NorthStar RXR | Marketing Materials
Great Scott!: Rechler
Talks Reckson,
RXR and Redevelopment
BY CATHY CUNNINGHAM | OCTOBER 11, 2017
hen he was a kid, Scott
Rechler was always
the top hat or the race
car when he played
Monopoly.
hat might tell you
something about the founder of RXR Realty.
First, there’s the fact that Monopoly was
the board game of choice. “[It] was always
my favorite game,” Rechler told Commercial
Observer. “My brothers and I would play it
for hours.”
he top hat suggests a certain debonair
quality—a suave, worldly real estate igure.
And then there’s the race car, which perhaps
implies two things—the guy likes speed, and
he’s interested in transportation.
Sound like anyone you know?
Of course, Rechler’s connection to the
profession goes much deeper than a board
game. His grandfather, William Rechler, built
New York City’s irst industrial park in 1958
before creating Long Island-focused real
estate irm Reckson Associates with Rechler’s
father and uncle in the 1960s.
Today, Long Island, N.Y.-based RXR is
one of the largest owners, managers and
developers in New York City with 74 properties valued at a whopping $15.7 billion in its
portfolio.
All the while, Rechler, who turns 50 next
month, is busy trying to ix the city’s transit
woes (as an Metropolitan Transportation
Authority board member) and its traic congestion issues (recently joining Gov. Andrew
Cuomo’s FIX NYC Committee). And this is
hot on the heels of his “tour of duty” as vice
chair of the Port Authority of New York &
New Jersey.
Most recently, RXR, with SL Green Realty
Corp., announced it would purchase a 49
percent stake in Worldwide Plaza. Although
prohibited from elaborating on the deal,
scheduled to close this month along with a
$1.2 billion Goldman Sachs-led debt rei-
W
nancing, “It’s very easy to be bullish about
what’s happening in New York right now,”
Rechler said when CO met with him at his
New York oice at 75 Rockefeller Plaza, an
RXR building on West 51st Street between
Fith Avenue and Avenue of the Americas.
Rechler grew up in Port Washington,
Long Island. Today, he splits his time
between Manhattan’s West Village and Old
Brookville, Long Island. He lives with his
wife Debby and their daughter Gabrielle
(23), son Elijah (20) and adopted son, Tyrone (20).
COMMERCIAL OBSERVER: How has
the transition into the MTA role been
since Gov. Cuomo nominated you as
a member of the board in June?
RECHLER: When I inished the Port
Authority role [in 2016], my tour of duty as
I call it, my intent wasn’t necessarily to be
redeployed as quickly as I was [laughs]. But,
the areas that create the greatest risk for the
health of New York City are the capacity
and afordability of our transit system. If
people can’t rely on transit to get to work, to
get home to more afordable housing and to
see their kids and family then this whole
“quality of life” model isn’t going to work.
As things start to break, you realize that we
were living on borrowed time, and our
credit is now due. here’s major heavy
liting to do.
Do you enjoy it?
I enjoy it because I love New York, I care
about it. I want to put something forward to
get [the city] on the right course.
So, is it your fault my train is always
late?
You can’t even imagine how many texts I get
from people when they have train problems
now, like, “I’ve been stuck underground for
20 minutes!”
Were you always destined for a
career in real estate?
here are pictures of me growing up with
building blocks in one hand and a phone
in the other so I guess that was the thing I
was going to go into. hat’s when I had hair.
I’d always walk the diferent job sites with
my father and talk about diferent real estate
business. It gets in your blood.
I understand you were almost
a lawyer.
hat’s right. At the last minute, I decided to
skip law school and go into the family real
estate business at a unique time. It was 1989
and the beginning of a real estate recession, so the way that things had been done
historically was about to be transformed. We
were in pretty good shape coming out of the
downturn, relative to others, so there was a
view that if we could access the public markets that would give us a currency to be able
to acquire those other generational real estate
businesses. So we took my family business
[Reckson Associates Realty] public in 1995
and used that platform to grow from a Long
Island company to a $300 million New York
tri-state area company.
