The lease masters are in-(the)-house
In-house leasing professionals direct deal making for the city’s top commercial landlords
After about two years of scouting for a location, Facebook committed to establishing its New York headquarters at 770 Broadway in May.
The complicated deal came together after Vornado, the building’s owner, took back a 160,000-square-foot space from media company Nielsen and then approached the social networking giant. But Facebook only wanted 100,000 square feet, with the option to expand later.
So Vornado put together a two-year, 60,000-square-foot deal with online gambling company High 5 Games, in the anticipation that Facebook would absorb the space at the end of the lease.
The transaction, said Vornado’s leasing director Glen Weiss, involved five tenants and 16 documents. But it was sewn up in 23 days.
“This is an example of what we do for a living,” he said.
Weiss is among an elite cadre of New York commercial in-house leasing professionals who together oversee more than 100 million square feet of prime Manhattan office space for the city’s top landlords.
Their jobs require granular knowledge of each building in their massive portfolios, and also a chess master’s sense of how all the pieces fit together and how each deal plays into their company’s long-term growth strategy.
“They’re able to talk interchangeably about their assets,” said Mary Ann Tighe, CEO of mega brokerage CBRE Group’s New York Tri-State Region. “If you bring them a credit-worthy tenant with a heartbeat, they can find a way to get you what you need.”
This month, The Real Deal looked at this under-the-radar group of individuals. Some — like 44-year-old Weiss, a self-described Vornado “lifer”— climbed to the top of the leasing food chain at their current companies. Others, such as 39-year-old Jeremy Moss of Silverstein Properties and 54-year-old Steven Durels of SL Green Realty, earned their chops at traditional commercial firms and joined their current companies at a more senior level.
But the job evokes strong feelings about being in-house rather than working for a brokerage, where the commission-based structure could ostensibly lead to greater financial rewards for top performers. Being in-house is “an opportunity to build and grow a business, versus building and growing a book,” said Brookfield Office Properties’ David Cheikin. “It’s about creating something tangible and emotional.”
Though none of the in-house executives would discuss compensation, Tighe said it was likely that their packages, which include bonuses, were commensurate to their brokerage peers.
“No one keeps a very gifted in-house agent undercompensated,” she said, “just for the reason that they could come here and lead our agency group.”
Tighe added that some people were also attracted to the more defined career path available to in-house employees.
“An in-house person can go on to become the CEO or a top executive at a landlord,” she said. “A broker just becomes an older broker.”
Larry Silverstein, chairman of Silverstein Properties, said that an in-house leasing director was in a position of “enormous responsibility, with great authority to consummate deals.”
SL Green Realty
Square Feet in NYC: More than 30 million
SL Green signed Citigroup to a 2.6 million-square-foot renewal at Tribeca’s 388-390 Greenwich Street in December, ending an 18-month marathon of talks between the banking giant and New York City’s largest commercial landlord. The deal will see Citi shift its global power base from Boston Properties’ 399 Park Avenue, and allow SL Green to “play offense” in 2014, CEO Marc Holliday said in a January conference call.
The REIT, which owns more than 30 million square feet of commercial space in New York City, hopes to lease about 2 million square feet this year, Holliday said at the time. The person responsible for getting them there is Steven Durels, perhaps the most low profile and yet the most aggressive player on this list.
The Citi lease was the latest in a string of big deals for Durels, including a 1.6 million-square-foot renewal and expansion at 1515 Broadway with entertainment giant Viacom in 2012, and a 340,000-square-foot lease with Young & Rubicam at 3 Columbus Circle in 2011. Durels knows his sprawling portfolio inside-out, CBRE’s Peter Turchin said, from the “1,000-square-foot prebuilt space to the 500,000-square-foot new construction.”
As an owner, he’s “extremely adaptable,” Turchin added, because SL Green owns so many more buildings and has such a diverse portfolio compared to other landlords.
But Durels is not one to charm a tenant and take them out to lunch, said Tighe, who’s worked with him on several buildings, including 280 Park Avenue and 3 Columbus Circle. “He’s very direct and very focused,” she added. “The more hair on the deal, the more’s he’s excited and engaged by it.”
