing.”

REBNY hosting Certified Distressed Property Institution Designation course for 2 days – 1st day has been amazing! 1:51 PM Sep 10th from web REBNY named Mary Ann Tighe as first woman Chair in its 113 year history. Term begins January 1, 2010. Click link for info 11:35 AM Sep 9th from HootSuite

7 West 51st Street

110 East 55th Street

45 Popham Road, Scarsdale

25 East 67th Street

The Parkoff Organization, a fixture of the NY real estate market since 1930, has and continues to acquire an enviable portfolio of properties. Our portfolio includes the office buildings "Park 55", 110 East 55th Street, between Park & Lexington Avenues and 7 West 51st Street in the middle of Rock Center. It also features luxury East Side & Gramercy Park apartment buildings, as well as beautiful pre-war buildings in the boroughs, Westchester and on Long Island. We are looking to acquire additional prime property. Brokers protected. 98 CUTTERMILL ROAD • SUITE 444 SOUTH • GREAT NECK, NY 11021 212-324-1600 • 516-487-6790 • 718-225-5046 A four generation record of excellence in real estate investment & management 40

September 15, 2009 | the commercial observer

Dramatic Rent Reductions In Our Centrally Located Owner Managed Portfolio

the commercial observer |

September 15, 2009 41

lease beat

Compiled by Emily Geminder Email information on new leases to Emily Geminder at


594 Broadway

350 Madison Avenue

462 Seventh Avenue

28 West 44th Street


3,275 square feet





The Architectural League


Winoker Realty

China Daily


Newmark Knight Frank

The Architectural League, a century-old creative hub and meeting ground for some of New York’s most audacious architectural minds, signed a new lease for 3,275 square feet. The 12-story building is something of a hotbed for artsbased institutions, counting the National Dance Institute, the Museum of Comic and Cartoon Art, American Primitive Gallery, Poets House and Housing Works among its tenants. The asking rent for the three-year lease was $39 a square foot. Paul Wolf of Denham Wolf Real Estate Services represented the tenant. Landlord Newmark Knight Frank was repped by its own Brian Steinwurtzel and Donna Vogel.

BT Americas

Information technology firm Axispoint plans to open a new 19,200-square-foot headquarters, consolidating its current base at 21 West 38th Street and its software business at 55 Broad Street. The three-year sublease from BT Americas, the London-based phone company, had an asking rent of $75 a square foot, but Crain’s reports that Axispoint will pay a heavily marked-down price. FirstService Williams’ Seth Hecht and Eric Meyer represented Axispoint; Clayton Kline and Patrick Lennon of Jones Lang LaSalle represented BT Americas.

