501 Seventh Avenue (photo courtesy of Propertyshark.com)

Mssrs. Blair and Kearns, who also handle leasing for 250 West 57th Street, another W&H Properties building, will be replacing CBRE as the leasing agents for 501 Seventh Avenue.

"Harry and Sean are already doing a great job highlighting the qualities of these outstanding Pre-War Trophies to more and better members of the brokerage community,"  said Anthony Malkin, president of Malkin Holdings, which supervises W&H Properties.

Since receiving a $53 million capital improvement program in the mid-2000s, the building has netted two Building Owners & Managers Association New York Pinnacle Awards: the Operating Office Building of the Year in 2007, and the Renovated Building of the Year in in 2006.

Situated mere steps away from Penn Station, the 500,000 square foot office building offers suites that range in size, from 1,500 square feet to 13,500 square feet. 

"Broker commissions are paid in full at lease signing," concludes the press release.

drosen@observer.com 

Public Financial Management, which does business as PFM Asset Management, is taking 9,263 square feet of turnkey space on the entire 49th floor of 40 Wall Street, brokers involved with the transaction exclusively told The Commercial Observer yesterday. Asking rents were in the low $40s.

40 Wall Street

A Cushman & Wakefield team lead by Jeffrey Lichtenberg that includes Jared Horowitz, Gabe Whitman, Courtney Adham and Andy Peretz represented the Trump Organization in the deal.

Jonathan Mayeske and Jonathan Fein, also of Cushman and Wakefield, represented the tenant.

Leasing activity continues to flourish in 40 Wall Street, which just years ago faced daunting vacancies and unsteady management. Donald Trump, Jr., who has had 40 Wall Street under his stewardship for the past few years, helped turn the asset into an appealing office tower by offering favorable deal incentives. PFM Asset Management received 5 months free in its lease deal with 40 Wall Street, said those close to the deal.

Mr. Trump is the brother-in-law of Jared Kushner, who owns The Commercial Observer.

Mr. Lichtenberg, who heads the exclusive Cushman and Wakefield leasing team for 40 Wall Street, said the building had three more deals in the pipeline, all for pricier space at a higher part of the tower, that is was close to finalizing.

“There’s a lot of activity,” Mr. Lichtenberg said. “Everybody’s bitching that activity’s dying, and we’re as hot as can be."

Companies like Duane Reade, the Harry Fox Agency, and Leslie E. Robertson Associates have all inked big office leases at the building. Duane Reade also inked a deal this year for ground-floor retail.

While activity is picking up, there are challenges that lay ahead for Mssrs. Lichtenberg and Trump.

Insurance firm CNA is set to move out of its office space (at a size of up to 135,000 square feet) on March 31st, two years before its lease expires.

But there are a few deals afoot for the building, including a couple of deals in the soon-to-be-vacant CNA space, and the aforementioned deals in the tower portion of the building.

Next week 19,000 guests from 90 countries will descend on Cannes, France, for MIPIM, a four-day event that roughly translates as "International Market for Real Estate Professionals" featuring speaking panels and networking opportunities that allow developers to shop major new projects to prospective tenants and investors.

Greetings from Cannes.

The conference is considered the biggest of the year on the global real estate event schedule. But in Manhattan’s tight knit, somewhat-insular real estate community, few know of it.

“I am not familiar with Mipim???” One developer with a major new speculative office building rising out of the ground emailed The Commercial Observer when questioned whether he was going.

The developer wasn’t the only one in the dark. Several prominent real estate executives interviewed by The Commercial Observer either weren’t familiar with the conference or weren’t planning to go.

Of course not everyone was taking a pass. The Related Companies and Oxford Properties, partners in the massive development project planned for the West Side rail yards, is setting up a booth at MIPIM, a source at the partnership said. Brookfield Properties, the real estate investment trust that has a competing large-scale development known as Manhattan West nearby is going to have executives attend. A person at the REIT said that it will be sending the company’s head of development based out of Britain, not New York executives like Related and Oxford are sending to represent the rail yards.