You were the architect behind the
IPO. How old were you at the time?
I was 26. I’m more sensitized to the significance of that now that I’m 50. I remember
being on the road meeting all of these big
institutional investors, and they were looking
at me like, “We’re going to support this kid?”
But ultimately they did, and we did a lot of
transactions. hen, in January 2007, we sold
to SL Green, which was a tough decision to
make because it was a family business that
my grandfather had started.
How did you reach that decision?
It wasn’t easy. Selling a company, even if it’s
not a family business, is always tough. Mike
Maturo [the president of RXR] came over
to my house one Sunday, right before we
launched the sale, and he said, “Look before
we launch this thing I need you to know
that we don’t have to do this. We know this
is your family business.” I said, “No, we’ve
gone over this. We feel this is the top of the
market, and I’d rather sell and start over
afresh.” It was nice that he came over to have
that conversation with me.
I was at a barbecue that night, and my
son [Elijah], who at the time was 10 years
old, comes up to me and says, “Dad, I heard
you and Mike talking about selling Reckson. But it’s not yours to sell, dad. hat’s the
family business.” I’m already emotional and
I now have tears coming down my eyes into
my burger as I’m trying to explain that it’s
complicated and a once-in-a-lifetime opportunity. I was saying that we thought it was
the right thing to do for our shareholders, for
our employees, for everyone. He says, “Dad,
this is the biggest mistake you’ll ever make
in your entire life,” and then he walks of and
leaves me there!
We sold in January 2007 [for $6 billion]
and literally the next day formed RXR. I
always say that the reason for me getting up
in the morning and going to work everyday
is to prove [Elijah] wrong and that it wasn’t
the biggest mistake of my life.
Any regrets?
Not taking some time off after we sold.
The whole process is hard enough—selling
a company like that. We generated 700
percent returns for our shareholders, but
even though we saw with clarity that it was
the time to sell, the whole market was so
bullish that shareholders thought we were
selling too cheap.
How did you know it was the right
time to pull the trigger?
When you take that step as a public company you want to know that you’ll be able to
get [the deal] over the inish line. Knowing
that there were multiple bidders that could
write $6-plus billion checks and would have
interest in our company gave us the comfort
to go forward.
Plus, you already had a relationship
with SL Green?
Yes. When I bought Tower Realty Trust [in
1999] I sold all of the Class B assets to SL
Green. My irst meeting with [SL Green
Chairman] Steve Green was Marc Holliday’s
irst day at the company. We’ve always have a
very good relationship.
Did you take advantage of any buying
opportunities during the crisis?
In August 2009, we bought debt from a public
company at a 30 percent discount to face value
because they were trying to deleverage. It was
on 1166 Avenue of the Americas, which was
leased to J.P. Morgan. We were getting a 15
percent return, $400 a foot. We spent weeks
in investment committee deciding whether to buy it in case J.P. Morgan went out of
business—which at the time was a perceived
real risk. But we did that then we began to
buy from hedge funds and private equity
irms that were looking to get rid of their
real estate exposure. he market ultimately
shited in 2010, and we invested about $1.5
billion in Midtown South with Starrett Lehigh
[at 601 West 26th Street between Eleventh
and Twelth Avenues] and 620 Avenue of the
Americas [between West 18th and West 19th
Streets]. hen we were of to the races, continually focusing on where the customer was
going next and trying to be there.
How is your multifamily pipeline
shaping up?
We have 5,200 units under development at
the moment in ive markets [New Rochelle,
Yonkers, Glen Cove, Hempstead, [N.Y.,] and
Stamford, [Conn.]. It’s going to be extremely valuable as a portfolio ive years from
now. he areas we’ve targeted are suburban
downtowns near public transit where you
can create walkability and quality of life,
places that have character and diversity, yet
are 30 to 40 minutes from Midtown Manhattan by train or ferry (a.k.a. “urban-suburban”). We’ve been doing these public-private
partnerships with local governments where
we become the master developer and build
on vacant land. We build great tax revenue,
generate demand in their downtown, help
revitalize the area and reverse a cycle that
has been going negatively for some time.