Kaufman Organization


Marolda Properties

260 Elizabeth Street


Babel Fair

299 Broadway



1385 Broadway


The New York State Health Foundation n/a

60 East 42nd Street


Breckenridge Pharmaceutical


104 East 40th Street


Enusion Systems


242 West 36th Street

Full floor

Arel Studio

Kaufman Organization

306 East 61st Street


Liz O’Brien

Philip Carter and Alan Schwartz


The United Nations Federal Credit Sheldon Solow Union

380 Madison Avenue


September 15, 2009


Olmstead Properties

Commercial real estate firm Winoker Realty signed a five-year lease to renew its headquarters at 462 Seventh Avenue. The brokerage, with 9,200 square feet, has called the Kaufman-owned building’s 13th floor home for a decade. Asking rent for space in the garment district tower was in the high $30’s a square foot. Steven Kaufman, Kaufman’s president, said, “After 10 years in this location, it made sense for the company to keep its office here.” Kaufman’s leasing director, Barbara Raskob, represented both the landlord and tenant in the negotiations. State-run Chinese newspaper the China Daily signed a one-year sublease after establishing a U.S. bureau earlier this year. The English-language paper, widely reflective of the Chinese government’s stance on policy issues, began publishing in February a weekly paper aimed at a U.S. audience. The 2,146-square-foot deal was brokered by Joseph Hilton, Grubb & Ellis’ New York China Practice leader, who has managed multiple major deals with Chinese companies, including China Construction Bank and China Merchant Bank. Indicative of the migration east of young, hip businesses and designers from the once trendy epicenter of Soho to Nolita, the boutique Babel Fair is setting up shop on Elizabeth Street. Both priced-out and big-branded out of its old hood, Babel Fair inked 1,100 square feet to sell its distinctive collection of clothing and accessories from around the world. The deal, brokered by Constance Byrne of New York Commercial Realty Services, came in at a respectable $210 a square foot, according to Crain’s—approaching neither last year’s highs of $300 a square foot nor its post-recession lows of $120 a square foot. The space is split between 550 square feet on the ground floor and 550 square feet on a lower level. Faith Hope Consolo of Prudential Douglas Elliman represented landlord Marolda Properties. Digital advertising firm Danoo signed a three-year lease for 2,400 square feet, reports The Real Deal. GlenMark Realty’s David Gomez represented Danoo; Steve Marvin of Olmstead Properties repped the landlord. The New York State Health Foundation, dedicated to issues of public and community health, signed a 15-year lease for the entire 23rd floor. The statewide private foundation is relocating to the 17,000-square-foot space from its former home at 1412 Broadway. Laurence Briody and Susan Kahaner of CB Richard Ellis represented the New York State Health Foundation, reports CoStar Group. Cushman & Wakefield team Diana Gaines, Gary Greenspan, Larry Lazerwitz, David Malawer and Jonathan Serko represented the landlord. Breckenridge Pharmaceutical signed a seven-year deal for 3,142 square feet, with plans to move in next month. The asking rent for the 52nd-floor space was $55 a square foot, according to The Real Deal. The pharmaceutical company was represented by Chris Salizzoni of Century 21 New York Metro. Newmark Knight Frank repped the landlord. Enfusion Systems, a company that develops software for hedge funds, signed a one-year sublease from Last Minute Transactions. The 2,264-square-foot deal was brokered by Michael Mandel of Grubb & Ellis, according to The Real Deal. Theatrical costume and fashion design company Arel Studio is shifting to a new floor, signing a six-year expansion lease for its home. The deal was brokered by Francine Oro of Hunter Realty, reported The Real Deal. Building owner the Kaufman Organization was repped by Kaufman’s own Grant Greenspan.

High-end decorator Liz O’Brien is relocating her swanky gallery from Fifth Avenue to the Interior Design Building, home to a host of tenants in the field. Ms. O’Brien’s soon-to-be 2,400-square-foot shop was recently vacated by Historical Design. Owned by Philip Carter and Alan Schwartz in Urban Partners, the building has an asking rent of around $135 a square foot, reports the New York Post. The United Nations Federal Credit Union has signed a five-year lease, where it will expand onto the 20th floor. The asking rent for the 3,815-square-foot space was $69 a square foot, according to The Real Deal. The transaction was negotiated by CB Richard Ellis team E. Goldman, Steven Siegel and Bruce Weinberg, who acted on behalf of landlord Sheldon Solow. | the commercial observer

Move to DUMBO-Take advantage of the $3,000 per employee REAP tax incentive.

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the commercial observer |

September 15, 2009 43

MANHATTAN (continued) Address




The Hawthorne Agency

W&H Properties


Cary Kane

W&H Properties

Employment law firm Cary Kane expanded its offices by about 60 percent. The law firm will now occupy 8,877 square feet on the W&H-owned building’s 14th floor. Grubb & Ellis’ Ira Rovitz repped Cary Kane; Newmark Knight Frank team Julie Christiano, Jonathan Fanuzzi and Brian Waterman repped W&H.

1180 Sixth Avenue

Full floor

Distinguished Programs Group

Murray Hill Properties

Insurance firm Distinguished Programs Group signed a 15-year lease for the entire sixth floor, moving from 6 East 43rd Street. The asking rent for the 18,124-square-foot space was $60 a square foot, according to Bisnow. Studley’s Michael Goldman and Dan Posy represented the tenant; landlord Murray Hill Properties was repped in-house by David Greene and Louis Pappas.

1180 Sixth Avenue


Corporation Service Co.

Murray Hill Properties

Corporation Service Co. signed a 10-year lease for 15,000 square feet. The asking rent was $50 a square foot, reports Bisnow. Newmark Knight Frank’s Kyle Ciminelli, David Falk and Pete Shimkin represented the tenant; landlord Murray Hill Properties was repped in-house by David Greene and Louis Pappas.

500 North Broadway


Jericho Atrium

Metropolitan Realty Associates

Long Island’s Jericho Atrium signed a renewal lease with ARS Financial Services, which will remain in its 32,000-square-foot office. Real Estate Strategies’ Harris Rousso represented the landlord, Metropolitan Realty Associates, according to Bisnow.