My-Lan Cao, MIPIM’s director of press said that the large real estate services companies Jones Lang LaSalle, Cushman & Wakefield and CBRE would all have professionals at the event. She ceded that the list of New York names was short, but that a few high profile companies would be there, revealing that Thor Equities, the real estate investment company run by Joseph Sitt will be at the conference to give presentations on the Takashimaya Building, the roughly 100,000-square-foot Fifth Avenue retail and office building Mr. Sitt bought in 2010 for $140 million and has been trying to lease for near record breaking numbers.

Ms. Cao said that owners - like Mr. Sitt - in search of filling space can tap a global pool of tenants at the event.

The rail yards and Manhattan West will not be alone. Ms. Cao said that several large scale development projects from around the world will be represented at the conference. A proposed $4 billion development outside of Moscow envisioned by the Russian agency, the Skolkovo Foundation, that is being billed as Russia's Silicon Valley for instance will be on display. Skolkovo is seeking partners, capital and developers.

“A number of cities will be there as well, including Paris, London and Berlin,” Ms. Cao added.

Ms. Cao, who is based in Paris, said that city was sending officials to solicit partners in major infrastructure and development projects it is seeking to plan and build in order to improve transit, create business districts and build new housing.

The Middle Eastern country Qatar, which has poured state resources into a large development outside the Olympic Village being built in London for the 2012 Summer Games, is also going to be at MIPIM to show off its project.

Some of the world’s largest capital sources will also be there. Singapore’s sovereign wealth fund GIC, one of the largest investment pools, which famously pumped in nearly $7 billion into Citibank during the scary depths of the credit crisis, will be at the show Ms. Cao said.

So will some American money sources such as Lone Star Funds and TPG Capital. Ms. Cao said that the New York real estate financing consultant and equity placement firm Carlton Advisors was also scheduled to attend.

"About six of us are going," said Howard Michaels, chief executive of Carlton Advisors.

Dgeiger@observer.com

“The sale of IOF’s interest in the New York asset will complete the fund’s exit from the US market in line with our stated strategy, at an overall premium of 9.4 percent to June book value,” IOF Fund Manager Toby Phelps said in a prepared statement.

900 Third Avenue. (Courtesy Property Shark)

German-based Paramount Group owns several Manhattan towers, including 1325 Avenue of the Americas and 1633 Broadway, where a multi-million dollar lobby renovation is set to be completed this summer. Cushman & Wakefield and Eastdil Secured brokered that sale.

There was no word on who the brokers for this stake of 900 Third Avenue were. Paramount declined comment about the deal and Investa Office Fund, which had roughly $2.8 billion under management at the end of financial year 2010-11, didn’t return an email requesting comment.

900 Third Avenue is 595,105 square feet and 92 percent occupied, with tenants such as law firms Littler Mendelson and Davies Ward Phillips & Vineberg.

With so little Class A, trophy office towers coming to market and investors anxious to put their capital in these assets, the sale of Investa’s interest in the building was sure to draw interest, an assertion Andrew Lance, a partner with Gibson Dunn’s Real Estate practice, said he agreed with. “I agree with the statement that the meager pipeline of high quality assets in the top CBDs results in a very competitive situation whenever an asset fitting that description comes on the market,” he told The Commercial Observer.

All told, once the deal closes, Investa said that it anticipates a tidy profit. Net proceeds of roughly $19 million on the 49 percent stake, which it purchased in August 2003 for $107.7 million, are anticipated.

Cgaines@observer.com

“With debt available and with interest rates so incredibly low, it encourages one to buy because money is so cheap,” he said. “If the asset class is in favor compared with what much of the alternatives are—if borrowing costs are incredibly low—it continues to steer people to want to invest in hard assets like real estate.”

Illustration by Peter Lettre.

