Commercial Observer: What have you been up to since stepping down as co-president?
Douglas Durst: I’m starting to step away and attend less meetings and come in a little later and that’s been terrific. My father taught me that you go for cocktails and then you have somebody say ‘I just saw him over there,’ and then you sneak out. That hasn’t changed.
Do you expect to have more free time?
Douglas Durst: I certainly hope so. People ask me that, and I don’t think that’s much of an issue. There’s lots of things I like to do and certainly I have a whole stack of books I’m looking forward to reading. I have my bicycle that’s missing me.
What added responsibilities will you have, Jody?
Jody Durst: Just being more discriminating with my time because there’s more to do.
And how has that been going?
Douglas Durst: Last night we had a brokers’ party and he had to stay for the whole thing.
Jody Durst: Douglas’ typical philosophy is the sooner you show up the sooner you can leave. I told him the other evening that I was surprised to still be seeing him.
Is there anything you won’t miss about the job, Douglas?
Douglas Durst: I’m not going to miss sitting at interminable meetings, certainly. It’s like being a grandparent: I get all the pleasure and then when things get tough I hand my grandson over to my daughter and say ‘Change ‘em.’
Jody Durst: Get the wipes!
Give me an overview of what’s happening at One Bryant Park?
Douglas Durst: We have still about 40,000 feet, I think. We’re in discussions for about 20,000 of that so out of 2.1 million that’s pretty good. Jody is still trying to get the building completed as quickly as possible. I don’t know if you noticed, but after a very lengthy struggle we’ve got our window-washing rigs approved and we’re starting to clean the building and replace the broken panels. This weekend we’ll be installing our living sculptures in the urban garden room off the lobby. When you go out you’ll see them working in there. These are gigantic, the largest Chia Pets ever. And basically they’ll be finishing getting the windows in.
Jody Durst: There are two or three partial floors that we’re building out now and they should be ready by November.
Has there been a slowdown at the Durst Organization because of the recession?
Douglas Durst: Oh, yes, a marked slowdown in activity.
Was that to be expected?
Douglas Durst: After last September it’s about what I expected. A year and a half ago, no, it wasn’t the way we thought things were going to go. We thought we’d see a gradual slow down, but the collapse, the bankruptcy of Lehman, was just like somebody turned off the spigot.
How has the recession affected leasing at your buildings this year?
Douglas Durst: When things start to look very dark, tenants just stop leasing because tenants don’t know what’s going to happen, but after a while they have to do something—their leases are expiring, the space is getting old. The other thing that happens is the big-space users throw all their shadow space on the market, space that they’re keeping for future expansion, and so you have people not renting space. But now they’re starting to pull that space off the market, the sublease space. That’s the case with [Durst tenant] Bank of America. Eight or nine months ago they put the entire building on the market, 500,000 square feet, and about four weeks ago they took it off the market. They’re looking at moving people into the building. They haven’t decided yet, but the space is no longer available for sublease.
With Conde Nast tightening the belt, do you expect their lease to change at 4 Times Square?
Douglas Durst: I don’t think you really have to worry about Conde Nast. They’ve had a tremendous loss in ads, but they have a huge cash flow and I don’t think it’s a worry. They’re cutting, which is probably something they should have done a while ago. I was up there the other day and they were complaining about not having a receptionist on every floor, which I think most people eliminated 10 years ago. So I think they’re fine. And at 4 Times Square they have a very nice rent they negotiated back in 1996. Their lease goes to 2018 or 2019.
You had mentioned last year plans to invest $300 million in distressed assets?
Douglas Durst: We’re still getting ready. There’s nothing available. You talk to everybody and there’s nothing being offered for sale. We were very much in favor of relaxing the market requirements and that has just had the wrong consequence for everybody–because the banks and the financial institutions have not been forced to get rid of these bad assets. They’re still holding them on their books, but that also means they can’t do any new projects because they’re weighted down with bad assets so nothing’s being sold and there’s no financing even if you wanted to buy something.
Is it a waiting game at this point?
Douglas Durst: We’re talking about our Plan B right now.
What’s Plan B?
Douglas Durst: We’re still talking about it. It would be investing in our own assets. Short-term money these days is earning under 50 points and we have mortgages that are 6 percent or 7 percent so it might make sense to just pay them down.
Jody Durst: Depending on whether we stick with Plan A or go to Plan B really dictates what the future holds. Douglas is talking about a more conservative approach where we won’t have discretionary funds to invest if and when opportunities come about. I’ve always been concerned about having these mortgages outstanding, even though I don’t think we’ve ever gone above 40 percent leverage, but they’re still big numbers and they’ve always scared me.
Any new projects on the horizon?
Douglas Durst: We have two projects starting and a third, which will start in the spring. We just closed on a building at 102nd Street and Fifth Avenue where we’re going to be renovating a building into condos and working with Mt. Sinai to develop an 80/20 building for them. Mt. Sinai owns it and it’s a rental building. This is being done through our partnership with Sidney Fetner and Durst-Fetner will be the developer.
And we’ve just agreed to be the developer for the New School on a building on Fifth Avenue and 14th Street. We should sign it any moment. As I recall it’s 300,000 feet.
Jody Durst: There are two components. One is a dormitory and one is an academic facility. The academic facility is about 220,000 square feet, and the dorm is somewhere around 110 or 120,000 square feet. And that sits on top of the academic facility.
Douglas Durst: We’re also working again with [former Esquire owner] Chris Whittle on a school midblock on 57th Street. I think the entity is called Avenues.
Tell me about the environmentally friendly amenities you have at buildings like the Helena and 4 Times Square. Are they financially sound decisions?
Jody Durst: Some components of each building were done as sort of a demonstration in order to make the technology more viable. For example, incorporating the photovoltaic and the curtain wall of the building at 4 Times Square was a demonstration of the use of photovoltaic, not only on a building, but also to replace a portion of the curtain wall so that you’re saving the cost of the curtain wall and getting the benefit of the energy production of the photovoltaic. But we’ve come to realize that the energy requirements at a high-rise building are so dense compared to what a photovoltaic can provide. It’s really a demonstration that the technology works, but it’s not necessarily the right application for it.
Jody, do you share Douglas’ views on the environment?
Jody Durst: I don’t have any water running at my house.
Douglas Durst: That’s a joke, but the fact that you don’t have any air-conditioning is something. When Jody first moved here from California his house was never heated more than 66 degrees. His wife convinced him that maybe they could turn it up a little bit.
Are you wearing your green socks, Douglas?
Douglas Durst: Always.
And you, Jody?
Jody Durst: No.
Douglas Durst: That’s where we differ. I mean, how do you prove to people you’re an environmentalist, Jody?
Jody Durst: I tell them about my room temperature.