37 West 17th Street



Joseph Moinian

1350 Broadway

1350 Broadway

345 West 145th Street


Notes The Hawthorne Agency, provider of commercial trade credit information and political risk insurance, signed a renewal in Herald Square. The 22nd-floor space in the W&H Properties–owned building stands at roughly 12,300 square feet. Jay Lapham of Jones Lang LaSalle represented Hawthorne; Julie Christiano, Jonathan Fanuzzi and Brian Waterman of Newmark Knight Frank repped W&H.

The proliferation of social networking sites continues to make its mark on the world of real estate as well as the cybersphere. MobiNow, one such site, inked a downtown 2,500-square-foot deal. The price tag for the five-year lease was $28 a square foot, reported The Real Deal. The Kaufman Organization’s Elliot Warren represented MobiNow in negotiations; the landlord was repped by the Moinian Group’s Kimia Shadrokh. Wireless service provider MetroPCS Communications will open another Harlem location. The Hillview Towers is home to both residences and 11 stores. Prudential Douglas Elliman’s Faith Hope Consolo, Joseph Aquino and Arthur Maglio brokered the deal, according to Bisnow.

MetroPCS Communications

386 Park Avenue


Atelier Esthetique

New York State licensing school Atelier Esthetique Institute of Esthetics extended its lease by four years. The Monday Properties school is based on the 3rd and 14th floors, comprising 4,250 square feet, reports The Real Deal. Landlord Monday Properties was represented in-house by C. Panzirer and I. Deas.

126 Fifth Avenue


The Covala Group


10 West 33rd Street


Silver Rock


530 Seventh Avenue


Lerner et Cie


Women’s apparel company Lerner et Cie is relocating from 231 West 39th Street to new office and showroom space on the 22nd floor. The 4,600-square-foot deal was negotiated by Marc Schoen and Michael Schoen of Savitt Partners, according to The Real Deal.


Bard College


The international studies program of Bard College signed a lease for 1,880 square feet. The asking rent was roughly $48 a square foot, according to The Real Deal. Living Real Estate Group repped both parties in the transaction, with broker Eli Someck repping the college and Jonathan Bakhash repping the landlord.

444 Madison Avenue


Business Monitor International


Business Monitor International, publisher of business data, inked a 1,949-square-foot lease. The lease runs for 31 months, according to The Real Deal. The publisher was represented by G. Brill and J. Carney of CitySites Commercial Group. Elie Gross of CB Richard Ellis repped the landlord.

11 Broadway


Leana Group

36 West 44th Street


September 15, 2009

Braun Management

Insurance brokers the Covala Group is subleasing 4,450 square feet. The firm signed a four-year deal for the thirdfloor space, relocating from 1430 Broadway, according to The Real Deal. Cory Gahr of Newmark Knight Frank acted on behalf of the tenant; Marc Ellman of Ellman Realty Advisors repped the landlord. Fashion company Silver Rock signed a nine-year deal for 4,400 square feet. The deal, brokered by David Levy of Adams & Co, commanded an asking rent of $39 a square foot, reports The Real Deal.

Financial services provider Leana Group inked a five-year lease. Landlord Braun Management’s asking rent for the 2,312-square-foot space was $35 a square foot, reported The Real Deal. Max Vizgalin of Own Manhattan brokered the deal. | the commercial observer

P latfOrm Perfec tiO n: tHe territO ry system t m

masse y kna kal re alty s erv i ce s nyc’s #1 building sales firm

877.657.0777 *as reported in Crain’s New York Business, July 27 - august 9, 2009.

the commercial observer |

September 15, 2009 45

MANHATTAN (continued) Address

90 Broad Street




Hudson Institute


Swig Equities

Notes Policy research firm the Hudson Institute signed a one-year lease. E. Zemachson and C. Mongeluzo of Newmark Knight Frank brokered the 2,531-square-foot deal, according to The Real Deal. The landlord was represented by Todd Korren of Swig Equities. Law firm Drabkin & Margulies is moving its executive office to 120 Broadway, where it signed a five-year lease. The asking rent for the 2,828-square-foot space was $39 a square foot, according to The Real Deal. The Kaufman Organization’s E. Warren and R. Reihanian repped the law firm; the landlord was repped by Stuart Christie of landlord Silverstein Properties.

120 Broadway


Drabkin & Margulies

Silverstein Properties

275 West 39th Street


J Brand

Britex Associates

The denim extravaganza J Brand signed a five-year lease. The asking rent was $35 a square foot for the 3,000-square-foot space, reported The Real Deal. Grant Greenspan of the Kaufman Organization represented both the tenant and the landlord, Britex Associates

419 Park Avenue




Medical product manufacturer Langer is subleasing space on the fifth floor, reports The Real Deal. Cushman & Wakefield’s Michael Burlant, acting on behalf of Langer, brokered the 3,000-square-foot deal. Kenneth Beilin of Commercial Real Estate represented the landlord.