Investment sales figures for the past few years bear this out. According to data from Cushman & Wakefield, the total volume of Manhattan investment property sales closed in 2011 was the third-highest total on record—at $25.8 billion. This marked an 88 percent increase over 2010, to levels not seen since 2007. And Massey Knakal’s Pricing Index, a measure of the change in price per square foot across all property types in New York City, registered a 6 percent increase in 2011 from the year before.

Still, experts said that velocity for the rest of the year, and whether it speeds ahead or screeches to a halt, is subject to a number of different factors.

Clearly the most unyielding of those is supply, which Helen Hwang, executive vice president of the Capital Markets Group at Cushman & Wakefield, recently described as “in check,” particularly for office space.
“The existing inventory is about 400 million square feet in New York—that’s just Manhattan,” she said.“The only thing that’s really under construction right now are World Trade Center Towers One and Four, which is about five million square feet, and you’ve got Boston Properties’ deal—250 West 55th Street, which is about a million square feet.” Ms. Hwang continued adding up square footage under construction in Manhattan and then subtracted the World Trade Center total, which, as she pointed out, is not new but replacing what has been lost.

“Effectively what’s under construction right now that will be added to the market is about 1.5 million square feet,” she concluded, “which is really not a lot for a market this size.” This leaves very little from which to choose, for buyers who experts say are keen on Class A office space.

On top of this, with the market still improving, not everyone is convinced that it’s a good time to sell. Plus, with a huge pool of real estate loans coming due in 2012, some partners just want out, leading to a trend that Ms. Hwang seemed reluctant to mention, given that it’s been bandied about so much.

“This has been said a great number of times,” she offered, “but we saw a great number of recapitalizations.” Last year, she estimated, 40 percent of total deals in the office arena were recapitalizations, whether to replace an existing partner or to infuse new equity into a deal that needed the capital.

“There’s not much out there—that’s what’s keeping pricing so high,” said Andrew Simon, executive managing director in the New York office of Colliers International. “I think that you’re going to see buildings that have maturing debt and they have to figure out what to do, how to hold on. That seems to be the primary story these days and that’s why you’re seeing deals like both Park Avenue Plaza and 299 Park—you saw the 49 percent interest in both buildings traded.”

Over at CBRE, Paul Gillen, a senior vice president in the Investment Properties Institutional Group, pointed out that his firm closed several major transactions last year, including the aforementioned 299 Park Avenue, with recaps as a theme. The Alaska Permanent Fund snapped up the Rockpoint Group’s 49.5 percent stake in 299 Park in a deal that revalued the property at $1.26 billion.

But with recaps serving as what Ms. Hwang calls a hedge in the improving market—sellers keep a portion, let a portion go—overall investment sales for 2012 are largely predicted to remain flat, a point Newmark Knight Frank president Jimmy Kuhn makes, with one caveat.

“In the very near term I don’t see velocity increasing that much because a lot of people in New York aren’t sellers,” Mr. Kuhn said, adding that that could change depending on one future condition. “And that is, if it appears that the administration is going to dramatically change the tax structure, people may bail out. That may be the linchpin to cause increased velocity. If people want to take the old capital gains tax rates before they change.” The current capital gains tax is set to expire at the end of the year and any new rate is up in the air, pending November’s presidential election.

Peter Von Der Ahe, who deals primarily with multifamily, agreed that the issue of capital gains could put pressure on sellers, providing an opportunity for foreign buyers in particular. The Marcus & Millichap first vice president of investments said that with “capital gains most likely increasing in 2013, there’s a financial incentive to sell your property this year.” He predicted that, for multifamily at least, as more buildings start to trade it will create a snowball effect of sorts. “It becomes self-perpetuating on the positive side, too—that’s what I see happening this year.”

As for the investment sales buyers, they constituted all the usual suspects in 2011, though institutional investor participation in the market rose to fill a gap left by private capital for the year. According to the Cushman & Wakefield data, institutional investors accounted for 36 percent of 2011’s total sales, REITs and private capital 26 percent each, and foreign investors 9 percent. For 2010, private capital was at 35 percent and institutional investors were at 15 percent.