What’s rewarding is, because it’s so localized
and relationship-driven, you feel like you’re
making the community better. Our motto is
“Do good and do well at the same time.”
Which development will come online
irst?
Our irst [new multifamily] project is coming
out this year in Stamford, Conn., and then
every year subsequent to that the rest will
come on—over the next 24 to 30 months.
Stamford has changed signiicantly
since the boom.
It has. We used to be the largest landlord
there, so we have a good feel for the city.
here was a period of time in the late
1970s where oice buildings were built like
fortresses because of the crime there. Now,
for urban planning purposes, you want the
opposite. hey’ve done a great job of opening
the city up and making it walkable. he
inancial services irms never really clicked
there—the reality is that talent wants to be in
New York, so UBS brought all their people
back [to New York City].
Speaking of UBS, how did the 1285
Avenue of the Americas purchase
come about?
We have so many disciplines here—we have
the inancial sophistication, we have the
leasing and market understanding, and we’re
in the low of things. When we bought 1285
Avenue of the Americas [for $1.7 billion, last
year] it wasn’t that we [had plans to redevelop] the building, it was that UBS was in the
market to leave [its 900,000 square feet], and
because of that, there weren’t any bidders
that were willing to take that risk.
Mike [Maturo] and I were in China meeting with investors and every single one asked
about 1285 Avenue of the Americas. hey
said they were interested, but wouldn’t go
near the building because UBS was leaving.
So I ly home and call the broker to ask what
[bids had come in]. He said, “We have this
guy from China, and that guy from China,”
and I said, “No, you don’t, because I spoke
with them all [and know that to be false]. So
here’s [the price] we would be at to buy the
building.” I gave him the price and we ended
up settling at that. I knew the tenant didn’t
really want to leave but they didn’t like the
landlord. And, I knew there was no competition. Within ive months we negotiated a
long-term extension for UBS.
Is revamping Midtown buildings still
high on your priority list?
Yes, we view ourselves more as a redeveloper than a developer. Even in the suburban areas, we’re redeveloping the iconic
downtowns. In Manhattan we’re redeveloping iconic, irreplaceable oice buildings
that we’re buying at big discounts then
reinventing them for the 21st century. his
building [75 Rock] is a great example—
we’re respecting the character of Rockefeller
Center and using materials that are similar
to the limestone of the architecture era of
the 1940s and 1950, but we gutted the entire
building and everything is brand new. So
you have this iconic, landmarked building
in an unbelievable location that now has
everything modern in it. Same thing with
Helmsley Building and 237 Park [Avenue
between 45th and 46th Streets]—we’re
always looking for situations like that.
Starrett Lehigh was another
makeover.
Yes. When we bought it [in August 2011] the
rents were $30 a foot, and now we’ve done
enough work that we’re getting $65 a foot.
We’ve taken a building that had the right
bones and added the right amenities and
touches but still respected its history and its
character. It’s now in high demand.
You’re still bullish on Midtown East?
I think we’re in a state of equilibrium, but our
view is it’s still healthy. We’re not underwriting big rent increases right now, but I think
as we go out three to ive years we’ll be back
at a point where it will be a landlord’s market.
here’s inancial services job growth at the
fastest pace it’s been at since the downturn in
2008, so if that continues growing along with
media and tech you’ll have more demand
that will drive rents back at a faster pace.
How is Pier 57 coming along?
We’re getting ready to deliver it to Google
at the end of this year, and they’ll start their
buildout. It’s coming along on time and on
budget. [Rechler said there are no updates
on Anthony Bourdain’s food hall opening at
the site.]
You’ve done some huge reinances
recently—a $1.4 billion rei of 5 Times
Square plus a $850 million rei of 237
Park Avenue. What does that say
about the debt markets?
All the debt markets are very strong right now.
here’s more demand from lenders than there
is supply of properties. So whether it’s CMBS
or balance sheet loans, the appetite is there
and the rates have come down fairly dramatically. At 237 Park we are at a 3.9 interest rate
for 10 years. As an owner you’re less likely
to sell if you can reinance at such attractive
terms, unless there is a buyer who is willing to
pay premium-type pricing, that is.
