Last month, SL Green Realty Corp. CEO Marc Holliday flew a group of his key executives and top New York brokers to Louisville for the Kentucky Derby, where Holliday’s horse, Love Train, ran in an undercard race.
The three-year-old filly didn’t place at Churchill Downs, but Holliday’s Blue Devil Racing Stable has had a strong run, with some $2.5 million in winnings to date, according to thoroughbred racing site Equibase.
That windfall comes as no surprise to top real estate attorney Robert Ivanhoe, who counts the SL Green head as a longtime friend and client. Whether it’s horse-racing or real estate, Holliday “just has incredible judgment and instinct about how to make money,” Ivanhoe said.
Since Holliday joined SL Green 15 years ago, the company has mushroomed from a mid-size landlord into a publicly traded behemoth. Now New York City’s largest commercial property owner, SL Green has roughly $19 billion in gross asset value, according to data from Sandler O’Neill + Partners.
SL Green’s portfolio encompasses more than 30 million square feet of office properties, including such prized assets as the 1.75 million-square-foot One Astor Plaza at 1515 Broadway, the 926,122-square-foot 485 Lexington Avenue, the Graybar building at 420 Lexington Avenue and the News Building at 220 East 42nd Street.
In recent years, SL Green has surged ahead of its competitors, including the once seemingly invincible Vornado Realty Trust. With an aggressive strategy that combines acquisition and leasing of properties with mezzanine financing, SL Green was the only New York–focused REIT to outperform both the MSCI US REIT Index — a market capitalization index that represents 85 percent of the country’s REITs — and the S&P 500 index in the first quarter. Also in the first three months of the year, SL Green signed Manhattan lease deals totaling nearly 600,000 square feet, including 42,664 square feet of space at 521 Fifth Avenue and 43,294 square feet at 100 Park Avenue. And at the time of the REIT’s April earnings call, the REIT had nearly 1 million square feet of deals in the pipeline.
These days, as one real estate insider put it, SL Green “[eats] Vornado’s lunch.”
Holliday took over for firm founder Stephen Green in 2004, and industry players and analysts credit him — and the ferociously competitive culture he’s instilled at SL Green — with the REIT’s rapid ascent.
“We take it almost personally when it comes to retaining tenants and getting opportunities at the right price,” Holliday told The Real Deal in a rare phone interview.
To his peers, Holliday is a talented negotiator, able to deftly balance aggression and fairness to come away with the spoils.
Jared Kushner
“He’s a win-win guy,” Jared Kushner, CEO of Kushner Companies and a former intern at SL Green, said of Holliday. “He understands how to make a good deal for himself, and he understands that you’ve got to let the other person make a good deal, too.”
All in the family
New York real estate is renowned for its dynasties, and Holliday, like many in the field, has strong family ties to the industry.
Holliday’s maternal grandfather, George Goldberg, was a prominent owner of real estate in Brooklyn, and his father, Morton Holliday, was a managing director at real estate financing company Sonnenblick-Goldman in the 1970s.
“Mort Holliday was doing the biggest deals in New York in those days,” recalled James Kuhn, president of Newmark Grubb Knight Frank.
Of his son, Morton Holliday said, “Real estate was always in his genes.”
“Like any father, I gave him the benefit of my experience and advice,” he added, and “many of my clients are now Marc’s clients.”
The younger Holliday grew up in the wealthy town of Huntington on the North Shore of Long Island, and was the starting goalie on the Huntington High School lacrosse team, his father said. The family took frequent trips to the Thoroughbred track in Saratoga Springs, N.Y., where Holliday developed his love of horseracing. (These days, he shares that love with his wife, Sheree, a competitive rider.)
In 1990, Holliday graduated from Columbia University’s graduate real estate development program and went to work at the private real estate investment bank Capital Trust. Ivanhoe, who first met Holliday around that time, recalls being “extremely impressed” with the young man, especially with his skill in structured finance.
Back then, the real estate landscape was undergoing a sea change, with mortgages beginning to be “securitized,” or converted into securities that investors could purchase. To cope with that increased complexity, real estate bosses looked to Wall Street. The most high-profile of these hires came in 1996, when Vornado’s Steven Roth lured capital markets dynamo Michael Fascitelli from Goldman Sachs.
Fascitelli’s hire signaled that real estate industry players would now be “unsentimental, not good ol’ boys, but young tough boys,” said Kenneth Patton, the onetime COO of Helmsley-Spear and a longtime professor at NYU Schack Institute of Real Estate. These newcomers, ushering in a new level of intensity in the industry, would “kill, fight and pillage to make [their] shareholders value.”
Holliday was Green’s answer to Fascitelli. Green had founded SL Green Properties in 1980, acquiring and upgrading Class B buildings on side streets. By the 1990s, the company had a $500 million portfolio and was gearing up to go public.