Mr. Simon, at Colliers International, said that there is serious capital out there looking for a home. “Any of these big institutional, international groups have to look at New York as a safe haven.” He added that investors are looking for value-add opportunities and opportunities to boost returns, in a cap rate environment that has been low “for a very long time now.”

From Mr. Gillen’s perspective, REITs were obviously big in 2011 but there was another foreign influence, apart from, say, the Canadian REIT that bought 2 Gotham Center for $415.5 million in a deal he helped broker, or the Kuwaiti firm that paid $485 million—all cash—for 750 Seventh Avenue in another CBRE-brokered deal. “A lot of times, the name on the transaction wasn’t necessarily all the capital,” he said. “You had a lot of global capital backing the more traditional names in the city.”

Newmark Knight Frank’s Mr. Kuhn agreed. He anticipates foreign investors to continue looking for opportunities in New York. “But if they don’t team up with a local operator they will not be able to move fast enough and they will make a mistake,” he said. “Foreign buyers, if they don’t have a presence in New York and they don’t have an operating partner, I don’t see them as big competition.” He added that Newmark Knight Frank had just been hired by a large Australian group looking to partner with a local operator to build an office building.

Another barometer for investment sales velocity is leasing vacancy rates. Mr. Heller, at Studley, pointed to 200 Fifth Avenue, the old International Toy Center, where in 2010 the firm represented Tiffany & Co. in its 345,000-square-foot headquarters relocation. “The most recent rent paid was $85 a foot for a prewar building in Midtown South,” he said, “which had been a somewhat sleepy market for decades.” Drastically declining vacancy rates had changed all that.

Mr. Simon, fresh from a Grand Central District Office Building committee meeting, related how he had piped up about this lag between vacancy rates and the price a building can garner when sold. “I said to them, ‘I’ve been telling people for a long time that in the leasing market there continues to be a disconnect between what’s going on in leasing and what’s going on in investment sales,’” he said. “Because in the investment market there is very little product out there and what does come to the market sells at a very big price.”

At the end of the day, the ease of getting a loan for new development projects might be the best way to gauge investment sales velocity for the year. One source said he had just had lunch with a lender buddy from the workout department at a major bank, who described lending requirements as loosening and the bank as expecting to get paid off at par for loans still on its books.

Cgaines@observer.com

The school and studio, which has its entrance on the 230,000 square foot building’s 45th Street side entryway, which goes by the address 322 West 45th Street, offers both classes for beginners and workshops for seasoned dancers alike taught by acclaimed professionals.

Broadway Dance Center.

The center renewed its lease for the building’s entire third floor in the deal, a roughly 20,000-square-foot space, and expanded onto the ground and second floors, an addition of about 10,000 square feet. The expansion space was formerly occupied by the restaurant and bar Sweet Carolines, which left the building in recent months.

"People will now be able to walk by on the street and see the dancing inside," said April Cook, a teacher at the school, who showed The Commercial Observer around the center's space with associate executive director Reese Snow.

The building at 321 West 44th Street is owned by Kushner Companies, the real estate company where Jared Kushner, owner of The New York Observer and The Commercial Observer, is an executive and principal. Both publications base their operations out of the building.

Broadway Dance Center will add two studios on the new levels to the five it already has on three and install a street front retail store that will sell branded dance apparel. The ground floor studio will be visible from the sidewalk through the new retail space's glass facade and down a short hallway inside.

Dancers were busy in the school’s studio spaces as construction workers were busy outfitting the floors below for the center’s occupancy in upcoming weeks.

A lithe gentleman that Ms. Cook said simply went by the name Q expertly ran through a hip hop routine, leading a class in one of the studios.

“He has done choreography work for the Anderson Cooper show,” she said. “He’s been on MTV.”

Mr. Snow said that the dance school used to be located on West 57th Street but moved to 322 West 45th Street a little over five years ago. The new location has been advantageous.

“We get students from out of town who come here because they want to connect into the New York dance scene,” he said, noting the tourist traffic in the area.