499 Seventh Avenue


Overseas Garment Production


Apparel company Overseas Garment Production will expand its offices and showroom; it currently occupies the second and fourth floor, and will now include the third floor. The 3,200-square-foot lease was brokered by M. Dubin and C. Sacks of Savitt Partners, according to The Real Deal.

530 Seventh Avenue


Point A Showroom

Savitt Partners

Relocating from West 39th Street, Point A Showroom is setting up shop on the 22nd floor. Savitt Partners team Marc Schoen and Michael Schoen brokered the 2,700-square-foot transaction, reports The Real Deal.




Sky View Center


Bob’s Discount Furniture

449 Seventh Avenue


Homebody Boutique


Retailer Homebody Boutique inked a three-year lease in Park Slope. The 450-square-foot deal was brokered by Jennifer Rhodes of Ideal Properties, who negotiated for both the tenant and the landlord, according to Bisnow.

808 Eighth Avenue


Doctors Management Group


Doctors Management Group is leasing 2,300 square feet in Park Slope. The deal was brokered by Brad Einhorn of Ideal Properties, who represented both the landlord and tenant, according to Bisnow.

60 12th Street


Lifeguard Financial


Lifeguard Financial signed a three-year lease for 7,000 square feet in Gowanus, Brooklyn. Karen Christian of Ideal Properties represented both the landlord and tenant in the transaction, according to Bisnow.


September 15, 2009



The retail chain Bob’s Discount Furniture will eat up 35,000 square feet at Sky View Center, the mall coming to Muss Development Queens’ Sky View Parc, with plans to open by next spring. The 10-year lease marks store number 34 for the furniture chain, reports the New York Post. Fred Feinblum and David Lucas of Julius M. Feinblum Real Estate represented Bob’s. John Hanlon of Ripco Real Estate repped landlord Muss Development. | the commercial observer

the commercial observer |

September 15, 2009 47

THE BOROUGHS (continued) Address 378 93rd Street

276 Prospect Park West





Power Express Mortgage


Power Express Mortgage signed a two-year lease in Brooklyn’s Bay Ridge. The 2,100-square-foot lease was brokered by Justin Dower of Ideal Properties, who represented both the landlord and tenant, according to Bisnow.




Anorco inked a one-year lease in Brooklyn’s Windsor Terrace. The 300-square-foot lease was brokered by Brad Einhorn of Ideal Properties, who represented both the landlord and tenant, according to Bisnow.

153 Green Street



Anovy Associates

55 Washington Street


Compassionate Care Hospice

Two Trees Management


Custom cabinetmaker Rodos signed a lease for a 5,000-square-foot warehouse in Greenpoint, Brooklyn. The annual rent for the five-year lease was $54,000, or approximately $11 a square foot, reported The New York Times. Jacques Wadler and Vincent Lopez of Kalmon Dolgin Affiliates represented the tenant. Landlord Anovy Associates Brooklyn was repped by Len Gold of Finch Realty.

Compassionate Care Hospice of New York signed a lease for 1,943 square feet. Landlord Two Trees Management was represented in-house by Caroline Pardo, according to The Real Deal.

Under Glass Mfg. Corp. is the exclusive manufacturer of the original Lord & Burnham greenhouses and solariums. We were established in 1989 after acquiring the Lord & Burnham product line.

At Under Glass we are committed to our motto:

“Elegance and Function” The growing environment cannot be compromised.


September 15, 2009

Under Glass Manufacturing PO Box 81, High Falls, NY 12440

(845) 687-4700 Email: • | the commercial observer

666 Fifth Avenue: Unparalleled address. Superior space. Move-in condition law firm space for up to 230,000 rsf • Interconnecting stairway through entire space • Will lease floors separately • Private cafeteria • Potential building signage • A host of unparalleled amenities

for tenants including complimentary concierge service and a one-of-a- kind cigar bar—the private Grand Havana Room

• Lobby recently renovated

For more inFormation on this opportunity, contact theodore J. Koltis 212-588-8620 or peter r.c. Brindley 212-588-8624

the commercial observer |

September 15, 2009 49

THE LOBBY Major Job Entries and Exits

Haves, Pine & seligman Financial advisement and commercial mortgage brokerage services for over 20 years Established in 1987, HPS has closed more than 700 commercial real estate transactions. Recently celebrating our 20th year in business, we can attribute our success to our commitment to the fundamental theories of business which include respect, loyalty and knowledge. 708 Third Avenue, 14Th Floor, new York, nY 10017 212-953-2400 •

Michael Lafitte.

