The Real Deal New York

Can Wendy Silverstein rescue New York REIT?

The company’s CEO is charged with dismantling a 4.4 million-square-foot portfolio amid a cooling market
By Kathryn Brenzel | August 01, 2017 11:00AM

Wendy Silverstein (Photos by Sasha Maslov)

Four months after New York REIT started liquidating its holdings, its first-quarter earnings call turned hostile. The company — which had been dogged by shareholder disputes, lackluster returns and scandals for the better part of three years — finally had a plan to recoup cash by selling off its trophy assets, but some investors and analysts expressed alarm about how it was all playing out.

The real estate investment trust’s newly minted CEO, Wendy Silverstein, estimated that the sale of the company’s assets would render $9.25 per share — $1.75 less than predicted shortly before she came on board. And some analysts on the call questioned whether NYRT’s pending sale of One Worldwide Plaza, a 1.8-million-square-foot trophy Manhattan office tower, would fall short.

Andrew Walker, of Rangeley Capital, told The Real Deal that some shareholders expected the property to fetch as much as $1.9 billion. But rumors have recently surfaced that RXR Realty and SL Green Realty are the two top bidders and that they’ve only offered $1.7 billion. Walker — who said the lower number would be a “massive disappointment” — argued, however, that Silverstein can’t be blamed for the cards she was dealt.

“She had a good reputation coming in, and I think she’s handled a really bad situation well,” Walker told TRD last month. “You can’t fault her for coming into a situation where everyone wants $11 per share, and then she canvasses the market and the best she can get is $9.”

In February, the REIT’s board appointed Silverstein — a 17-year veteran of Vornado Realty Trust — as CEO. But unlike most chief executives, the 56-year-old structured-finance expert was charged with dismantling the company rather than growing it. Now, not only is she responsible for liquidating NYRT’s 4.4 million-square-foot commercial portfolio, she is also expected to ensure that shareholders are paid back an estimated $1.55 billion when all is said and done.

It’s a complicated undertaking and not one that all high-level real estate executives would want. It requires unloading 19 properties (at maximum prices) in a market that’s cooled drastically in the last year. In 2017’s second quarter, Manhattan investment sales plummeted 60 percent year-over-year to $13.8 billion. And she has the added challenge of unloading those assets under the dark cloud cast by NYRT’s previous affiliate American Realty Capital Partners, whose former chief financial officer, Brian Block, was convicted in June of misleading shareholders about the financial health of the company.

Nonetheless, Silverstein — who ended her run at Vornado as the company’s highest-ranked female — sought out the job. She said it harks back to her days restructuring bad loans at Citibank during the commercial real estate collapse in the early 1990s.

“While people were streaming out of the door of real estate, to get away from it, I went into the fire,” she told TRD during an interview in her Midtown office last month. “If I could come in and help, then I’d be a hero.”

Tough gig

NYRT’s troubles began in October 2014, when news of an accounting scandal surfaced at American Realty Capital, led by former REIT czar Nicholas Schorsch. The news sent stock prices at NYRT tumbling and set off a months-long battle over the REIT’s leadership.

Schorsch resigned from NYRT and 12 other affiliated companies, and Michael Happel, previously president of NYRT, was appointed its CEO.

In May 2016, NYRT and Maryland-based JBG Companies announced that they would merge to form a new REIT with $8.4 billion in assets.

But that news did not sit well with some investors, who argued that it didn’t create enough value for shareholders and that the REIT had let better offers slip away.

NYRT’s stock immediately dropped more than 8 percent, to $9 per share, and activist investors began protesting the move. Leading the charge were Winthrop REIT Advisors’ Michael Ashner and developer Steve Witkoff, who fired off an angry letter to the board opposing the deal and instead lobbied it to elect five new members.

The following month, Ashner asked Silverstein to join the replacement board. She declined, saying she had no interest in joining a proxy slate. But when Ashner and Witkoff proposed having Winthrop take over as the REIT’s external advisor, meaning that the company would need a new CEO, Silverstein changed her tune.

“I literally raised my hand and volunteered,” Silverstein said.

Though she was surprised the board ultimately decided to bring Winthrop on in December, given Ashner’s aggressive approach, she was suddenly in a position to head up a public company — “a bucket-list item.”

“She was ready to be the boss,” said Michael Fascitelli, former CEO of Vornado, who worked with Silverstein for more than a decade. “It wasn’t a perfect situation. It was a little messy, but she’s not afraid of complexity.”

For Ashner and Witkoff, Silverstein seemed an ideal choice. She had an institutional pedigree and was experienced in responding to shareholders, Witkoff said.

“We wanted a real pro at the helm every single day,” he said. “We felt that it would’ve been irresponsible for us to not bring in someone of her caliber on it.”