Ms. Cook said she’s seen dance pros walk in for a class just to get warmed up for an audition on Broadway.

“We’re right in the neighborhood where all these shows are taking place,” she said. “So expanding here is perfect.”

The new lease stretches for until 2023, Mr. Snow said.

CresaPartners repped Broadway Dance Center in the deal. An agency team from the real estate services firm Cushman & Wakefield represents Mr. Kushner at 321 West 44th Street.

Dgeiger@observer.com

Arthur Mirante, C&W’s former chief executive who is now a top dealmaker at the firm, will lead leasing at the property along with C&W executives Jeff Lichtenberg and Joshua Goldman.

C&W will be replacing a team from Colliers International.

Jared Kushner, an executive and principal at Kushner Companies, is the owner and publisher of The New York Observer and The Commercial Observer, both of which base their operations at 321 West 44th Street.

In a conversation with The Commercial Observer, Mr. Mirante said he was excited to take over leasing duties at the building.

“I’ve have a long relationship with Jared and his father and am happy to be working with them again,” Mr. Mirante said.

Mr. Mirante led a C&W team that formerly had the leasing assignment at 666 Fifth Avenue, a large office building that Kushner Companies owns in midtown.

Mr. Mirante said that the 230,000 square foot 321 West 44th Street has about 30,000 square feet of availability that he and his team will work on at the outset and some limited turnover in the near future. “I think the building is the kind of property that will attract a lot of interest for the limited space it has available,” Mr. Mirante said.

Dgeiger@Observer.com

While Condé Nast’s million-square-foot lease at 1 World Trade Center last year has become a dominant emblem of downtown’s resurgence as a popular destination for office tenants, the C&W group’s lease-up of 77 Water Street has also etched its way into recent lore in the neighborhood.

77 Water Street.

Mr. D’Avanzo and colleagues Robert Constable and Joseph Fabrizi, who are also top executives at C&W, have filled close to 600,000 square feet at the property in recent years, almost the entirety of the building, at times braving the recession’s darkest depths to do it. The string of deals has been so impressive that even brokers at rival firms have pointed to the activity as an early sign of momentum in an area that just a few years ago seemed haunted by the possibility of high vacancy.

A recent deal to fill the building’s 16,400-square-foot mezzanine level has shown that the team, despite all its success, hasn’t turned away from the property, a postmodern skyscraper built in the late 1960s by the family-owned Kaufman Organization.

“I’ve been telling my team, let’s wrap this up,” Mr. D’Avanzo said. “If you don’t follow through to the bitter end, all your client remembers is the bitter end.”

The C&W team inked the mezzanine-level deal with the Lactalis Group, a large French cheese making and dairy company that owns the popular cheese brands Sorrento and Président.

Mr. D’Avanzo said that several tenants had been interested in the space. The floor sits between the building’s ground level entrance and the second floor and is called the mezzanine due to its configuration; its perimeter, which encompasses 16,400 square feet, steps back from the 25,000-square-foot footprint of the floors higher above in the 26-story tower. Though smaller and close to the street, the space was attractive because of its above-average 14-foot ceiling heights. The floor, in fact, had sat vacant for as long as it did so that the team could have the option of offering it to larger tenants who wanted to add to existing space or use it as an entrance.

“There were options to potentially run an escalator up to the mezzanine level so we didn’t want to lease it until we were done with the rest of the building,” Mr. D’Avanzo said.

Goldman Sachs initially leased 77 Water Street in the early 2000s, but the banking institution later reconsidered the lease soon after and never moved in. Mr. D’Avanzo said he couldn’t discuss Goldman because the firm remains one of his clients, but brokers familiar with the building told The Commercial Observer that the space had been toggling on and off the market for years.

It wasn’t until Goldman hired the C&W team in 2009 that deals at the property got going. Despite the fact that the economy was in a serious downturn and leasing in the city ground to a near standstill that year, the C&W team began signing tenants. By the end of that year, the group had finished deals amounting to hundreds of thousands of square feet with big-name tenants including AT&T, the engineering company Arup, the law firm Lewis Brisbois Bisgaard & Smith and the insurer OneBeacon Insurance Group.