By Jotham Sederstrom

CBRE’s New King of Americas


ichael Lafitte has been named president of Americas Business for CB Richard Ellis, a position that he will oversee from his native Dallas. Mr. Lafitte, 48, was previously president of CBRE’s Institutional & Global Corporate Services, where he helped increase profits by $1.7 billion. In his new role, Mr. Lafitte will oversee business lines in the United States, Canada and Latin America, which, with 1.3 billion square feet of property and $3.2 billion in revenues last year, is CBRE’s largest segment. “It’s a tremendous change from my last position,” said Mr. Lafitte by phone from his Dallas office. Mr. Lafitte, who was hired at CBRE in December 2006, previously worked as a leasing agent at Lincoln Property Company and, later on, as a leader at the Bear Stearns Real Estate Group. He joined CBRE when the company acquired Trammell Crow Company, where the married father of three served as a director of global services. The outgoing Americas president, Calvin Frese Jr., meanwhile, has been named CBRE’s global chief operating officer. “Mike is the perfect person to lead our Americas operation to the next level of success,” Mr. Frese said in a statement. “He is widely respected by our employees and clients alike and is a great leader who lives out our corporate values.

at the helm of 11 million square feet of property in Manhattan, Westchester County and Connecticut. Mr. Mockler, 47, previously worked at Johnson Controls Inc., where he served as general manager for Real Estate Services–Americas Division. “Our objective is to be the best,” said Mr. Mockler, the father of 7-year-old twins. “The biggest will come, but our initial priority is to be a high-quality provider of real estate services.” The position, which will include managing clients’ assets and adding value to distressed properties, is newly created for Mr. Mockler, who said he was tapped, in part, to capitalize on the down market. “We think it’s a unique time in the marketplace for change because people are looking to optimize their revenue streams, and the better a building is can make a big difference when you’re trying to retain and attract business,” said Mr. Mockler, whose portfolio includes 250 Park Avenue and 277 Park Avenue, among other high-profile trophy properties.

Also Notable … Maureen Ehrenberg, an Illinois native, has been tapped to join CB Richard Ellis’ Global Corporate Services organization as a senior consultant. Ms. Ehrenberg, who will be based in the company’s Chicago office, will assist CBRE clients with cost cutting and operational improvements. Previously, Ms. Ehrenberg led the Global Client Services business for Grubb & Ellis, a role that included providing corporate services, project management and consulting services.

Eric Mockler.

Colliers Position to Capitalize on Down Market 50

September 15, 2009


ric Mockler has been named senior management director at real estate services firm Colliers ABR, effectively putting him | the commercial observer

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By Jotham Sederstrom Wednesday, September 16 Now that the summer has sizzled away and the bikini briefs—or, alas, the size 38 trunks—have been stashed, it’s time for the titans of real estate to do what they do best: Par-tee! And what better way to celebrate the changing of the seasons than a raucous, industrywide seminar on the finer points of—wait for it …—yes, exactly, loan restructuring, the catnip of equity managers from here to Cancún. The Real Estate Lenders Association, always the bawdiest of hosts, is throwing a bash—well, a panel, actually—focusing on the finer points of resuscitating the deal. … If that event isn’t enough to satiate the soul, the New York Associa-

tion of Realty Managers’ annual Real Estate Expo should do the trick. The Expo, which will feature panels on how to manage buildings on the Internet and the art of collections and holdovers, will be held on the dizzying top floor of the Hotel Pennsylvania, in case you want a bird’s-eye view of your portfolio. … After that, hop over to B’Nai B’Rith for an afternoon of kibitzing with the president of the Economic Development Corporation, Seth Pinsky, who will pontificate about the “New Vision for New York City” and likely detail the city’s plans for Coney Island, the East River Development Project and Willets Point in Queens. [Real Estate Lenders Association Panel, 3:30 p.m. to 6:30 p.m. at the offices of Morrison & Foerster LLP, 1290 Avenue of the Americas, www.; The New York Association of Realty Managers Expo, 7:30 a.m. to 4:30 p.m., Hotel Pennsylvania, Seventh Avenue and 33rd Street, 212-216-0654; B’Nai B’Rith Luncheon with Seth Pinsky, noon, Cornell Club, 6 East 44th Street, Ivy Room, email Ms. Aracelis Kuilan at to secure reservations]

Thursday, September 17

Seth Pinsky.

