"You can make more money on a single real estate deal than as a REIT," he said at the 16th annual REIT symposium hosted by the N.Y.U. Schack Institute. Mr. Ackman, who made at least some of his many millions by buying stock in General Growth, a once-bankrupt REIT, made an exception for good pal Steven Roth: "Vornado," he said, "is the only REIT that's opportunistic."

In fact, while SL Green, led by Marc Holliday, has been amassing a solid portfolio of Class B assets in New York City, and Boston Properties, led by Mort Zuckerman, has bought up a handful of marquee assets, Vornado Realty Trust, led by Mr. Roth, its chairman, has pursued an enigmatic yet aggressive strategy that has quietly allowed it to become the most widely spread REIT in town.

Vornado now owns or has a stake in 95 properties in New York City, according to data obtained by The Commercial Observer from CoStar. In comparison, SL Green owns or has a stake in 61 properties around the city, and Boston Properties trails distantly at 14.

Mr. Roth almost never gives media interviews and is said to turn in the other direction if he sees a reporter coming, so what we know of his strategy for taking over New York, New Jersey and a small slice of D.C. comes from public appearances and the statements therein, such as one he gave at the Pierre on Thursday. Mr. Roth, with a football coach's build and brusque tones, is, well, bullish. "I've fallen in love with a graph."

"Try a woman," Equity Group Investments' Sam Zell cackled.

But Mr. Roth plunged ahead. The graph, he explained, shows the rental market in New York going back 25 years. Following every recession, office rents have come back at three times the rate of decline. "I keep it under by pillow," he added. "My office buildings are going up in value." 

Mr. Roth painted his strategy as simple and low-risk: Just focus on New York City. But Vornado is playing a more high-stakes game than he let on.

Vornado recently took a 25 percent stake in special servicer LNR Property Corporation, suggesting it plans to become a bigger player in the distressed-assets market. For years, Vornado has owned a substantial stake in McDonald's but has since sworn off similar investments. Still, in Vornado's largest acquisition since 2007, the REIT last year bought a $600 million stake in J.C. Penney. (And, coincidentally, its latest flag-planting came in a joint venture with SL Green to recapitalize 280 Park Avenue in exchange for a stake in the building.)

VORNADO has come a long way since 2007, when it lost out to Blackstone in a bidding war over Mr. Zell's Equity Office Properties. "They didn't have the luxury as a public company of being able to lever up as much as the non-public companies," Larry Longua, the director of the REIT Center at the Schack Institute, told The Commercial Observer.

But suppose, for example, the commercial real estate market turns and Vornado's stock drops dramatically after it's broken ground on what is supposed to be the city's third-tallest tower, 15 Penn Plaza? "That's a big risk and a concern for me that [REITs] are in development," Mr. Longua said. "REITs really did not want to be seen as just baby-sitting an existing portfolio. It became harder and harder for them to create value." 

In 2010, Vornado more than doubled its funds from operations to $1.1 billion, or $6.05 per share, compared to the $583.6 million, or $3.36 per share, in 2009. But for the firm, as with all REITs, the question is how to prolong success once equity becomes easier for private investors to come by. Longer term, the larger question is whether real estate is growing enough to support the ravenous appetite of the public markets for growth. As Mr. Zell asked at the Pierre: "How much real estate does this country really need?" 

Mr. Roth frowned, but did not disagree. "The country has $14 trillion of debt," he said. "Japan has been in a funk for 20 years."

lkusisto@observer.com

And so Newmark Knight Frank's Jimmy Kuhn kicked off the star panel at this year's Capital Markets in Real Estate Global Markets Recovery with an unintential real estate rap.

Sadly, not all real estate gurus can rhyme, but everyone's got some talent. We bring you the juicy bits from this afternoon's star panel, New York City: We Are the Golden Apple: 

--"Out-of-the-box is not out of the box." 

Bill Rudin, Rudin Management, explaining that they're still keeping a lid on unorthodox investments. 

--"It's scary being between two developers and two REITs." 

Bill Mack, AREA Property Partners, on seating arrangements as metaphors.  

--"You can go make money and look like geniuses, but that doesn't take a lot of effort."

Mike Fascitelli, Vornado Realty Trust, on why he's a lot richer than we are. 

--"The sites are superb and beautifully serviced. The buildings will be spectacular. By golly it's now going forward at an accelerated clip." 

Larry Silverstein, Silverstein Properties, on his great love, the World Trade Center

--"We've been blessed to have him as mayor. The business community needs to start looking for someone to follow in his footsteps. Those are elephant footsteps."

Mr. Silverstein on his other great love, Mayor Michael Bloomberg. 