Wendy, a history

Silverstein grew up in Middletown, N.J., the youngest of three children. Her father was an electronic-warfare expert for the government — his work was classified, and they didn’t talk about the specifics of his job at home. Her mother had a master’s degree in special education.

After graduating from the Wharton School at the University of Pennsylvania — with both her undergrad and master’s degrees — she started working at Citibank’s leveraged capital group in 1986. At the time, the sector was booming: Between 1980 and 1989, the U.S. saw more than 2,000 leveraged buyouts, worth some $250 billion, according to economists Sheridan Titman and Tim Opler in a 1993 article.

“The right answer to every deal you saw was ‘yes’,” Silverstein said. “There was really no discipline, and the truth is by the end of 1989 going into 1990, you could see and feel that the bust was coming.”

As the market turned, she joined Citibank’s corporate debt restructuring group, which was working on monster bankruptcies involving the likes of international developer Olympia & York and Canadian development and investment firm Campeau Corp. It was her first foray into real estate, and she didn’t view it as a long-term commitment to the industry.

Citibank had been in dire financial straits. In 1990, the bank had $27 billion in bad real estate loans on its books. The following year, it wrote off a $125 million loss from foreclosures on delinquent loans, the New York Times reported. In 1992, Citibank cut a deal with one notable delinquent developer, Donald Trump.

Silverstein was in charge of recouping Trump’s 27 percent stake in the department store chain Alexander’s, the Trump Shuttle and the Plaza Hotel. She had joined the board of the now-defunct retailer just two months before it filed for bankruptcy that year. (Silverstein declined to comment on what her interactions were like back then with the now-U.S. president).

But it wasn’t Trump who changed her career path, it was two other players she met during that time: Fascitelli and Steven Roth.

Wendy Silverstein

Roth owned 29 percent of Alexander’s through Vornado and went on to buy the 27 percent stake Citibank had acquired from Trump. At the time, Fascitelli was working at Goldman Sachs and helping Citibank sell its stake in Alexander’s (which today operates as a REIT).

“[Silverstein] was very smart, very articulate and very tough, but fair,” Fascitelli said.

In 1996, a few years after the Alexander’s deal, Fascitelli joined Vornado. And a year after that, he and Roth tried to woo Silverstein over, too. But the timing was off: Her husband, William Drobner, was battling cancer and passed away in December 1997. Silverstein was left with their 4-year-old twins, Zach and Rachel. (She married Scott Marinaccio in 2003 and lives with him in Tribeca. Zach and Rachel, now 23, work for Vornado and WeWork, respectively.)

“The toughest thing you can do in life is be a single parent. I did it with every possible resource available, and it still humbles me greatly how difficult it is,” she said.

“It’s part of why I am the way I am,” she added. “I can shake off a lot of difficult things because at the end of the day, they don’t matter.”

The tragedy made her rethink her career path, and in 1998 she joined the REIT as executive vice president of capital markets. Though she had worked in acquisitions for some time, she officially became co-head of acquisitions and capital markets in November 2010.

In her 17 years at the REIT, she helped turn the $3 billion New Jersey strip mall owner into a $35 billion office and retail giant.

Silverstein left Vornado in April 2015, and at the time, she was the company’s only senior-level woman. According to public filings, she earned $5.36 million in fiscal year 2013.

The company by that time had started selling assets in order to focus on its core office and retail properties. Silverstein told TRD she supported the strategy but found that building up the company excited her more than unwinding it. Plus, she said, she was ready for a break and considered retiring. But that line of thinking didn’t last long.

“With that brain of hers, when she said she was going to retire, I was like, ‘That’s not going to happen,’” said CBRE power broker Darcy Stacom, who worked with Silverstein over the years and considers her a friend. “I don’t see her playing tennis.”

The negotiator

Heading up NYRT is by far the most public role Silverstein has had during her 30-plus-year career. Though she was the highest-ranking woman at Vornado, she largely stayed behind the scenes (a product of working at a press-shy REIT and avoiding the media limelight).

But while this public mantle may be new territory for her, the dealmaking will be right in her comfort zone, Stacom said.

“She was a major, major player who was seeking no spotlight whatsoever,” Stacom said. “For years I’d ask people, ‘Who’s the top woman in the industry?’ and they might say ‘Mary Ann [Tighe], Leslie [Himmel],’ and I’d say, ‘Nope, it’s Wendy Silverstein.’”

Ashner first met Silverstein in the early 2000s. Developer Harry Macklowe had defaulted on the nearly $7 billion in financing he used toward his purchase of seven Manhattan office buildings from the Blackstone Group, and both Winthrop and Vornado owned slices of the underlying loans. Ashner and Silverstein were involved in the subsequent “blow-up,”  in which Macklowe cut deals with his lenders and sold off the properties (Vornado had bid on the General Motors Building but lost out to Boston Properties).