“Our strategy has always been to be aggressive in pursuing deals,” Mr. D’Avanzo said.

Mr. D’Avanzo wouldn’t discuss rents or concession packages at the property, but several sources said that Goldman officials demonstrated uncommon savvy in judging the market conditions at the time and cooked up economics that would spur transactions at the property despite the daunting headwinds. The company gave the C&W group leeway to offer rents in the $30s per square foot, a competitive rate, and generous incentive packages such as work allowances that would allow tenants to build out their offices. Goldman also invested more than $20 million in the property, money that was used in part to correct what was widely regarded as its principal weakness: a diminutive lobby.

“We have a beautiful lobby in the property now,” Mr. D’Avanzo said.

Mr. D’Avanzo’s team did its part, recruiting brand name space takers with sterling credit.

It is the practice of some leasing teams to be especially choosy with what deals they do for the final slivers of a large space that has mostly been leased. After filling much of the downtown office building 7 World Trade Center, for instance, developer Larry Silverstein waited years before signing deals for the building’s uppermost floors to hold out for very high rents.

Mr. D’Avanzo and his team knew they didn’t have that luxury at 77 Water Street. Because the space is being offered as a sublease, rather than directly from Kaufman, the landlord—which, depending on the floor, expires in either 2018 or 2021—the pressure was on from the start. Because large tenants typically sign leases for long periods of time, a big block of space with a dwindling term would become only less valuable and harder to fill as time went by.

For that very reason, the building’s roster of brand-name tenants shows a clear preference for creditworthiness, officials explained.

“We had to be very careful with who we selected,” Mr. D’Avanzo said. “If you have a seven-year lease term left on the sublease and your subtenant gives up the space after five years, the space you get back with a two-year term is just about worthless.”

Mr. D’Avanzo took the same approach with the mezzanine floor.

Numerous tenants had been circling the mezzanine space and making offers for the floor but when he and his team connected with Lactalis, they quickly zeroed in. The company, which will relocate from 950 Third Avenue in Midtown, is one of the world’s largest producers of dairy products and has solid financials.

“We looked at everything, even office condos that we could buy,” said Lactalis’s broker in the deal, Michael Burlant, a leasing executive who also works for C&W. “In the end 77 Water had the right combination of criteria. It was a very cool building, the mezzanine level has great ceiling heights, and the rents are competitive. When Lactalis saw this space, there wasn’t any hesitation; they were sold.”

Perhaps unsurprisingly, Mr. D’Avanzo, a boyish-looking broker who has worked at C&W for most of his career, appeared preoccupied with the second floor rather than celebratory. In his determination to fill the building’s remaining vacancy, he showed the same ethos that bred success throughout the leasing campaign.

“We want to lease that space,” Mr. D’Avanzo said.

Sure enough, Mr. D’Avanzo is close to a deal for about half of the floor, he claimed. Nonetheless, even with only about 12,000 square feet of space left to lease, the agent hardly seemed satisfied.

“I told my guys, bring me a list of every tenant in the market who could be a taker for that remaining piece,” he added. “Let’s make sure we’re reaching out to them.”

dgeiger@observer.com

In the past year, two large tenants relocated from buildings Mr. Cohen owns.

3 Park Avenue.

The moves came when the American Society of Mechanical Engineers reached a deal last summer to move nearly 100,000 square feet of offices from one of Mr. Cohen’s buildings, 3 Park Avenue, to the nearby office property 2 Park Avenue.

More recently, Guggenheim Partners, a large financial firm, signed a lease to take almost 190,000 square feet at 330 Madison Avenue, relocating from another of Mr. Cohen’s buildings: 135 East 57th Street.

In a recent conversation with The Commercial Observer, Mr. Cohen said that letting ASME slip away was a calculated bet on the market, explaining that the society will not vacate its space until 2014, when he expects the office market in the city to be stronger than it is today.