RXR provided $463 million in
mezzanine debt to Extell
Development’s Gary Barnett last year
for three Manhattan residential
properties—what was the appeal
there?
A lot of banks were pulling out of the construction marketplace. RXR went into the
year with a view that we wanted to meet with
all of the major developers that had attractive
projects and more on their plate than they
thought they’d have in a market where they’d
get less loan proceeds than they thought
they’d get. Gary and I had lunch and started
talking about this opportunity and picked
out a few buildings. A year later we inally
closed, as oten happens [laughs]. It was a
good deal for both of us.
Any new trends on the inancing side?
I think the luidity and eiciency of the
syndication market is something that is new,
in terms of how well J.P. Morgan and Morgan
Stanley can take loans down on their balance
sheets and de-risk by syndicating out the
loans. On the equity side there has been no
slowdown in demand, but it requires you to
be disciplined. Last year we bid on $40 billion
of transactions and we did zero new deals. We
closed what we had coming in from 2015 but
did no new deals because they didn’t meet our
pricing and return expectations.
How did you get involved in the Drum
Major Institute (a nonproit
organization focused on equality
initiatives, founded by Rev. Dr. Martin
Luther King Jr. in 1966)?
I got involved in 2008 through one of my
associates Bill Wachtel whose father was
counselor to Martin Luther King Jr. he
mission is focused on social justice consistent
with what Martin Luther King would want,
which is also consistent with my values. I’ve
been focused historically on voter rights and
access to voting. his election is a perfect
example; you have all these people marching the day ater [Donald] Trump is elected
[president] but how many didn’t vote? As a
democracy the most important thing to do is
to vote. You don’t have to be elected oicial
to exercise your political rights.
Similar to what happened in the U.K.
with the Brexit vote.
I had dinner with [David] Cameron [former
U.K. prime minister] right ater the Brexit
vote…We talked about the comparison, and
he said there’s no way it’s going to be the
same situation. he Brexit vote happened
not because there was a person behind it but
because it was an issue that people identiied
with. He was wrong.
How have those events impacted
New York?
Brexit is a plus for New york in terms
of investment because it puts a mark on
London. With the election, immigration is a
big [concern]. One of the things that makes
New York so special is the diversity of people
that live here. he good news is that we as a
community are making sure that we embrace
people from all diferent parts of the world,
but there are people in our job sites that have
been paying taxes and next thing [Immigration and Customs Enforcement] takes them
and deports them back to their country—
and they have kids here. It’s tough. Of all the
issues, that is the one that feels like there is a
dispassionate understanding of the values of
America, and New York.
What’s on the agenda for the rest of
the year?
If I tell you, all my competitors will know
[laughs]. We have a few large transactions
we’re working on, and we want to deliver Pier
57 to Google. I’d also like to get the trains to
run on time.
Would you run for mayor?
No. But thank you.
his article is provided for informational purposes regarding the commercial real estate environment only in the New York metropolitan area. he publisher of this article is not
ailiated with NorthStar/RXR New York Metro Real Estate (NorthStar/RXR), and NorthStar/RXR made no payment or gave any consideration to the publisher in connection
with the publication of this article. Mr. Scott Rechler is a member of RXR Realty LLC’s (RXR Realty) leadership team and is not employed by the issuer, NorthStar/RXR.