--"Sometimes being an REIT felt like being between a dog and a fire hydrant."

Mr. Fascitelli, on being an REIT during the boom time. 

--"What can I tell you? I love the REIT structure. It's liquid, transparent. That's what investors want these days, greater scrutiny." 

Marc Holliday, SL Green, on being a REIT now.

--“I'm too old to complain any more.”

Mr. Fascitelli on being zen. 

--"Every week one of our tenants, collectively, the SCC was investigating. If we did some of the things our tenants did, we'd be out of business."

Mr. Rudin, on why real estate keeps him out of prison.

Previously: No One Wants to Talk About Printing Money ... Except When They Do 

lkusisto@observer.com  

"We can regain absorption quickly when people start hiring again," said Marc Holliday, SL Green's CEO. "We’re at 85,000 job losses now, but that can quickly reverse itself. ... It’s not going to take much, in my opinion, before you will see vacancy levels trending to 10 percent and under, and rents starting to rise again." 

Mr. Holliday pointed to the relative lack of huge blocks of space in Midtown Manhattan -- only 10 blocks of space of 250,000 square feet or more, and only five in midtown's "core": 11 Times Square, the old New York Times building, 120 Park Avenue, 345 Park Avenue, and 510 Madison Avenue -- and to the paucity of recent development.

"Roughly, there was an 8-million-square-foot net increase over 10 years," Mr. Holliday said. "That’s about a quarter point a year addition in inventory."

Nor is there much new construction in the pipeline, or many prime development sites left in midtown. Even better, who owns the primest of the prime? SL Green, according to SL Green.

"The one that sort of stands out is our development site at 317 Madison Avenue, which we’ve always said would be a next-cycle development," Mr. Holliday said. "We’re certainly approaching that cycle."

Mr. Holliday said the folks at his firm are even more optimistic than Cushman & Wakefield's head researcher, the optimistic Ken McCarthy, who recently told Cushman brokers that the recession is just about over.

Mr. Holliday and his team also dished on foreign investment, the Sapirs, the Aqueduct, and the collapsed sale of an interest in 485 Lexington Avenue.

In no particular order, on foreign investment:

Andrew Mathias, SL Green's president and chief investment officer, said that in his global peregrinations, he's been struck by the diversity of the investors eager to invest in real estate -- hence the slide to the right. Even better, he's found that investors were largely interested in only two places: midtown Manhattan and London. "[They] are all drawn to the safety and liquidity of these two worldwide markets," he said.

On the Sapirs, the former owners of 100 Church Street, on whom SL Green is in the process of foreclosing:

Mr. Holliday and friends never named the Sapirs explicitly, but they didn't really need to. Matt DiLiberto, SL Green's vice president and controller, referred to the building's "very litigious borrower," while Steve Durels, executive vice president and director of leasing, described the "poor stewardship of the prior owner" and the "seriously flawed lobby renovation." More specifically, he called the Sapirs'  installation of more than 50 Swarovski crystal chandeliers -- supposedly the world's largest such installation -- "hideous." SL Green is, needless to say, planning a major lobby renovation.

On the never-ending bidding process for the development and racino rights at the Aqueduct in Queens, a process that has spanned three gubernatorial administrations:

"[We] believe that the departure of a prominent Vegas gaming mogul you can fill in the blank, has proved that construction in New York requires resilience and a skill set unlike any other place in the world," said Ed Piccinich, executive vice president for property management and construction. 

A selection could be coming soon. According to Mr. Holliday, the recently passed state budget, "included amounts from the Aqueduct in this current fiscal year, indicating they will try to wrap things up shortly."

And, finally, on the sale of a 49.5 percent interest in 485 Lexington Avenue to Optibase and Gilmor, a deal that collapsed because, said Mr. Mathias: "The special servicer has effectively rejected the assumption of the loan":

It looks like a lawsuit is pending. Said Mr. Holliday, "We have an entity out there that’s trying to rewrite the rules and it’s not good for the industry that that happens."

drubinstein@observer.com

Taking his place onstage, the former city planning official and development executive began to speak about his favorite project: the redevelopment of Pennsylvania Station-in the planning stages for nearly two decades-an effort he led for developers Related Companies and Vornado Realty Trust.

"What I've finally come to realize about this is that as a city, we're not sufficiently embarrassed by Penn Station," he said. "You had a private sector that was willing to put $14 billion into that area that right now is the poor stepcousin to midtown, and we couldn't get our collective act together to do it.

"We simply have a process that's broken."