Like a tenant to a lease, the real estate elite always returns to the green, and so it goes that the Society for Marketing Professional Services will tee off in Long Island. Eighteen holes, cocktails, networking—what more could you ask for? In between bogeys, players will network and drink until the loans are restructured. … Then it’s back to the city for the Manhattan Association of Realtors monthly “Techy Thursday” seminar, which aims to teach real estate professionals about the many resources

available to them on the Internet. [The SMPS-LI Golf Classic, Stonebridge Golf Links and Country Club, visit or email for more information; Manhattan Association of Realtors’ “Techy Thursday,” 3 p.m. to 5 p.m., Empire State Building,]

Friday, September 18 Compassionate real estate bigwigs will converge on Hartford for an Energy Summit that you can assume will draw environmentally friendly guests like Durst Organization’s chairman, Douglas Durst, or at least his doppelgänger in Connecticut. … [Energy Summit, Marriott Hotel & Conference Center, Rocky Hill, Conn.; contact Amy Orsini at]

Sunday, September 20 And then it’s back to the links. Another Sunday, another real estate golf outing, this time sponsored by the New York Building Congress up north in Purchase. [New York Building Congress golf outing, Brae Burn Country Club, 39 Bay Burn Drive, Purchase, N.Y., $275,]

Monday, September 21 C’mon, don’t be embarrassed. Nobody will laugh if, as an equity manager, you don’t know how to, say, restructure a loan. Just ask at the Real Estate Board of New York’s “Everything You Want to Ask About Buying or Selling Real Estate in New York City.”… Once all those questions are answered, the Manhattan Association of Realtors has another question for the brokers: Want to become a member? The respected organization is opening its doors to real estate professionals interested in becoming new members. Luckily, the information session isn’t expected to get in the way of any golf outings. [Real Estate Board of New York

Seminar, from 9:30 a.m. to 11:30 a.m., REBNY offices, 570 Lexington Avenue,; Manhattan Association of Realtors information session, 11 a.m. to noon, Empire State Building, suite 4711, www.] Calendar items can be sent to Jotham Sederstrom at

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September 15, 2009 53

this week’s photos The National Realty Club’s ‘The State of the Real Estate Market’ Luncheon The Williams Club, Sept. 9, 2009

Matt Moore and Jutta Ishii

(l-r) Barry T. Zeman, Chanan Averbuch, Jeffrey S. Mitzner and Shimon Shkury

Thomas K.Graf and Andrew Albstein

Jennifer L. Busch and Stuart I. Rich 54

September 15, 2009

Stephen J. Waldman and Michael D. Green | the commercial observer


(l-r) Jerry Ragano, Josh Prottas and Wayne R. Baird

We wish you many years of great observations. Congratulations on the launch! Douglas Durst

Jonathan Durst

Crain ’s New Y ork B usines ® s To

noteworthy. n a t io n a B O M A In t e r


Year e h t f o g in d il Bu a c il it y F e t a r o p r o C ager for Property Man uarters SONY Headq Avenue 550 Madison

# 1 Sponsor for Non-Public

Traded REITs



W IN NE R Microsoft Environmental Award5

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ignm s s a 0 Over 3 d in NYC e award SF 0 0 0 , 25 sed Over 2 a e l y l l sfu succes 009 2 e t to da

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p 5 Fa stest Portf Growi olios u ng nder Mana gemen 3 t --

CoSt ar’s T op Ma nhatt Office an Leas ing D eals 4

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l Nationa state E l a e R r ’s Investo ® atch" W o t "10

And, we will continue to translate today’s turbulence into opportunity for our clients. 6


Grubb & Ellis was ranked No. 1 by Robert A. Stanger & Co. in non-traded REIT sales year-to-date through July 31, 2009. BOMA’s International TOBY for Corporate Facility of the Year 2008. 3 % change in commercial square feet managed, 2007–2008. 4 Four of top 25 CoStar’s Top Manhattan Office Leasing Deals, first-half 2009, ranked by square feet. 5 2008 6 2008 2

Grubb & Ellis NEW YORK 1177 Avenue of the Americas, New York, NY 10036 212.759.9700



Commercial Observer - September 15, 2009  

Cover Story: Double the Durst - Jody and Douglas Durst on Leasing and Lending in the Downturn

Commercial Observer - September 15, 2009  

Cover Story: Double the Durst - Jody and Douglas Durst on Leasing and Lending in the Downturn