He may face conlicts of interest relating to his obligation to other RXR Realty ailiated entities. Performance of RXR Realty is not indicative of performance of NorthStar/RXR and an investment in NorthStar/RXR is not an investment in RXR Realty. NorthStar/RXR’s investments may be adversely afected by economic cycles and risks
inherent to the New York metropolitan area, especially New York City and to risks inherent in geographic concentrations. Because of this concentration, any adverse situation
that disproportionately afects the New York metropolitan area, including a worsening economy, would have a magniied adverse efect on our portfolio. his is neither an ofer
to sell nor a solicitation of an ofer to buy securities. An ofering is made only by the prospectus. his material must be read in conjunction with the prospectus in order to
fully understand all of the implications and risks of the ofering of securities to which the prospectus relates. A copy of the prospectus must be made available to you
in connection with any ofering. No ofering is made except by a prospectus iled with the Department of Law of the State of New York. Neither the Securities and Exchange
Commission, the Attorney General of the State of New York nor any other state securities regulator has approved or disapproved of our common stock, determined if the prospectus is truthful or complete or passed on or endorsed the merits of this ofering. Any representation to the contrary is a criminal ofense. An investment in NorthStar/RXR
involves a high degree of risk, including: (1) no public market for its shares; (2) no assurance that the investment objectives of this program will be attained; (3) the inancial
risks associated with luctuations in the real estate market, including decreases in some or all of the value over time; (4) there is no guarantee of distributions. Distributions have
been paid and may continue to be paid from sources other than cash low from operations, including ofering proceeds, borrowings or sales of assets and distributions may
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Talks Reckson,
RXR and Redevelopment
BY CATHY CUNNINGHAM | OCTOBER 11, 2017
hen he was a kid, Scott
Rechler was always
the top hat or the race
car when he played
Monopoly.
hat might tell you
something about the founder of RXR Realty.
First, there’s the fact that Monopoly was
the board game of choice. “[It] was always
my favorite game,” Rechler told Commercial
Observer. “My brothers and I would play it
for hours.”
he top hat suggests a certain debonair
quality—a suave, worldly real estate igure.
And then there’s the race car, which perhaps
implies two things—the guy likes speed, and
he’s interested in transportation.
Sound like anyone you know?
Of course, Rechler’s connection to the
profession goes much deeper than a board
game. His grandfather, William Rechler, built
New York City’s irst industrial park in 1958
before creating Long Island-focused real
estate irm Reckson Associates with Rechler’s
father and uncle in the 1960s.
Today, Long Island, N.Y.-based RXR is
one of the largest owners, managers and
developers in New York City with 74 properties valued at a whopping $15.7 billion in its
portfolio.
All the while, Rechler, who turns 50 next
month, is busy trying to ix the city’s transit
woes (as an Metropolitan Transportation
Authority board member) and its traic congestion issues (recently joining Gov. Andrew
Cuomo’s FIX NYC Committee). And this is
hot on the heels of his “tour of duty” as vice
chair of the Port Authority of New York &
New Jersey.
Most recently, RXR, with SL Green Realty
Corp., announced it would purchase a 49
percent stake in Worldwide Plaza. Although
prohibited from elaborating on the deal,
scheduled to close this month along with a
$1.2 billion Goldman Sachs-led debt rei-
W
nancing, “It’s very easy to be bullish about
what’s happening in New York right now,”
Rechler said when CO met with him at his
New York oice at 75 Rockefeller Plaza, an
RXR building on West 51st Street between
Fith Avenue and Avenue of the Americas.
Rechler grew up in Port Washington,
Long Island. Today, he splits his time
between Manhattan’s West Village and Old
Brookville, Long Island. He lives with his
wife Debby and their daughter Gabrielle
(23), son Elijah (20) and adopted son, Tyrone (20).
COMMERCIAL OBSERVER: How has
the transition into the MTA role been
since Gov. Cuomo nominated you as
a member of the board in June?
RECHLER: When I inished the Port
Authority role [in 2016], my tour of duty as
I call it, my intent wasn’t necessarily to be
redeployed as quickly as I was [laughs]. But,
the areas that create the greatest risk for the
health of New York City are the capacity
and afordability of our transit system. If
people can’t rely on transit to get to work, to
get home to more afordable housing and to
see their kids and family then this whole
“quality of life” model isn’t going to work.
As things start to break, you realize that we
were living on borrowed time, and our
credit is now due. here’s major heavy
liting to do.
Do you enjoy it?
I enjoy it because I love New York, I care
about it. I want to put something forward to
get [the city] on the right course.
So, is it your fault my train is always
late?
