Rob Speyer on the long arc of megadevelopment, New York’s renaissance and proptech bets

The Tishman Speyer CEO gets candid in conversation with TRD

New York Issue /
May.May 26, 2022 12:00 PM

Tishman Speyer CEO Rob Speyer (Photo by Paul Dilakian)

In most real estate rooms, Tishman Speyer is the 800-pound-gorilla. But Rob Speyer wants it to be the most nimble gorilla, one that can constantly reposition its 90 million-square-foot portfolio in response to the trends driving the world today.

Speyer insists that the company isn’t in the landlord-tenant business, so much so that he’s banned use of the T word at the firm, believing it connotes a “feudal” approach to real estate.

“It suggests an adversarial relationship, and that’s the last thing we want,” Speyer said during an in-depth conversation with The Real Deal this month.

The scars from the commercial behemoth’s disastrous bet on Stuy Town have faded, but the lessons remain, he indicated, stressing that “civic engagement” is now core to the firm’s development strategy, particularly on megaprojects such as the $1.4 billion overhaul of San Diego’s Tailgate Park.

Speyer riffed on how the fifth-generation family firm, which has developed and owned some of the world’s most recognizable properties, from Rockefeller Center to the MetLife Building to Paris Bourse, is diversifying its portfolio across multifamily, industrial and life sciences, and how it sees its proptech bets — it took Latch public and has invested in Side, VTS and others — as an opportunity to glimpse into the future of the business.

From left: TRD's Hiten Samtani and Rob Speyer (Photos by Paul Dilakian)

From left: TRD’s Hiten Samtani and Rob Speyer (Photos by Paul Dilakian)

You just announced a 265,000-square-foot lease with HSBC at the Spiral, your Bjarke Ingels-designed office skyscraper at Hudson Yards. Even though that’s a coup for you, they’re taking about half the space that they had in their old location, which says a lot about where demand for office space is headed.

The unlock with them was our co-working business. You may find that surprising, but we’re going to have two floors of co-working space very close to where their space is. And what we’ve said to them is, anytime you need to grow, you’re going to have flexibility to go into our space. We call that our Studio product.

Five years ago, I was talking to the head of corporate real estate of one of our most important customers. And he said, “WeWork understands us better than you do or any traditional landlord does. They understand our office space represents our culture.” And I thought to myself, wow. So when we lease to WeWork, we are financing another business to disintermediate us. We stopped all leasing with WeWork. Over the last two years, we’ve done more than two dozen deals like HSBC, traditional leases that we may not have gotten if we didn’t have the Studio adjacency.

What if they want to compress? These are companies that, when it comes time to renew, might say, “We’re going from five days a week to two days a week.” When you look at your global portfolio, you have to be considering that and making some adjustments.

Projects like the Spiral are benefiting right now disproportionately. But it’s not just new construction — it’s buildings where the owner has been intentional and purposeful about creating a collaborative environment, about creating a highly amenitized product, about being deeply engaged with their customer. Because here’s the truth: You’re not going to force people to come back. You have to make people want to come back. And fortunately, that has been the focus of our office business.

Let’s talk about scale. How does it help, and how does it maybe hurt, being the biggest player?

We’ve been on this decade-long journey to diversify our platform. It started in the residential business, where we delivered 9,000 units and we’ve signed up another 13,000 during Covid, $5 or $6 billion of residential investments. We launched a life science platform, closing a $3 billion dedicated fund: It combines our expertise in real estate with one of the great life science entrepreneurs, Arie Belldegrun. So we’re offering the best in science and the best in real estate, which will provide both a physical and a social infrastructure in these buildings that will empower the companies that sign up and empower their people to create life-changing discoveries.

The approach you’re taking in San Diego with the Padres project and in San Francisco with the Giants is interesting: Using life sciences as a magnet, and developing a mixed-use community around it.

It starts with a philosophy that people want to live and work in highly engaged environments. They don’t want to feel like they’re walking into an office building that is somehow distanced from the community around it. So in San Francisco, which will be the largest development in the city’s history, Visa’s moving their world headquarters there, we’re doing a lab building, we’re going to have residential, food and beverage, a nine-acre park. It all sits on the bay, and the value of each component of the project will be greater because of what’s around it and how the interplay works.

We have to build a significant horizontal infrastructure, but we’re also building our own energy plant. So this is going to be a net-zero [in terms of carbon emissions] development.

Sustainable development seems to have gone from a buzzword to a movement, with pressure from regulators, investors and tenants. How is that playing out in a business like yours, which gets so much institutional capital?

The good news for us is we’re not a Johnny-come-lately to sustainability. You asked earlier about the benefits of being global — we’ve been in Europe for 35 years, and it’s been focused on sustainability a lot longer than we have here. You learn a ton if you’re paying attention. And if you’re humble enough to learn, you can apply those lessons across your portfolio.

You’ve become an active proptech investor, taking Latch public through a SPAC deal, backing Side, VTS and others. Has the recent rout of tech stocks forced a reckoning of some of those bets?

