Power lunch: Breaking bread at Pastis

Barry Sternlicht, Ziel Feldman, Bobby Cayre and Jared Epstein talk about retail bankruptcies, the U.S. Postal Service and shopping at Hermès while dining at the Meatpacking celebrity hotspot

Oct.October 01, 2019 11:00 AM
From left: Jared Epstein, Barry Sternlicht, Bobby Cayre and Ziel Feldman

From left: Jared Epstein, Barry Sternlicht, Bobby Cayre and Ziel Feldman

It was drizzling when four development pros recently wedged into a half-moon-shaped banquette at Pastis in the Meatpacking District.

Amid the din of an animated lunch crowd, The Real Deal sat with Starwood’s Barry Sternlicht, HFZ Capital’s Ziel Feldman and Aurora Capital’s Bobby Cayre and Jared Epstein, listening in during their unscripted conversation.

Keith McNally’s iconic French bistro — a trendy eatery favored by celebrities and New York foodies — reopened after a five-year hiatus in June at Gansevoort Row, a 150,000-square-foot space developed by Aurora in partnership with William Gottlieb Real Estate. In 2016, a community group sued to stop the project, but a state appellate court sided with the developers in 2018.

In 2012, the developers bought 9 Ninth (Pastis’ longtime home), striking a $250 million deal with Restoration Hardware to open a showroom at the site. 

Today, Pastis is paying below-market rent, at roughly $125 per foot blended, Epstein said.

“They were key to activating Gansevoort Street,” he said. “At the time they took the lease, the neighborhood was under major construction. Fourteenth Street was a ghost town.”

And Aurora and William Gottlieb are currently working on the Solar Carve, a 10-story office building at 40 Tenth, where Sternlicht’s Starwood leased a full floor this past March.

Asked if he got a good deal, the Starwood chief replied: “No, but it’s a beautiful building.”

“I gave him a verbal favored-nations clause!” exclaimed Cayre, of his agreement to give Starwood Aurora’s best lease terms. “My word means something.”

Over beet salad, salmon tartare and tuna crudo, the conversation hit on the politics, online retail, doughnut vendors and more.

On the Trump administration and the relationship between developers and Mayor Bill de Blasio:

Sternlicht: I give [Trump] credit for one thing: He stopped vilifying business.

Epstein: I think people are more reactive to his comments, not his actual policies.

Feldman: As developers, thank god not myself, [de Blasio] has been actually very good because he’s a mayor who’s very approachable.

Cayre (on de Blasio and the city in general): If you look at property taxes, they’re insane. I think they’re killing the golden goose. At the end of the day there’s a day of reckoning, and we’re seeing it now. Look at retailers going bankrupt left and right. Barneys filed today.

On the ubiquity of online retail and the consolidation of tech companies:

Epstein: Does breaking up a company like Google or Facebook or Amazon have a net negative impact on real estate?

Sternlicht: It might actually be better. Long term, it may not be the end of the world. But short term, it could cause the markets to pause.

Epstein: Sounds like an opportunity.

Feldman: But Amazon puts companies out of business. … On the other hand, it’s almost like a tax refund to the consumer, who’s spending a lot less money to buy the same goods.

Sternlicht: For now, until they wipe out all of retail.

Epstein: So you actually did say that?

Sternlicht: I did. Trump is right. [While] Amazon used the post office to ship their stuff, [it also got] billions and billions of dollars [in tax breaks] while it was an “emerging company.” Like China’s an emerging market? China’s not emerging. And Amazon is not an emerging company. You don’t need to subsidize their growth.

Feldman: But in the short term, the consumer is the beneficiary.

Cayre: Barry, we need you to go to Hermès!

Epstein: Well, you can’t buy Hermès on Amazon. There are still a few companies that are smart enough not to be vendors.

Cayre: Only the ultra-high end. We’re talking about Chanel et al.

Sternlicht: None of the Lauder brands are on Amazon. But the ones that aren’t on there are figuring out another online strategy. [Sternlicht is on the board of Estée Lauder.]

Cayre: We’re seeing a lot of online retailers have a brick-and-mortar presence, and they’re expanding those more and more. I don’t know if that’s enough to take up all the vacant retail space, but … I think ultimately [what] comes back in some sort of fashion is high-street retail on the best streets in the best cities. I don’t know where the rents shake out, though, to be honest with you. That’s the problem.

Feldman: They need it, but at what price?

On the state of physical retail and the broader NYC market:

Cayre: When I’m negotiating with retailers today, I’m the first guy to sit there and tell them that it’s a terrible market and I think you should be taking advantage of me.

Sternlicht: Interestingly, sales are up 2 percent this year in the malls. Where we’re really getting hurt is the serial bankruptcy of the retailer. We’re able to re-let the space … but it requires a lot of money. It’s really the capital cost of turning over these tenants that we didn’t think about. Sears just gave back one of our stores this morning.

Epstein: What about the proliferation of illegal street vendors on every high-traffic retail thoroughfare in Manhattan? This guy’s selling coffee inside Starbucks and outside there are five guys illegally selling coffee and doughnuts.

Sternlicht: There’s a bigger issue in the city, which is the union backbone makes everything incredibly expensive. New York has a cost-of-living issue; people love the city, but they can’t afford to live here. When you’re taxed at 55 percent of your income, you’re at a tipping point.

Feldman: We’re definitely losing [some buyers], but many more are coming here not [just] to live but to spend money, to educate their kids, to buy apartments and to invest lots of money. Look at New York in relation to the rest of the world from a capital flight and safety perspective.

Epstein (agreeing): [New York is like the Knicks.] The Knicks’ James Dolan — what does he have to do? He doesn’t need to bring on the best talent. He doesn’t need to do much, because the Knicks sell out every single night.