You can’t even imagine how many texts I get
from people when they have train problems
now, like, “I’ve been stuck underground for
20 minutes!”
Were you always destined for a
career in real estate?
here are pictures of me growing up with
building blocks in one hand and a phone
in the other so I guess that was the thing I
was going to go into. hat’s when I had hair.
I’d always walk the diferent job sites with
my father and talk about diferent real estate
business. It gets in your blood.
I understand you were almost
a lawyer.
hat’s right. At the last minute, I decided to
skip law school and go into the family real
estate business at a unique time. It was 1989
and the beginning of a real estate recession, so the way that things had been done
historically was about to be transformed. We
were in pretty good shape coming out of the
downturn, relative to others, so there was a
view that if we could access the public markets that would give us a currency to be able
to acquire those other generational real estate
businesses. So we took my family business
[Reckson Associates Realty] public in 1995
and used that platform to grow from a Long
Island company to a $300 million New York
tri-state area company.
You were the architect behind the
IPO. How old were you at the time?
I was 26. I’m more sensitized to the significance of that now that I’m 50. I remember
being on the road meeting all of these big
institutional investors, and they were looking
at me like, “We’re going to support this kid?”
But ultimately they did, and we did a lot of
transactions. hen, in January 2007, we sold
to SL Green, which was a tough decision to
make because it was a family business that
my grandfather had started.
How did you reach that decision?
It wasn’t easy. Selling a company, even if it’s
not a family business, is always tough. Mike
Maturo [the president of RXR] came over
to my house one Sunday, right before we
launched the sale, and he said, “Look before
we launch this thing I need you to know
that we don’t have to do this. We know this
is your family business.” I said, “No, we’ve
gone over this. We feel this is the top of the
market, and I’d rather sell and start over
afresh.” It was nice that he came over to have
that conversation with me.
I was at a barbecue that night, and my
son [Elijah], who at the time was 10 years
old, comes up to me and says, “Dad, I heard
you and Mike talking about selling Reckson. But it’s not yours to sell, dad. hat’s the
family business.” I’m already emotional and
I now have tears coming down my eyes into
my burger as I’m trying to explain that it’s
complicated and a once-in-a-lifetime opportunity. I was saying that we thought it was
the right thing to do for our shareholders, for
our employees, for everyone. He says, “Dad,
this is the biggest mistake you’ll ever make
in your entire life,” and then he walks of and
leaves me there!
We sold in January 2007 [for $6 billion]
and literally the next day formed RXR. I
always say that the reason for me getting up
in the morning and going to work everyday
is to prove [Elijah] wrong and that it wasn’t
the biggest mistake of my life.
Any regrets?
Not taking some time off after we sold.
The whole process is hard enough—selling
a company like that. We generated 700
percent returns for our shareholders, but
even though we saw with clarity that it was
the time to sell, the whole market was so
bullish that shareholders thought we were
selling too cheap.
How did you know it was the right
time to pull the trigger?
When you take that step as a public company you want to know that you’ll be able to
get [the deal] over the inish line. Knowing
that there were multiple bidders that could
write $6-plus billion checks and would have
interest in our company gave us the comfort
to go forward.
Plus, you already had a relationship
with SL Green?
Yes. When I bought Tower Realty Trust [in
1999] I sold all of the Class B assets to SL
Green. My irst meeting with [SL Green
Chairman] Steve Green was Marc Holliday’s
irst day at the company. We’ve always have a
very good relationship.
Did you take advantage of any buying
opportunities during the crisis?
In August 2009, we bought debt from a public
company at a 30 percent discount to face value
because they were trying to deleverage. It was
on 1166 Avenue of the Americas, which was
leased to J.P. Morgan. We were getting a 15
percent return, $400 a foot. We spent weeks
in investment committee deciding whether to buy it in case J.P. Morgan went out of
business—which at the time was a perceived
real risk. But we did that then we began to
buy from hedge funds and private equity
irms that were looking to get rid of their
real estate exposure. he market ultimately
shited in 2010, and we invested about $1.5
billion in Midtown South with Starrett Lehigh
[at 601 West 26th Street between Eleventh
and Twelth Avenues] and 620 Avenue of the
Americas [between West 18th and West 19th
Streets]. hen we were of to the races, continually focusing on where the customer was
going next and trying to be there.