“She was the most tranquil person in the room,” Ashner said, referring to the frenzied meetings surrounding the deal. “She was able to voice her opinion without crazy testosterone flying everywhere.”

Stacom said that in a male-dominated industry, Silverstein’s presence as a powerful woman is hard to miss. “She walks in the room, she’s striking, she quickly takes command and the men are like ‘woah,’” Stacom said. “She’s not someone where it’s going to take a man half an hour to figure out, ‘Wow, she’s actually smart.’”

Those who spoke to TRD generally described Silverstein as a quick study and deliberate, with a low tolerance for nonsense.

“She is, in my humble opinion, one of the smartest structured-finance folks in the business,” said Bank of America Merrill Lynch’s Kenneth Cohen, who worked with Silverstein when she was at Vornado. “She’s been able to get lenders to do things — in terms of structure and pricing — that a lot of borrowers aren’t able to achieve.”

Friends described her as someone who knows how to separate her work life from her personal life: She’s not glued to her phone at dinner, and she’s fun to talk shop with over drinks.

She also loves showing off her “grand-doggy”: her daughter’s dog, who goes by Princess Gigi the Pug and has her own Instagram account. (Silverstein has decided that she’ll go by nonna instead of grandma in the event human grandchildren arrive in the future.) And by her own admission, she’s not a morning person: If you are not her child or experiencing some sort of emergency, don’t call her at 7 a.m.

Greta Guggenheim, head of TPG Real Estate Finance Trust (a subsidiary of private equity giant TPG Capital), said that when she first met Silverstein in the early 2000s, she’d heard from other people in the industry that she was “highly, highly intelligent” and “a very tough negotiator.”

“Initially, I was a bit intimidated by her,” said Guggenheim, who was working as a loan originator at UBS back then.

Silverstein lived up to that reputation when the two were negotiating a $250 million mortgage for Vornado’s 909 Third Avenue. Guggenheim said that unlike her counterparts at other companies, Silverstein wouldn’t attempt to win every point. Instead, she zeroed in with a laser focus on issues that were most crucial to Vornado.

“I don’t think that anyone would ever refer to Wendy as a wallflower,” said Guggenheim, who tapped Silverstein to serve on TPG’s board last month when the company issued its initial public offering. She said they wanted people who would challenge the company’s leadership when needed.

Silverstein agreed that she’s not a wallflower: “Somebody shouts at me, depending on what they say, I may shout back. I don’t take a lot of things personally. To me, business is a sport. …There’s very little that I take personally, because I don’t put a lot of ego into it.”

For men in the industry, toughness is often perceived as a strength, as the hallmark of a good negotiator, Silverstein said. For women, though, it’s often seen differently.

“The truth of the matter is, I’m not always calm. I can be very tough. When a woman is tough, she’s called a bitch,” Silverstein said. “As smart as you are, you sometimes have to be conscious that you’re more powerful if you’re a little bit softer, but not too soft. I don’t think of myself as a whisperer; I’m not a whisperer.”

CEO with an expiration date

Just a few months after leaving Vornado in 2015, Silverstein joined Michelle Felman — who worked with Silverstein in Vornado’s acquisitions and capital markets group for nearly a decade — as an independent consultant on Trinity Church’s sale of its Hudson Square portfolio.

Felman said it was a tricky and complex deal because they needed to find a joint venture partner willing to buy a partial interest in ground leases on 11 buildings. The church didn’t want the JV partner to use a lot of debt in the deal, so they needed to find a well-capitalized player — someone who could write a massive check on a 75-year ground lease.

In September 2015, a Norwegian sovereign wealth fund managed by Norges Bank, paid $1.56 billion for a 44 percent stake in the lease, and in April of the following year, Hines invested $35 million for a 1 percent stake in the portfolio and to operate the properties.

In April 2015, when Silverstein left Vornado, she rejoined the board at Alexander’s. She has also served on the Toys “R” Us board of directors since 2005. (The retailer is going through its own financial troubles now, and in February announced it had laid off up to 15 percent of its corporate staff.)

As for her role at NYRT, it comes with an expiration date. She projects that the REIT will sell off its portfolio by the first quarter of 2018. She also said there’s a possibility that a buyer will acquire the REIT along with a few of its assets — and that there’s been some interest in that option.

Whatever ultimately happens, Silverstein insists that the shadow cast by American Realty will not impact her ability to liquidate NYRT’s assets.

She said the misconception about liquidation in general is that the properties up for sale are distressed. Though she acknowledged that the market is at a tipping point, she said she’s confident the REIT’s office properties will sell at “fair market value.”

“We’ve been in a bull market for the last several years,” Silverstein said. “The market is dying to see some distress, and they are just not going to get it here because we’re not distressed.”