Durels, whose brother Thomas runs leasing at Empire State Realty Trust, joined SL Green in 1998 after a 16-year run at commercial firm Helmsley-Spear, where he oversaw a 2.5 million-square-foot portfolio. His leasing and marketing team includes 19 employees, significantly more than his counterparts at other landlords. An SL Green insider said the REIT exerts an even tighter grip on leasing than its competitors and prefers to use brokers as consultants, rather than dealmakers.
When doing deals, Durels taps into several of SL Green’s key strengths, including its role in structured finance, sources said. “You can’t do a condo interest purchase and a simultaneous lease without pulling in other threads of the company,” Tighe said.
Vornado Realty Trust
Square feet in NYC: More than 25 million
Vornado is a high school sweetheart of sorts for Weiss, who started his real estate career at age 16 as a summer porter with the Mendik Company, now a Vornado subsidiary.
“I swept the sidewalks, ran the freight elevators, all that stuff,” he said.
He worked his way up to an assistant building manager’s role at Mendik in 1992, and when Vornado acquired the 4 million-square-foot Mendik portfolio in 1997 for $650 million, his responsibilities expanded to include leasing.
“[Vornado was] buying a building a month at that point,” Weiss said.
He took over the firm’s New York portfolio in 2007 and now also oversees its Chicago and San Francisco properties. In New York, he stewards over 25 million square feet of office space and is at the helm of a seven-person team that did about 2.4 million square feet of leasing last year. He works closely with Vornado CEO Steven Roth, who sees leasing as central to the REIT’s strategy. “In our business, leasing is the main event,” Roth said recently in his annual letter to shareholders.
“It’s a very unique position in the marketplace,” Weiss said of his role. “I get in the mix and I’m also involved in the company’s global strategy.” He weighs in on acquisitions and capital improvement projects, for example, by helping the company’s top executives understand what building upgrades would be attractive to tenants and how much rents can be increased if they’re implemented.
As with the Facebook deal, Vornado does most of its leasing deals and building management in-house. “It’s a rarity for us to go outside,” Weiss said. “We have a way about doing things that works in the market.”
The exception to this rule is the 1.29 million-square-foot 280 Park Avenue, which Vornado co-owns with SL Green. In 2011, the duo hired CBRE to lease the building. The partners also kicked off a $150 million capital improvement project at the building that year, and have since hiked asking rents by more than 40 percent, according to Crain’s.
In January, Weiss, his SL Green counterpart Durels and CBRE’s Tighe and Turchin brought two hedge funds to the building, Napier Park Global Capital and Mount Kellett Capital Management, which leased about 60,000 square feet between them. Both deals were in the $80s per square foot, and Tighe said they also signed tenants for up to $120 per square foot at the building.
“Glen is the lovable face of Vornado,” said Tighe, who’s worked with Weiss on several deals over the years. “Even if you ask him something preposterous, he can’t help himself to either feel sorry for you or help you in some way.”
Square feet in NYC: 10 million
Moss joined Silverstein Properties in 2008 from Forest City Ratner, where he was a vice president of commercial development and leasing.
At Silverstein, he started off by picking up leasing efforts at 7 World Trade Center, taking the building from 75 percent to 100 percent leased. He now oversees a six-person team responsible for a roughly 10 million-square-foot portfolio in New York. This includes 4 World Trade Center, which has about a million square feet available, and the still-to-be-built 3 World Trade Center, which signed on advertising giant GroupM as an anchor tenant for 516,000 square feet in December. (The company does not control One World Trade Center, which was developed by the Durst Organization and the Port Authority of New York and New Jersey.)
Silverstein Properties also selected a CBRE team led by Turchin and Tighe to lease up its WTC buildings.
“We elect to bring agents in on certain properties, depending on how that property is positioned,” Moss said. “In new development, having an agent can be particularly helpful,” he added.
Tighe said that an outside agent’s job is to bring to the table as much knowledge of the competing buildings as possible. She also said that Moss was gifted at helping a tenant visualize their space.
“Jeremy’s role is to say ‘hello tech company, or hello financial company, let us tell you what it would look like to work here,’” she said.