This, more or less, is how Mr. Chakrabarti, 43, spends much of his time these days. The recently named director of the real estate development program at Columbia University's architecture and planning school, he has been a constant presence at forums on development and transportation, quickly assuming the pundit's role. Unbound by a profit-sensitive employer, he is free to spout on, uncensored, about how suburban growth is madness; to criticize the federal stimulus' focus on road repairs; and to complain about mismatches in transportation spending, such as the new PATH terminal downtown being slated to cost more than $3 billion to serve 60,000 passengers a day.

The job of bulking up Columbia's program is the latest turn for one of the more ambitious, young figures in the world of New York City planning and development, someone who has always managed to find himself in a prominent and public role, typically on the city's most visible projects.

In many ways, Mr. Chakrabarti's résumé reads like a book about the city's real estate industry in the past decade, as he's followed the industry as it grew steadily more ambitious before recently retreating from investment in the wake of the credit crunch and the recession.

TEN YEARS AGO, THE financial services sector was growing fast, expanding its real estate and bringing Mr. Chakrabarti along with it. An associate partner at the powerhouse architecture firm Skidmore Owings & Merrill, he worked on the design of Bear Stearns' soaring new headquarters at 46th Street and Madison Avenue, and then pushed a fresh trading floor for the New York Stock Exchange with an office tower above it.

The next chapter was Sept. 11, 2001, and its aftermath.

The private real estate sector slowed dramatically-the stock exchange plan was shelved-and the new Bloomberg administration turned to the Planning Department to leave a mark on the city, particularly by spurring growth in sleepy, underutilized swaths of Manhattan, and by rebuilding Lower Manhattan.

Plucking him from Skidmore, the new Department of City Planning director, Amanda Burden, brought on Mr. Chakrabarti as the agency's Manhattan director in 2002. From that perch, he helped create a plan for a revitalized downtown and lead major efforts such as the High Line and the rezoning of the far West Side, along with the failed push to put a football stadium over the rail yards by the Javits Center.

With the real estate boom in full swing, private developers reached for the skies. Mr. Chakrabarti left the city in 2005, and, after a brief, uncomfortable stint back at Skidmore, he took a job at the Related Companies and Vornado Realty Trust, leading their plan to completely redo Penn Station. Known as Moynihan Station, the project sought to move Madison Square Garden to the Farley Post Office, and thereby unleash more than 5 million square feet of development rights. The $14 billion project was perhaps the city's most complex development deal, and Mr. Chakrabarti was at its head-giving presentations to then Governor Eliot Spitzer and sorting through the array of agencies and actors involved. Hampered by uncertainty and cost, that large deal collapsed when Governor Spitzer left office. (Mr. Chakrabarti is still working on a smaller form of the project.)

As the Moynihan deal slowly unraveled, Mr. Chakrabarti also led the planning on Related's proposal to develop the West Side rail yards-the football stadium site-a $15 billion investment of its own.

Through all of this, he was the public face-a visibly self-confident (his critics call him overconfident) salesman who was eager to talk to the community, reporters or the long list of constituency groups involved with his projects. Mr. Chakrabarti's eloquence was one of his best qualities in winning whatever support he did.
The local Community Board 4, for instance, abhorred the concept of a stadium, but respected Mr. Chakrabarti.

"He was very well thought of out here in the CB4 community," said Anna Levin, a City Planning commissioner who was then chair of a land-use committee on the board. "He was always accessible; he was always thinking. I think he had some excellent, comprehensive ideas about good planning in the neighborhood."

AFTER THE DEVELOPMENT BOOM cratered in the absence of financing, there was little activity left at Related for Mr. Chakrabarti, and like the industry as a whole, he retreated from the development business. By his telling, Columbia approached him this summer, looking for someone to build up its real estate development program, which was adding resources and full-time faculty and expanding from two to three semesters. His chair was endowed by Marc Holliday, the chief executive of SL Green, the city's largest commercial landlord.

"In a denser city, in a more complicated city, how do you find people who know how to make value?" Mr. Chakrabarti said of his charge at the school. "It's a tradesmanlike act: figuring out what things you can do to create more value from a site.

"That's what I think we can teach in a way that just didn't exist before in the marketplace, because it's really about value creation where your peers don't see that value."

This is no easy task.

In recruiting, developers, who generally have more of an eye for revenue than for design, tend to look to the halls of business schools, and Columbia's development program doesn't typically jump to the top of the list, development executives say.

The program is within the architecture school-developers and architects historically clash over differing motives, though not always-which makes it rather unique in the world of academia, but also something of an outlier. (N.Y.U. just brought in a new chair of its real estate program, Jim Stuckey, a former city official and executive at Forest City Ratner.)