From left: Andrew Mathias, Marc Holliday and Stephen Green (Credit: Steve Friedman)
Green hired the thirtysomething Holliday — on the recommendation of Ivanhoe, his attorney and golf buddy — as chief investment officer in 1998 with the intention of grooming him to take over.
“I was a big early fan of the securitization market and the positive impact it could have on institutional real estate,” Holliday said, describing Green as a “visionary” for “seeing the potential of a Wall Street approach to growing a real estate platform.”
Green quickly became Holliday’s mentor. For years in the late 1990s, the two met once a week for breakfast at the Royalton Hotel on West 44th Street, crafting an ambitious vision for the future of SL Green.
“All I ever had on me at the time was my Wall Street Journal and a pen,” recalled Holliday. “We’d pencil out the business plan and adapt it week-to-week.”
When Green stepped down as CEO in 2004, he “very happily turned over the reins” to Holliday, Ivanhoe said.
Indeed, when SL Green visited the New York Stock Exchange last year to celebrate the REIT’s 15th anniversary, the tall, leonine Green sounded the gavel, but the stockier Holliday was front and center.
“Steve has three sons, and none of them went into his business,” Ivanhoe said, adding that Green takes “enormous pride” in Holliday’s success.
Taking charge
Almost immediately, Holliday began having an impact at SL Green. First, he spearheaded efforts to “go after big buildings on the avenues,” Ivanhoe said, rather than the smaller Class B buildings that made up the bulk of the firm’s portfolio up to that point.
The McGraw-Hill Building
In December 2003, for example, SL Green paid $450 million for a 45 percent stake in the McGraw-Hill Building at 1221 Sixth Avenue. Seven years later, the REIT sold its stake to the Canada Pension Plan Investment Board for roughly $576 million, according to CoStar.
In making acquisitions such as these, Holliday displays a foresight reminiscent of his father, NGKF’s Kuhn said.
“Before the market got really hot, SL Green won a lot of buildings by being the highest bidder,” Kuhn recalled. “I asked Marc: ‘Do you think you overpaid?’ He replied: ‘I would rather overpay today at $500 a foot than three years later at $800 a foot.’”
Holliday also led the creation of a structured finance capability at the REIT, Ivanhoe said, which allowed SL Green to convert missed acquisition opportunities, such as the Young & Rubicam Building at 285 Madison Avenue, into lucrative financing deals. Though Aby Rosen’s RFR Realty bought the property for $189 million in late 2012, SL Green had a finger in the pie by giving RFR a bridge loan.
And at 100 Church Street, where the Sapir Organization in 2009 defaulted on its $30 million senior mezzanine loan issued by Gramercy Capital (then a SL Green subsidiary), SL Green moved to take control of the Financial District property. When the REIT took over, the building was barely 60 percent leased, but by October 2012, it was 97 percent occupied.
“They completely turned the asset around,” Ivanhoe said.
SL Green’s structured finance acumen, combined with its leasing expertise, allowed the company to forge “an identity” in the market, Patton said. That, and the competitive culture instilled by Holliday.
Earlier this year, SL Green bid on the Sony Building at 550 Madison Avenue, but lost out to developers Joseph Chetrit and David Bistricer. Ivanhoe, who was representing Chetrit and Bistricer, recalls being cornered at a party by several eager SL Green executives.
“They asked: ‘Did the other bidder win?’” Ivanhoe said. “When I nodded, they said: ‘OK, we have the asset underwritten, do they have the loan yet?’ I think they used words like ‘lock and load.’”
Joseph Chetrit and 550 Madison Avenue (credit: PropertyShark)
By the end of the next day, there was a signed contract for SL Green to arrange $925 million in financing for Chetrit and Bistricer’s $1.1 billion acquisition, one of the largest deals in Manhattan office history.
“The New York market is not forgiving with time,” Holliday said of the deal, summing up SL Green’s über-aggressive approach.
That ethos of hard work and long hours, several people familiar with the company said, is embraced by Holliday’s top lieutenants, including president Andrew Mathias, co-chief investment officers David Schonbraun and Isaac Zion and leasing director Steven Durels.
“No one will outwork Marc Holliday and SL Green,” said Ivanhoe, adding that the REIT’s employees are fully aware of that expectation. “The message [is], unless you’re willing to get on that train and you’re up for all of that, go somewhere else.”
For example, entertainment giant Viacom’s 1.6 million-square-foot renewal and expansion at SL Green’s 1515 Broadway in April of last year was a result of a week-long series of round-the-clock meetings. “They were literally 24-hour meetings, with phone calls to each side’s CEO, waking them up in the middle of the night, at 2 o’clock in the morning, with new issues,” Durels told the New York Observer of the deal.