Tighe singled out Moss’s role in the GroupM deal, in which five of the floors had 68,000-square-foot floor plates. “Those were the trading floors. They were built for financial firms,” Tighe said. “Jeremy showed the tenant how bench seating could work for them. He has that kind of patient and optimistic temperament that wears well in this business.”
Silverstein echoed Tighe’s take. “He must have spent about six months of his life” on the deal, he said. “Jeremy adds value to everything he touches.”
GroupM remains the sole tenant at 3 WTC, yet Silverstein is trying to strike a better financing deal for the tower’s construction by asking the Port Authority to back $1.2 billion in tax-exempt bonds. Though he’s taken a fair bit of criticism in the press for the attempt, he said that the negotiations aren’t hurting the building’s leasing efforts.
“If this had been the first building we’d ever built, it might have,” he said, “but we’ve been doing this a long time.”
Moss said the opportunity to “work with a legend like Larry Silverstein” and to contribute to the WTC project were two of the key reasons he opted to remain in-house at Silverstein instead of plying his trade at a brokerage.
“Financial reward is not the only consideration,” he said. “At the end of the day, I get to see a physical, tangible product that improves the skyline and creates an environment for the city. As someone who grew up in New York, that was an opportunity I could not pass by.”
Brookfield Office Properties
Square feet in NYC: 20 million
Three years ago, Brookfield made a $250 million bet on the 8 million-square-foot Brookfield Place, the Downtown office complex formerly known as the Word Financial Center. Brookfield is in the final stages of upgrading the retail and public spaces at the complex, where it’s had a hard time filling the 4.5 million-square-foot vacancy left by Merrill Lynch in October. With about 2 million square feet still left to lease, Brookfield is now using the retail, where it has signed on stores such as Paul Smith and J.Crew, as a lure for top-drawer office tenants.
“People want to be in the middle of this culinary destination,” Cheikin said. “They want the energy of sitting atop this fashion destination. The retail play at Brookfield Place is responsible for at least 50 percent of the [office] leasing we’ve done there.”
Including the Brookfield Place complex, Cheikin and his two direct reports oversee a 20 million-square-foot portfolio in New York. Among the properties is Manhattan West, a 7 million-square-foot mixed-use complex on the Far West Side expected to be completed in 2017. Brookfield tapped a Cushman team led by Bruce Mosler to manage office leasing at that property.
Cheikin said Brookfield uses outside brokers for about half its leasing deals.
“Frankly, brokers see more volume than us,” he said, referring to the fact that top brokers typically do more deals than in-house directors. “The ones that are very good as landlord reps, they put their Brookfield hats on throughout the transaction.”
The REIT is aiming to lease about 1.5 million square feet in New York this year, he said.
The 38-year-old Cheikin kicked off his career with a four-year stint at Jones Lang Wootton, the predecessor to JLL, in its advisory services and leasing programs. He joined Brookfield 12 years ago, after earning an MBA from Washington University in St. Louis.
He acknowledged that, in a good year, a top deal maker at a brokerage may take home a fatter paycheck than he does, but said the choice to remain in-house was about more than money. When courting a tenant, for example, he has the ability to pick from across Brookfield’s portfolio, which helped him sign College Board, the company behind college admission tests like the SAT, to a 145,000-square-foot deal at Brookfield Place in January.
“A broker came to us and asked if we could present the Brookfield portfolio,” Cheikin said. “It allows us to sell them on a variety of options.”
He’s also involved from the get-go in Brookfield’s acquisition talks, as his team helps determine whether the potential rents from an asset are worth the purchase price. On dispositions too, his team is key.
“No one understands the attributes of the buildings like we do,” he said.
Square feet in NYC: 9 million
In March, money manager Baron Funds renewed its lease at the GM Building and expanded its presence by 25,000 square feet. Baron agreed to pay rents of around $200 per square foot for its space near the top of the country’s most valuable office tower. As with all of Boston Properties’ renewal and expansion deals, Levin and his three-member leasing team did the 80,000-square-foot deal in-house.