A big question for Mr. Chakrabarti's observers is whether this is a long-term gig, or simply a way station as the ambitious planner-turned-developer-turned-academic again reaches for a large role in New York's development.

"Long term, I think Vishaan has always managed to find himself in great places," said T. J. Gottesdiener, Skidmore's managing partner and a former colleague. "Someday Vishaan might be running the city in some way."

ebrown@observer.com

Amid increasingly apocalyptic prophecies about the fate of  New York’s commercial property market, more than a dozen “Masters of Real Estate” convened at the Metropolitan Club on Tuesday for an eponymous conference hosted by The Observer devoted to making sense of the market’s troubles. The major players appear to have emerged from the recessionary trenches leaner, shell-shocked, and hungry for deals, though some panelists were more upbeat than others about the prospects for a long-term recovery.

Tishman Speyer CEO Rob Speyer, William Rudin, president of Rudin Management, Richard LeFrak, chairman of the LeFrak organization and Related's Stephen Ross were among those who spoke on panels like "How Will New York Real Estate Be Re-Invented," evincing a positive outlook while expressing some caution that the real-estate community would have to watch government closely

Regardless of the panelists’ outlook, “people are scratching their heads saying, ‘Where’s the stress,’” observed SL Green’s CEO, Marc Holliday, who moderated the second panel on “When/Where Will the Smart Money Come Off the Sidelines.

Some participants argued that even if the market does recover sooner rather than later, investors cannot expect the outsized returns they became accustomed to when New York property values were at their peak in 2006 and 2007.

editorial@observer.com

Once the deal is approved by SL Green’s mortgage lender, Wachovia, a joint venture between the Israeli technology firm Optibase and its Nigerian partner, Gilmor USA, will assume the company’s $450 million of outstanding debt and extend SL Green an additional $20 million loan, secured by SL Green’s pledge to sell all but 1 percent of its remaining interest in the building to the partnership within five years.

No one would have batted an eyelash at the deal two years ago, when low-interest financing, foreign investors and price tags upward of $500 per square foot in Manhattan were common. But, in August, it was greeted as the first sign of a thaw in what has been a glacial commercial market for more than a year.

In an Aug. 10 press release, SL Green’s chief executive, Marc Holliday, said, “If ultimately approved, the transaction would demonstrate that the midtown Manhattan office market continues to stand as one of the world’s top locations and that investor interest is once again on the rise.”

Though the proposed sale is certainly a welcome sign after a year of almost total paralysis, Isaac Zion, a managing director at SL Green, does not expect it to set a new bar just yet.

“In a market like this, where there are just a handful of trades, it’s hard to say what, if anything, is the new benchmark,” Mr. Zion told The Commercial Observer. “For any one particular transaction to set a benchmark in this climate is unlikely.”

THIS IS NOT THE This is not the first time observers have looked to 485 Lexington Avenue to gauge the future prospects of Manhattan’s commercial market. A little more than a half-century ago, Uris Brothers managed to quell mounting fear of a drop in demand for midtown office space with the news that 90 percent of the 921,370-square-foot tower then under construction at 485 Lexington had been leased.

Uris Brothers was among the pioneers of a decade-long commercial development boom following World War II, which saw Manhattan businesses migrate from single-tenant office buildings to the multi-tenant corporate towers common today.

By the time Uris Brothers broke ground on the 30-floor skyscraper designed by Emery Roth and Sons, 41 new “competitive”—Class A in modern commercial real estate parlance—office towers with a total of 10.5 million square feet had been completed since the war; another 14, including 485 Lexington, were under construction, and plans had been filed for 13 more, according to a February 1956 New York Times article.

The building was Uris Brothers’ sixth midtown project since 1949, when the 21-story Arabian American Oil Building was completed. The 351,000-square-foot “Look Building” at 488 Madison Avenue, the Colgate-Palmolive Building at 300 Park Avenue, and two others followed. By the middle of the decade, critics “were predicting that a point of over-building was being reached,” The Times reported. Luckily for Uris Brothers, their fears proved to be unfounded.

“The continued demand for office space in the competitive buildings was highlighted last week by the announcement that the [30-] story building under construction at 485 Lexington Avenue was 90 percent rented,” The Times wrote.

The firm also announced plans to build a seventh midtown property next door at 750 Third Avenue. SL Green acquired both properties—and 1.1 million square feet of vacant office space—from the teachers’ pension fund TIAA-CREF for $480 million in 2004, in what was also considered a risky investment. Two years and $90 million worth of capital improvements later, SL Green’s gamble on 485 Lexington appeared to be paying off, like the Uris Brothers’ had 50 years earlier. In 2006, Class A Manhattan office prices had jumped from the $282 a foot SL Green paid for 485 Lexington, and the building was 97 percent occupied. Its value to potential investors, barely two years after acquisition, was rising.