“I think as owners we have to be independent, you can’t just run and scramble to keep every tenant,” Mr. Cohen said. “In that case, I looked at the building and asked myself, am I really best suited incurring the cost of renewing that deal two years early when maybe the market will be a lot better in a year or so?”

In the case of Guggenheim, Mr. Cohen said he accepted that the company was no longer the right fit for the property.

“We really didn’t have the space nor the size floors for a mushrooming company like them,” Mr. Cohen said. “It comes to a point of efficiency and 135 East 57th Street is more of a boutique building suited for a smaller tenant.”

Mr. Cohen has made progress gearing up to face the leasing challenge. In 2010, he named a top Cushman & Wakefield leasing team led by the two former chief executives of the company, Bruce Mosler and Arthur Mirante, to head up leasing his sizeable Manhattan portfolio, which also includes 623 Fifth Avenue, 750 Lexington Avenue, 622 Third Avenue, 475 Park Avenue and 805 Third Avenue. In late 2010, the C&W group helped arranged one of the biggest leasing transactions that year, an over 200,000-square-foot deal at 805 Third Avenue taken by the media company Meredith.

At 475 Park Avenue, meanwhile, Mr. Cohen is in the process of a multimillion renovation of the property, including an overhaul of the tower’s lobby.

“We have space in one of the hottest markets,” Mr. Cohen said, referring to 475 Park Avenue’s location on the border between Midtown and Midtown South, which boasts the lowest vacancy rate of any office market in the country. “And we’re investing in that space.”

When 475 Park Avenue’s renovation is complete, Mr. Cohen said that the building would attract tenants over hot submarkets in Midtown South such as the Meatpacking District.

“What attracts people to a property is its convenience to where they live,” Mr. Cohen said, noting 475 Park Avenue’s proximity to Penn Station and Grand Central Terminal. “Our buldings are in great locations with great transit. I think the people who want to go to places like the Meatpacking are the exception rather than the rule.”

Dgeiger@Observer.com

Freshly tanned from a recent visit to Mexico, where he was overseeing a new project, the slicked-back scion grew steadily more enthusiastic as he discussed 40 Wall Street, an office tower that, with its rising and falling tenant roster, has contributed to the Trump Organization executive vice president’s growing reputation as a competent steward of the family name, a reliable fixer and successful dealmaker in his own right.

Donald Trump Jr. (photo credit: Hannah Mattix)

“When I took over the building, there was a lull in the market,” recalled Mr. Trump, who said the address remains one of his well-known father’s favorite properties. “By the time we fixed everything up and got it going, there was a high. It was certainly a unique experience. My focus had been on residential development as well as some resort hotel development, so to learn that part of the business and to spend time with that part of the business was fascinating to me. So I got involved and made it a big part of my day-to-day life.”

Indeed, 40 Wall Street had languished in the Trump portfolio since the mid-’90s, when family paterfamilias Donald Trump purchased the building from Kinson Properties, a Hong Kong-based company. Back then, internal discussions raged on whether to convert the office tower into residential property or to keep it as offices, according to insiders. The senior Trump eventually settled on keeping it as an office tower, and nearly 20 years after that decision, 40 Wall Street’s fortunes fell on his oldest son, who until then had never managed an office building.

(Disclaimer: Mr. Trump is the brother-in-law of Observer Media Group owner Jared Kushner.)

The junior Trump had spent much of his career overseeing a stretch of luxury developments along the West Side rail yards. He then jumped from project to project, working on construction of Trump International Hotel and Tower in Chicago and handling Trump licensing deals across the world.

But managing an office building as storied as 40 Wall Street, until recently known among tenant brokers as a difficult place to do business in part because of at least one Trump executive’s heavy involvement with leasing at the address, was entirely new to Mr. Trump.  