How is your multifamily pipeline
shaping up?
We have 5,200 units under development at
the moment in ive markets [New Rochelle,
Yonkers, Glen Cove, Hempstead, [N.Y.,] and
Stamford, [Conn.]. It’s going to be extremely valuable as a portfolio ive years from
now. he areas we’ve targeted are suburban
downtowns near public transit where you
can create walkability and quality of life,
places that have character and diversity, yet
are 30 to 40 minutes from Midtown Manhattan by train or ferry (a.k.a. “urban-suburban”). We’ve been doing these public-private
partnerships with local governments where
we become the master developer and build
on vacant land. We build great tax revenue,
generate demand in their downtown, help
revitalize the area and reverse a cycle that
has been going negatively for some time.
What’s rewarding is, because it’s so localized
and relationship-driven, you feel like you’re
making the community better. Our motto is
“Do good and do well at the same time.”
Which development will come online
irst?
Our irst [new multifamily] project is coming
out this year in Stamford, Conn., and then
every year subsequent to that the rest will
come on—over the next 24 to 30 months.
Stamford has changed signiicantly
since the boom.
It has. We used to be the largest landlord
there, so we have a good feel for the city.
here was a period of time in the late
1970s where oice buildings were built like
fortresses because of the crime there. Now,
for urban planning purposes, you want the
opposite. hey’ve done a great job of opening
the city up and making it walkable. he
inancial services irms never really clicked
there—the reality is that talent wants to be in
New York, so UBS brought all their people
back [to New York City].
Speaking of UBS, how did the 1285
Avenue of the Americas purchase
come about?
We have so many disciplines here—we have
the inancial sophistication, we have the
leasing and market understanding, and we’re
in the low of things. When we bought 1285
Avenue of the Americas [for $1.7 billion, last
year] it wasn’t that we [had plans to redevelop] the building, it was that UBS was in the
market to leave [its 900,000 square feet], and
because of that, there weren’t any bidders
that were willing to take that risk.
Mike [Maturo] and I were in China meeting with investors and every single one asked
about 1285 Avenue of the Americas. hey
said they were interested, but wouldn’t go
near the building because UBS was leaving.
So I ly home and call the broker to ask what
[bids had come in]. He said, “We have this
guy from China, and that guy from China,”
and I said, “No, you don’t, because I spoke
with them all [and know that to be false]. So
here’s [the price] we would be at to buy the
building.” I gave him the price and we ended
up settling at that. I knew the tenant didn’t
really want to leave but they didn’t like the
landlord. And, I knew there was no competition. Within ive months we negotiated a
long-term extension for UBS.
Is revamping Midtown buildings still
high on your priority list?
Yes, we view ourselves more as a redeveloper than a developer. Even in the suburban areas, we’re redeveloping the iconic
downtowns. In Manhattan we’re redeveloping iconic, irreplaceable oice buildings
that we’re buying at big discounts then
reinventing them for the 21st century. his
building [75 Rock] is a great example—
we’re respecting the character of Rockefeller
Center and using materials that are similar
to the limestone of the architecture era of
the 1940s and 1950, but we gutted the entire
building and everything is brand new. So
you have this iconic, landmarked building
in an unbelievable location that now has
everything modern in it. Same thing with
Helmsley Building and 237 Park [Avenue
between 45th and 46th Streets]—we’re
always looking for situations like that.
Starrett Lehigh was another
makeover.
Yes. When we bought it [in August 2011] the
rents were $30 a foot, and now we’ve done
enough work that we’re getting $65 a foot.
We’ve taken a building that had the right
bones and added the right amenities and
touches but still respected its history and its
character. It’s now in high demand.
You’re still bullish on Midtown East?