I’m excited. We got into protech five years ago and have done 20 early-stage investments. We’ve now closed our first venture capital proptech fund. It all started with a conversation with a good friend of mine, Sam Altman [former president of Y Combinator]. I went to see Sam and said, “What do you think about us doing direct proptech investing?” And he said, “Only do venture if it can be transformational to your business.”

And so now I look back at the last five years, and not just at those 20 investments we’ve made, which have done extremely well, but more importantly the impact it’s had on our real estate, on our stakeholders and our deeper connectivity to them, on our company, culture and the ability of people joining the company to feel like this is a place where they can really innovate.

Growth, by its nature, is volatile. Innovation is volatile and the tech economy is volatile — we’re certainly experiencing that at the moment. But here’s what I know about Latch: It’s got a great product, our customers and our residential buildings where we use it love it, and so I’m confident its best days are ahead.

But Latch’s shares are trading at a fifth of their IPO price. Do you think there’s going to be more of a focus on business fundamentals now, not just growth at all costs?

There’s always that balance between growth and value and you see that pendulum swing in both directions. When I think about the dividends that our tech relationships have paid for our business over the last decade, it’s been transformational for us.

I’ll tell you a story, because your cameraman is a Pittsburgh Pirates fan. Ten years ago, I was at a board meeting in Europe and I was sitting next to a guy named Mike Volpi, who’s one of the great venture capitalists. And Mike said to me, “Have you looked at Pittsburgh? It may surprise you. There is more AI and robotics research coming out of Carnegie Mellon than out of Stanford, and that’s got to have a real estate impact.” So we put a team on Pittsburgh and that team found this incredible project in partnership with Carnegie Mellon and the University of Pittsburgh. And we’re going to be creating a whole new innovation mixed-use neighborhood in Pittsburgh over more than 100 acres. But it all started with Mike’s insight.

That’s why I’ve always found it essential to look outside the real estate bubble, to the world around us, because it’s the change that’s happening outside of real estate that profoundly impacts our industry.

You’re in Pittsburgh, China, India, you’re all over the world, but you’re a New Yorker…

Amen.

What makes you most optimistic about New York today?

I was optimistic about New York in 2020, and at that point, it wasn’t a very popular point of view. As a fifth-generation New Yorker, what I’ve seen is that through every kind of adversity that could be thrown at New York, we’ve overcome it. And not just overcome it, but gotten better. One of the interesting pieces of feedback that I get from my friends in Silicon Valley is that the place that they are most often losing their young talent to isn’t Texas, isn’t Miami. It’s New York.

In order for New York to keep attracting the next generation, whether it’s kids moving here for their first job, whether it’s families moving here from other parts of the world to get their piece of the American dream, New York has to be affordable. We need more housing production. We need it at the deeply affordable level. We need it at the workforce level and we need it at the pure market level. And if we cut off supply, that’s the best way to send rents up and make New York less affordable, which is the worst thing we could do. So I think we have to come up with a compromise that allows for more housing production.

But are you concerned about the rise of the left? The rent-reform laws of 2019 rocked New York’s real estate industry.

There are probably a lot of people better qualified to opine about politics than me. Listen, the best thing about the real estate industry is we are, through every cycle, the most philanthropic industry in the city. You look at every hospital, you look at every educational institution, religious institution, they’re all supported by real estate. And so we know how to be collaborative and engaged. We need to do that with our political leadership. There’s no choice. We need to have an outcome on critical issues, like housing, to have a path forward for our city.

You continue to make serious bets on New York. I heard an interesting tale about your push into Long Island City.

That’s funny. I’m surprised you know about that, but this all started about 20 years ago. Bill Modell [of Modell’s Sporting Goods] was smart enough to buy up a swath of Long Island City, on the intersection of Queens Boulevard and Jackson Avenue. He was not a developer, so he wanted a partner. I met Bill out there one day and this area was desolate but for that intersection; it was where the Rikers Island bus let the inmates out. So not a trophy location.

But Bill said, “Wait a second, I’m taking you to lunch.” And he took me to a great Italian place, a few blocks from there, Manducatis. After lunch, we walked a little further into the neighborhood and you came upon really nice single-family homes. You came across Citibank’s old headquarters, and it sort of dawned on me: This site is going to be developed and could be something great. And there’s enough scale here to do something extraordinary.

Twenty years later, we’ve created more than 4 million feet, and not just buildings, but a real community. On the land that we ended up partnering with Bill on, we developed 2,000 apartments. And a lot of the lessons we learned there, we’ve applied to other things we’ve done and we’re applying to Santa Monica.

I love how food plays a role in so many of your stories. You and your dad Jerry Speyer decided to pull the plug on Hudson Yards over tuna fish sandwiches. If you picture yourself sitting and noshing with the next-generation leader of Tishman Speyer decades from now, what kind of conversation do you think you’d be having?

I’d tell them to play the long game. Always think about things in a long, wide arc. Don’t just think about a transaction, think about a relationship. Think about how you can be of service, whether it’s to your customers or your community, and think about what you want people to say about you 10 years from now, not two minutes from now.

This interview has been condensed and edited for clarity.
(Write to Hiten at [email protected] or @hitsamty on Twitter.
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