Now faced with his first-ever office-building management assignment, Mr. Trump made a strategic play to woo brokers, who, perhaps more than anyone else, had the leverage to sell 40 Wall Street to potential office tenants. “I look at the brokerage world as your unpaid sales force until they perform,” he said. “What I wanted to do was befriend those people, get to know the players.”

He reached out to Jeffrey Lichtenberg, an executive vice president at Cushman & Wakefield who had worked with the Trump Organization in the past. Mr. Lichtenberg and his team were eventually brought on as the exclusive leasing agents for 40 Wall Street, and from there, they courted other big brokerage firms to rouse up business.

“What we did was, instead of having one big party, we had a series of lunches with each firm,” said Mr. Lichtenberg. The message, brokers on both sides of the table said, was simple: 40 Wall Street was open for business. It wanted to work with brokers and it wanted new tenants.

“Because Don was cooperative and helpful to me and then we were cooperative to the brokers, the brokers realized that the best place for them to bring a tenant to get a deal done was 40 Wall,” added Mr. Lichtenberg. “Don helped turn around the image of the building.”

What also helped spur leasing activity was Mr. Trump’s willingness to sweeten the deal by offering incentive packages. He also kept a simple pledge: if a broker brings in business to 40 Wall Street, he would make honoring that broker’s commission a top priority.

“If I tell them I am going to do something, I am going to do it,” said Mr. Trump. “If I tell them that they’re going to get their commission check on this moment, they are going to get it on or before this moment,” he added, hitting the table with an index finger for emphasis.

That pledge worked. Jones Lang LaSalle broker Dan Suozzi, who had lunch with Mr. Lichtenberg and his team at Bobby Van’s during that recruitment period, estimates he has brought four tenants to 40 Wall Street in the past two and a half years, the most recent being John Carris Investments for roughly 13,000 square feet. (Former New Jersey Governor Jon Corzine was rumored to be subleasing space from John Carris.)

“Don Jr. was a pleasure to work with and he does the right thing and is very personable,” said Mr. Suozzi. “It makes a difference when you’re bringing a tenant through the building.”

Once they had the ears of intrigued brokers, Mr. Trump and his team focused on redefining 40 Wall Street’s image as a financial services asset. “With the Wall Street address 10 years ago, it was all financial industry,” said Mr. Trump. “Today, in the digital age, the street location is less critical.”

Mr. Trump also honed in on what his family’s building could offer that his competitors couldn’t. He targeted a crowd that didn’t fit the traditional mold of a Wall Street tenant, selling them on 40 Wall Street’s “impeccable” management services and attractive deal incentives. The Trump Organization has a “fungible” balance sheet that enabled it to offer value propositions, he added.

Wall Street address aside, 40 Wall Street had the charm of a Midtown South building with Midtown South amenities. It had recently renovated tons of turn-key space, and it had a Duane Reade megastore, the first of its kind that, with its sushi bar and a hair salon, could give the average customer a new ’do with her bottle of Kaopectate.

“With the Condé [Nast] deal and with everything that is going on downtown, I think it’s an opportunity for buildings to have boutique space they can do something with and offer that value proposition to tenants that are going to be the guys who are going to feed off those megadeals,” said Mr. Trump.

The offer worked. Midtown mainstays like the Harry Fox Agency and Duane Reade committed to the building for substantial office space, each with square footages in the five figures. Wiedlinger Associates and Leslie E. Robertson Associates also moved into the building.

“I had never done a deal with the Trumps in my 18-year career,” said Greg Taubin, a senior managing director at Studley who represented the Harry Fox Agency in its 47,144-square-foot sublease on the fifth floor. “You would always hear different things about having to deal with the organization, but those days are over. The reason is because of Donny Jr. getting involved and making decisions.”

Now faced with tenable vacancies in the base of the building, nearing a total of 100,000 square feet, Mr. Trump is enjoying his time at 40 Wall Street while also working on the development of Trump International Golf Links in Scotland.

“What makes my job interesting is that on any given day I can work on something that’s totally different,” he said. “It keeps things very interesting and fluid.”

drosen@observer.com