I think we’re in a state of equilibrium, but our
view is it’s still healthy. We’re not underwriting big rent increases right now, but I think
as we go out three to ive years we’ll be back
at a point where it will be a landlord’s market.
here’s inancial services job growth at the
fastest pace it’s been at since the downturn in
2008, so if that continues growing along with
media and tech you’ll have more demand
that will drive rents back at a faster pace.
How is Pier 57 coming along?
We’re getting ready to deliver it to Google
at the end of this year, and they’ll start their
buildout. It’s coming along on time and on
budget. [Rechler said there are no updates
on Anthony Bourdain’s food hall opening at
the site.]
You’ve done some huge reinances
recently—a $1.4 billion rei of 5 Times
Square plus a $850 million rei of 237
Park Avenue. What does that say
about the debt markets?
All the debt markets are very strong right now.
here’s more demand from lenders than there
is supply of properties. So whether it’s CMBS
or balance sheet loans, the appetite is there
and the rates have come down fairly dramatically. At 237 Park we are at a 3.9 interest rate
for 10 years. As an owner you’re less likely
to sell if you can reinance at such attractive
terms, unless there is a buyer who is willing to
pay premium-type pricing, that is.
RXR provided $463 million in
mezzanine debt to Extell
Development’s Gary Barnett last year
for three Manhattan residential
properties—what was the appeal
there?
A lot of banks were pulling out of the construction marketplace. RXR went into the
year with a view that we wanted to meet with
all of the major developers that had attractive
projects and more on their plate than they
thought they’d have in a market where they’d
get less loan proceeds than they thought
they’d get. Gary and I had lunch and started
talking about this opportunity and picked
out a few buildings. A year later we inally
closed, as oten happens [laughs]. It was a
good deal for both of us.
Any new trends on the inancing side?
I think the luidity and eiciency of the
syndication market is something that is new,
in terms of how well J.P. Morgan and Morgan
Stanley can take loans down on their balance
sheets and de-risk by syndicating out the
loans. On the equity side there has been no
slowdown in demand, but it requires you to
be disciplined. Last year we bid on $40 billion
of transactions and we did zero new deals. We
closed what we had coming in from 2015 but
did no new deals because they didn’t meet our
pricing and return expectations.
How did you get involved in the Drum
Major Institute (a nonproit
organization focused on equality
initiatives, founded by Rev. Dr. Martin
Luther King Jr. in 1966)?
I got involved in 2008 through one of my
associates Bill Wachtel whose father was
counselor to Martin Luther King Jr. he
mission is focused on social justice consistent
with what Martin Luther King would want,
which is also consistent with my values. I’ve
been focused historically on voter rights and
access to voting. his election is a perfect
example; you have all these people marching the day ater [Donald] Trump is elected
[president] but how many didn’t vote? As a
democracy the most important thing to do is
to vote. You don’t have to be elected oicial
to exercise your political rights.
Similar to what happened in the U.K.
with the Brexit vote.
I had dinner with [David] Cameron [former
U.K. prime minister] right ater the Brexit
vote…We talked about the comparison, and
he said there’s no way it’s going to be the
same situation. he Brexit vote happened
not because there was a person behind it but
because it was an issue that people identiied
with. He was wrong.
How have those events impacted
New York?
Brexit is a plus for New york in terms
of investment because it puts a mark on
London. With the election, immigration is a
big [concern]. One of the things that makes
New York so special is the diversity of people
that live here. he good news is that we as a
community are making sure that we embrace
people from all diferent parts of the world,
but there are people in our job sites that have
been paying taxes and next thing [Immigration and Customs Enforcement] takes them
and deports them back to their country—
and they have kids here. It’s tough. Of all the
issues, that is the one that feels like there is a
dispassionate understanding of the values of
America, and New York.
What’s on the agenda for the rest of
the year?
If I tell you, all my competitors will know
[laughs]. We have a few large transactions
we’re working on, and we want to deliver Pier
57 to Google. I’d also like to get the trains to
run on time.
Would you run for mayor?
No. But thank you.
his article is provided for informational purposes regarding the commercial real estate environment only in the New York metropolitan area. he publisher of this article is not
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