In a slowing real estate market, developers tend to bet on a sure thing. So one developer’s willingness to build a large-scale office building on speculation — without tenants lined up before construction begins — may seem surprising in the current shaky climate.
With 40 stories and 1.1 million square feet of Class A office space to lease, including 53,000 square feet of retail, SJP Properties has its work cut out for it at 11 Times Square. The $1.2 billion development at 42nd Street and Eighth Avenue is the largest speculative, or spec, building under development in New York City.
SJP Properties founder, chairman and CEO Steven Pozycki sounded undaunted by the task ahead during a couple of interviews last month, one in the 11 Times Square sales office, which is on the 38th floor in the New York Times building at 620 Eighth Avenue, overlooking the construction site of 11 Times Square.
“When we got going on this about two years ago, the office market was tightening up substantially,” Pozycki, 57, said. But, “it is still probably the tightest it’s been in at least my 25 years of observing it.”
With a January 2010 delivery date, he is hopeful that the market will reverse itself. SJP also benefits, he said, because of the dearth and age of the competition.
“This is the last site in Times Square,” Pozycki said. Furthermore, of the eight other buildings with 200,000 square feet or more available for lease, only 11 Times Square “will be new, LEED-certified and with new technology.”
In 2010, 63 percent of all New York City buildings are expected to be 50 years or older, and 60 million square feet in leases will expire in “one of the biggest rollover years in a long time,” Pozycki said.
Yet some statistics reveal a less than
Between this year and 2012, Colliers ABR predicts 17.7 million square feet of space will be delivered to the Manhattan office market, the majority of it in 2008 and 2009.
On the leasing side, vacancies rose in February, to a rate of 5.2 percent from a rate of 4.8 percent the month before, according to CB Richard Ellis. Leasing activity in Manhattan, meanwhile, was down 41 percent in February to 1.3 million square feet from 2.2 million in January.
At the same time, the average asking rent increased, CBRE found, but less than 1 percent to $69.56 a foot from $68.89.
A jittery time
As companies dump more office space back into the marketplace and leasing activity slows down, observers say that 11 Times Square is quite a risky undertaking.
Pozycki said that he thinks market uncertainty could work in his favor, with competitors potentially putting a stop to their projects.
“Simply put, I think it’s very risky, but he might pull a rabbit out of his hat and get lucky and get a tenant or two,” said Albert Laboz, a principal of New York City-based United American Land development company, who does not build on spec and is not acquainted with Pozycki.
Howard Michaels, founder, chairman and CEO of international real estate investment banking firm the Carlton Group, said of spec building: “Anything with the word ‘speculative’ is risky in today’s world.” The only other office building being done on spec at this time is Macklowe Properties’ 510 Madison, a 328,000-square-foot, 30-story office building at 53rd Street. The building caters to a different user than does 11 Times Square.
Perhaps Pozycki can afford to breathe easier than other spec builders because of the financials for 11 Times Square. “When we bought the site [in July 2006 for $305 million], the office market was not heated up as much, so we think we’re in the land at a very good price relative to the marketplace,” Pozycki noted. In addition, “our financing is controlled because Prudential [Real Estate Investors] is our partner.”
Pozycki himself is new to the New York City market, having made a name for himself in New Jersey, where his 27-year-old company is headquartered in Parsippany. But he has made a statement about his intention to compete in Manhattan with 11 Times Square and his two new successful condominiums, Platinum at 247 West 46th Street at Eighth Avenue, and 45 Park Avenue at 37th Street.
After all these years, why is he spreading his wings to New York?
“Well, I’m Polish, so I’m a little slow to get going,” Pozycki said, jokingly. Seriously, he said, “We hadn’t seen a time where supply and demand were so out of whack.”
Build a better mousetrap
Stephen Siegel, CBRE’s chairman of global brokerage who is heading up leasing at 11 Times Square, said part of Pozycki’s magic formula is being hands-on.
