This Friday, the international law firm Proskauer Rose moves into 11 Times Square as the SJP Properties-owned building’s anchor tenant. Amid piles of boxes, the 51-year-old co-chairman of the firm’s Real Estate department, Ronald Sernau, spoke with The Commercial Observer about the challenges of representing his own employer in one of last year’s biggest real estate deals and the benefit of having SJP as a former client.
What challenges did you face in getting the deal at 11 Times Square finalized?
I feel like I’ve spent my life on that building because my first involvement in that building was representing the landlord-being the landlord’s lawyer in leasing that space. That was maybe three or four years ago.
What prompted you to begin looking for new office space?
We were developing the leasing strategy for the whole building, and then Proskauer had a long-standing lease here at 1585 Broadway, and it started to percolate a little bit that Morgan Stanley was interested in negotiating a surrender agreement with us. So we found ourselves out there in the market looking for space. We looked at several buildings.
It’s funny how even in a market like New York, you would think there was all sorts of space and buildings to look at, but there’s really not that many when you’re looking for 500,000 square feet. So we looked at both 11 Times Square and 250 West 55th Street, which is the Boston Properties development.
Did you initially choose 11 Times Square?
We ended up going with the Boston Properties deal. We negotiated a whole lease with them, and it really came pretty close to down to the wire. But, in October 2008, the end of the world came, and that was really the end of that deal. In the meantime, I’m still involved with 11 Times Square, representing them. And we basically just resigned ourselves to staying at 1585, which is a great building. We were going to stay here for 20 years and everything was going to be fine.
I suppose during that time Morgan Stanley’s plans froze up as well?
Sure. October 2008, obviously, changed everything for everybody. But we were kind of back to square one, and back to the status quo-and that was it. But then in the middle of 2009 we started to kind of regroup. I think all of us got over the shock of 2008, and we continued to discuss things with our brokers. And 11 Times Square, which had been quite expensive before 2008, we decided to discuss with them a deal. That took us until probably about December of 2009 when we decided to really go to lease, which was a little awkward for me, of course, because I had been representing the landlord-and now all the sudden I’m on the tenant side.
Tell me about the challenges you faced representing Proskauer in such a big deal.
The landlord ended up engaging a very competent lawyer. Frankly, I thought that my exposure to the building-all the mechanical systems, all the operational aspects of the building-had really helped because it allowed me, as the tenant’s lawyer, to draft a lease that took into account the requirements to the building. And we signed our lease in May of 2010, and here we are basically seven months later moving in. I think that’s a pretty amazing task when you think about it.
Did you anticipate that it would all move smoothly, even with the building still under construction during the negotiations?
We had started our design even before we signed the lease. We kind of assumed that we would ultimately get the deal done and took the risk of starting to spend money to get the design going. And here we are.
Was it beneficial that you were already familiar with the SJP lease?
Sure! I mean, I wrote SJP’s lease. And, actually, I joked with the landlord. I told them I had never received such a well-written lease before. It was really very nicely done!
How were the negotiations?
We had a friendly negotiation. Of course, we bumped and bruised as you would normally expect, but we ended up coming up with a fair lease for both sides, and for us it’s really an exciting thing.
Why did the firm need to relocate?
We’re going from a building where we were landlocked. We had gone through all of our expansion space, and the future expansion was going to have to be in another building. And also we had a 20-year-old installation, which was certainly starting to show its age. So when we had the opportunity to go to a brand-new building, where we could reconfigure our space for a brand-new build-out, and have substantial expansion options, for us it was a big deal.
Look: It’s a big commitment. It’s the biggest financial commitment that this firm has ever undertaken. But on the other hand, it really poises us for the future. We have all the expansion space that we could ever imagine needing and we’re going to be in absolutely top-quality, first-tier, technologically advanced space. And this building is going to have a huge amount of Proskauer identity, which for us is really very exciting.
Your name-or rather Proskauer’s name-is going to be in lights.
We’re going to even have our name on top of the building-in lights, which is kind of hard to imagine for a law firm, right? Probably Judge Proskauer would roll over in his grave! The subdued Park Avenue lawyer finding out his name is on top of a building in Times Square in lights. That’s something.