Mathias, a Wharton graduate who followed Holliday from Capital Trust to SL Green shortly after it went public, is particularly crucial to Holliday’s team, industry sources said.
Mathias is “quiet and low-key,” Ivanhoe said, in contrast to the “more effusive and outgoing” CEO.
“We’re sort of alter egos,” Holliday said of his second-in-command.
Perhaps more importantly, the two share a reputation for integrity, several sources said.
Holliday and Mathias are among “the few guys in New York City whose handshake really means something,” said Robert “Large Loan” Verrone, founder of real estate financing company Iron Hound Management, who represented the Chetrit Group in sourcing the Sony Building loan. “They really go out of their way to take care of the relationship.”
In 2011, SL Green played the role of a white knight at Joseph Moinian’s prized 3 Columbus Circle, a 26-story, 768,565-square-foot tower at 1775 Broadway.
Moinian had been battling default at the tower, which was reportedly only 23 percent occupied at the end of 2009. In a bid to wrest the property from him, the Related Companies bought a $250 million note on the property.
“Joe was going to have a very hard time refinancing in a limited capital market,” said Kuhn, who was involved in leasing the building. “He brought in Marc, and [SL Green] paid off the loan and ended up controlling the property.”
A few months later, SL Green nabbed advertising giant Young & Rubicam as an anchor tenant at the tower.
Moinian told TRD that the 3 Columbus deal was “beautifully leased, beautifully done.”
“I can write a book about Marc,” he added, singling out Holliday’s ability to “skin a cat in many ways. He is not only very positive, but he has a Route A, Route B and Route C.”
Despite its successes, though, SL Green has made its share of mistakes under Holliday — most notably a 2006 mezzanine financing investment in Stuyvesant Town–Peter Cooper Village. SL Green invested $200 million in Tishman Speyer and BlackRock Realty’s $5.4 billion acquisition of the immense apartment complex. In 2010, with the property at the center of a controversy over rent-stabilized housing, the owners defaulted on their loans and handed over the keys to creditors, leaving SL Green with heavy losses.
Other people’s money
Though SL Green is known best for its office projects, Holliday has shown a knack for retail development, too. The REIT has partnered with retail czar Jeff Sutton on marquee retail projects such as 1552 Broadway and a 10-building portfolio on Fifth and Madison avenues, both deals viewed in the industry as unqualified successes.
Jeff Sutton
At 1552 Broadway, for example, SL Green and Sutton in 2011 paid the Riese Organization what was considered an exorbitant $136.6 million for the landmarked 15,000-square-foot building. But by striking a lease deal at neighboring 1560 Broadway, which allowed the two properties to be combined, the partnership managed to effectively triple the retail space at the site. In July 2012, the partners announced the clothing store Express as a 30,000-square-foot anchor tenant at the property, in a deal that could bring in north of $20 million per year, as TRD has reported.
In a phone interview with TRD, Sutton described Holliday as “very intelligent,” someone who “always keeps his word” and “very mature about other people making money.”
Holliday said SL Green’s retail ventures — comparatively few compared to its office holdings — are “a growing focus.”
Of Sutton, Holliday said, “We have kind of a shared point of view in terms of how we value real estate and where we see the emerging market. And we’re very nimble, not only at structuring the transactions, but at financing them. When that works, it works really well.”
In Kushner’s view, SL Green was “smart to identify Jeff’s genius. They helped him do things that he could never have done, and he helped them do things they could never have done.”
The only misstep for the partnership appears to be 1604 Broadway, a Times Square retail property where SL Green and Sutton acquired a controlling leasehold interest in 2005. Sutton is no longer involved, and SL Green is now facing a ground lease eviction at the site after missing a series of payments. Holliday confirmed to TRD that the property was in litigation, but did not elaborate. Sutton declined to comment on the deal.
SL Green has also dipped its toe in residential waters. In October 2011, SL Green partnered with Ofer Yardeni’s Stonehenge Partners in a $416 million acquisition of eight Manhattan retail and multi-family properties, including 400 East 57th Street, a 260-unit multi-family building. SL Green and Stonehenge will also do a luxury renovation of a 96-unit building at 1080 Amsterdam Avenue, where the partnership paid $13 million last summer for a 99-year ground lease.
And in March, SL Green paid $51.5 million to acquire a newly constructed Williamsburg condo and townhouse portfolio with developer Ben Shaoul. During its first-quarter earnings call in April, Mathias said SL Green is also considering converting 1 Madison Avenue, the 1.18 million-square foot Gramercy Park office building, to residential.
These new ventures, sources said, are made possible in part by Holliday’s track record.
“The two things you want in a deal,” NGKF’s Kuhn said, “are certainty of closing and a fair person on the other side who’s not trying to take the last nickel off the table. Marc gives you that.”