He is “very smart” and “intense,” Siegel said. “He’s very detail-oriented and extremely focused on every aspect of the project.”
Daniel Kaplan, a senior principal at FXFowle Architects, the architect of 11 Times Square, said Pozycki is “very open to innovation, to building a better mousetrap that will serve his tenants and create value over the long term. He is also obsessive about getting every detail right, from the dozens of design details, to craftsmanship in the field, to maintenance of end product.”
Pozycki agreed with the assessments, saying that he cares deeply about execution and quality, and always wonders whether there is a better way to do things.
“I think I’m demanding, but I think my team sees that I’m demanding of myself as well,” he said.
While Pozycki seemed at ease talking about business, he shied away from personal matters. Questions about his three dogs — two 100-pound mutts, Sharky and Oscar, and a 7-pound poodle, Samson — made him uncomfortable.
“This is about as vulnerable as I’ve ever been,” Pozycki said in a voice resembling actor Jack Nicholson’s. “To be honest with you, I don’t promote myself. I promote my company, my people.”
Holding his cards close
Even with people he’s close to, Pozycki plays it close to the vest.
Friend and colleague of 15 years John Westerfield, a managing director at Morgan Stanley, offered: “He’s always got a big smile, but he doesn’t give much up.”
Pozycki and his wife, Elaine, own three cars (he has a Range Rover and a Bentley, in which he is driven around, and his wife has a Range Rover), but questions from a reporter about the cars seemed to give
“Here’s the bottom line,” he said. “I’m a simple son of a bitch; I want to build the best buildings I possibly can build.”
The developer said he doesn’t like photographs being taken of him. But Pozycki is on the cover of magazines including the February issue of New Jersey & Company magazine with Douglas Durst, both donning construction hats.
“It’s the goofiest thing in the world,”
Pozycki said. “You feel like a boob. You do this shit because you have to.”
The article is a Q & A with him and Durst about green development. Durst Organization’s 1.6 million-square-foot 4 Times Square is LEED-certified and was done on spec in 1999. SJP’s 520,000-square-foot Waterfront Corporate Center III in Hoboken, N.J., will also be LEED-certified.
The first-generation developer has not strayed far from his New Jersey roots. Until age 10, when he moved to Woodbridge, he grew up in a four-story walk-up in Perth Amboy.
Today he and his wife of 35 years live on a 75-acre tree farm in Peapack-Gladstone in Somerset County. (Once the trees grow on his property, they are unearthed and replanted at the sites of SJP’s suburban developments.)
Pozycki, whose father, Harry Pozycki, founded a residential brokerage firm called Harry S. Pozycki, attended a West Long Branch college, Monmouth University. While real estate development is a family affair — his 28-year-old son, Steven M. Pozycki, oversees marketing and leasing for SJP’s New Jersey properties — Pozycki has done a variety of jobs in his lifetime, including roofing, moving shore pipes on a tugboat and delivering pizza. After college, he worked in the real estate departments at MetLife and Equitable, handling both successful and troubled real estate loans. He then became a regional development partner at the national Lincoln Property Company.
In 1981, he bought an interest in the company — about 5 million square feet — to form his own company. At his wife’s urging, he changed the name to SJP Properties for Steven Joseph Pozycki.
The company has since developed more than 20 million square feet in New Jersey, Pennsylvania and now New York, 50 percent of it on spec.
Pozycki’s intensity and attention to detail, coupled with a warm personality, have contributed to his success, Morgan Stanley’s Westerfield said.
“He has a street toughness, which makes him a great builder and a very charming corporate personality,” he said.
Does Pozycki’s willingness to build on spec mean he is a gambling man?
“I’m really not interested in going to casinos. They’re too noisy and too smoky, and I don’t like the odds,” Pozycki said. “If you look at us as gamblers, we’re gamblers that can control and understand the variables that you can’t control and understand in a casino.”