“[By contrast,] if we need to go out to the market to bring in new tenants, we typically use outside brokers,” said Levin, who’s been with the firm for 18 years. “I can pay a commission and get the talent level of a Peter Turchin or a David Green [of Cushman & Wakefield].”
If hired as landlord representatives, brokers take charge of the day-to-day negotiations with tenants, but the in-house leasing director is constantly involved and makes the final call, sources said.
“We see trends in the market sometimes a little bit earlier than owners do,” said CBRE’s Turchin, pointing to the fact that brokerages have bigger teams and a richer database to tap into. In some cases, a broker can also get to a potential tenant earlier in the process.
A landlord may also opt to go outside to a broker, Turchin added, because an in-house leasing director has so many different responsibilities, from budgeting to capital improvements to asset management. A broker, on the other hand, is “just doing deals, all the time.”
The 43-year-old Levin oversees about 9 million square feet of space in Boston Properties’ New York portfolio, and his team typically does between half a million and 1 million square feet of lease deals a year. In addition to the GM Building, the REIT’s portfolio includes trophy properties like 510 Madison Avenue, a speculative office tower built by Harry Macklowe that Boston Properties won out from under the developer, and 7 Times Square. The buildings tend to cater to blue-chip financial and law firms, which Levin termed “high-margin tenants.”
He’s also working on leasing up the company’s 1 million-square-foot spec office tower at 250 West 55th Street. Activity at the building got off to a sluggish start, but the tower is now over 60 percent leased with tenants such as Soros Fund Management, the investment firm of billionaire George Soros. Boston Properties is also reportedly in talks with Qatari media giant Al Jazeera for 50,000 square feet at the building, which Levin declined to comment on.
In addition, the REIT is looking to buy properties in neighborhoods such as Midtown South, which would allow it to cater to the wave of technology and media tenants making its presence felt in the city, Levin said.
“We always want to be near markets where occupancy is growing,” he said.
Levin graduated from Boston University and started his career at the Edward S. Gordon Company, one of the first firms to take a Wall Street–style approach to commercial real estate. The company was acquired by Insignia Financial Group, which was, in turn, bought by CBRE.
“We’d give brokers spreadsheets comparing Lease A to Lease B to Lease C, which they’d then share with their clients,” said Levin, who worked in the firm’s consulting division. “It got boring very quickly,” he said, noting that he progressed to doing analyses of the more complicated deals.
Levin went on to Columbia Business School, where he concentrated on real estate, fancying a career in development. While a student, he interned with the refinancing division of the Related Companies, and then accepted a project management job with Boston Properties shortly before graduating. With almost two decades under his belt at the firm, Levin said the challenging nature of the work makes him disinclined to consider alternatives.
“It’s hard to pick up your head and look at other things when you’re having fun,” he said.
The Durst Organization
Square feet in NYC: 13 million
Bow oversees about 13 million square feet for the Durst Organization. A graduate of Columbia College and Columbia University’s Business School, where he specialized in real estate finance, he joined the firm in 1992, after nearly five years as a leasing broker at Cushman.
In 2011, Condé Nast agreed to take about 1.2 million square feet at Durst’s One World Trade Center, the 2.6 million-square-foot tower at the center of the Ground Zero reconstruction. Condé Nast will move from 4 Times Square, which is also owned by Durst. And in December, the U.S. General Services Administration agreed to take 273,000 square feet at One World Trade.
Since then, there’s been less to write home about, as the owners have yet to secure another major tenant.
But Bow has shown that he can get creative with his portfolio. In 2011, he had to deal with the exodus of pharmaceutical firm Pfizer at 205 East 42nd Street. He was involved in converting the 530,000-square-foot building’s floors into separate condos. He then pitched those spaces to nonprofits, which could tap into tax benefits if they purchased them. He subsequently struck deals with the City University of New York for 161,000 square feet and the United Way for about 50,000 square feet. And in August, he crafted a lucrative signage deal with retailer H&M at 4 Times Square, where the Swedish retailer has 42,500 square feet of retail space under construction. Durst will put up signs measuring 70 feet by 70 feet atop the 48-story building for H&M, in a deal which is expected to rake in millions of dollars in annual rent for the landlord.