The $100 billion interview: Blackstone’s top US real estate exec on the one that got away
Firm's head of RE Americas discusses its big deals at REBNY luncheon
Blackstone Group [TRDataCustom] is the largest private landlord in America. Over the past decade, it has devoured assets ranging from Sam Zell’s Equity Office portfolio to the 11,000-plus-unit Stuyvesant Town.
But even then, the ones that got away still sting.
“If I think [of] one building, It Would Be One Worldwide Plaza in New York, which traded in 2009 for a very cheap price,” Nadeem Meghji, the head of real estate Americas for Blackstone Group, said at a Real Estate Board of New York luncheon Wednesday afternoon.
Meghji – a 36-year-old who joined Blackstone in 2008 after degrees from Columbia University and Harvard – said the main regret he has so far in his career was not buying more property in prime markets like New York City and San Francisco right after the recession.
In 2009, a group of investors led by George Comfort & Sons bought the 1.6 million-square-foot Office Building One Worldwide Plaza On Eighth Avenue for $600 million from Deutsche Bank, which took control of the property after then-owner Harry Macklowe defaulted on $7 billion in Deutsche loans.
Meghji said that when you invest in the best properties in the best markets, “you tend do better than your pro-forma suggests, and so we should’ve done more of it.”
Meghji said he was cautious in the near term on rent growth in the New York office market, as capital expenditures and tenant-improvement costs are climbing faster than face rents. He also said the company was bullish in the near term on Class B apartments such as Kips Bay Court and Stuyvesant Town-Peter Cooper Village.
The latter deal, he said, worked out to about $500 per square foot, “which is essentially land value in this location” and traded at essentially the same price as Tishman Speyer’s deal when it bought the complex in 2006.
The difference, Meghji explained, was that cash flow had doubled in the intervening years.
“The objective for us really was to buy this property, or this community, in a long-term vehicle with low leverage so that we could essentially hold it forever sort of like MetLife,” he said.
Instead of hiring an outside firm to manage the property, Blackstone brought on Rick Hayduk, the manager of the company’s Boca Raton Resort & Club in Florida, as the property’s general manager.
“It was the first time since the MetLife days that a GM lived on-site, which I think earned us a lot of credibility,” he said.
Before Kuhn and Mehgji took the stage, protesters crashed the event, staging a mock funeral procession as they mourned what they called the death of affordable housing. As attendees sat down for lunch, a handful of musicians wielding a trombone and other instruments entered the ballroom and took to the stage playing Chopin’s “Funeral March,” carrying caskets and gravestones reading “RIP Affordable Housing.”
The spectacle briefly silenced the crowd, who stared on in bewilderment wondering if it were part of the afternoon’s program. REBNY president John Banks began waving over the security staff, which eventually cleared the stage.
Tenant-advocacy groups and faith-based organizations said the aim was to highlight REBNY’s role in “killing affordable housing.”
When it came to the 1.2 million square feet of air rights that Blackstone negotiated the right to transfer as part of the Stuy Town deal, Meghji said “as of today there’s really no action on that.”