Its two biggest tenants, Citigroup N.A. and the Travelers Indemnity Corp., occupy half of the building under leases that expire in 2017, the same year SL Green’s $450 million mortgage matures.

Mr. Zion, the managing director, said these two leases were “the key” to the company’s deal with Optibase and Gilmore, but, according to another source, Citigroup is shopping for a tenant to sublet its offices on the 15th and 16th floors of 485 Lexington. Mr. Zion declined to discuss any specifics about the deal since it was still under contract, except to confirm that upon closing, Optibase and Gilmor will “have the ability to control management and leasing.”

Cushman & Wakefield, who brokered the stake sale for SL Green, and the Carlton Group, who represented the buyers, declined to comment for this article.

editorial@observer.com

It was July 28, just before 6 p.m., and Mr. Wynn, of the eponymous Wynn Resorts, was relaxing in his attorney’s conference room on the 23rd floor of the New York Times building, following an exhausting day of lobbying city editorial boards.

By “a room full of slot machines,” Mr. Wynn was referring to Empire City at Yonkers Raceway, an unadorned symbol of what he will not build at the Queens Aqueduct in Ozone Park should he win the hotly contested development and slot-machine rights. The prize is worth billions of dollars over the 30-year lease, both to the state and to the developer. It would be Mr. Wynn’s first big New York City investment, and, he said, his first investment in a racino (part racetrack, part casino).

So why here? Why now?

“New York City is New York City is New York City,” Mr. Wynn said. Behind him sat an easel holding a rendering of his vision for Ozone Park. It didn’t reveal much (Mr. Wynn is trying to abide by the state’s request not to reveal details of his proposal), but its aesthetic came through: a creamy white facade, billowing canopies, balconies, an ambience that he described as “high-end clubby.”

He faces stiff competition, including SL Green’s Marc Holliday and a team that combines R. Donahue Peebles, Harbinger Capital and MGM. 

But all indications are that Mr. Wynn’s ambitions are serious. He has “$1 billion in cash in a bank, in T-bills;” has hired Long Island–based PR exec Robert Zimmerman; and his staff will signal its dedication to the community by attending a National Night Out anti-crime event in Joseph P. Addabbo Park on Aug. 4.

“Anyone can put up phony renderings,” Mr. Wynn said. “I build places that are beautiful and attractive.”

drubinstein@observer.com

And fallow.

It is these 210 acres that have caught the gambler’s eye of casino magnate Steve Wynn, who was scheduled to land in New York City on Monday, July 27. On July 29, he is to personally present to Governor Paterson’s office his proposal for the racetrack’s redevelopment.

This week, Albany will also host solicitous visits from New York City’s largest office landlord, SL Green CEO Marc Holliday, and teammate Hard Rock; MGM and its partner, the Florida-based developer Peebles Corporation; and a cleverly devised consortium called Aqueduct Entertainment Group that combines both national investors like the Navegante Group and local ones like the Rev. Floyd Flake–founded Empowerment Development Corporation. Other bidders likely to make in-person pitches include: Mohegan Sun; Penn National Gaming; and Delaware North, which won development rights to the Aqueduct last year, before the credit freeze prevented it from keeping its financial commitments to the state.

If all goes as planned, these tête-à-têtes should mark the culmination of an eight-year state quest to award development rights for New York City’s first casino—Las Vegas lite, in Ozone Park. It will include thousands of electronic slot machines, known in the industry as VLTs, or video lottery terminals; and, depending on which developer wins, all manner of other amenities, like hotels, restaurants and parking garages.

The rights are worth billions of dollars over the 30-year term of the lease agreement, both to the developer and to the state, which will garner an estimated $300 million annually in revenue.

THE FATE OF NEW York City’s only racetrack has been the stuff of speculation and castle-in-the-sky building since at least the Pataki administration. In 2003, the New York Racing Association, which operates the track, reached an agreement with MGM-Mirage to install 4,500 slot machines on the second floor of the Aqueduct.

But an investigation into the Racing Association itself, among other delays, doomed that deal. In 2008, under Governor Paterson, the state selected the Buffalo-based Delaware North, in part because it promised $370 million upfront. But in yet another instance of epically bad timing, the credit markets froze, and Delaware North couldn’t fulfill its financial commitments.  

In April, the state reopened the bidding. Governor Paterson was later quoted as saying that a bidder would be chosen by Aug. 1. Not surprisingly, no dice.

“I’m not going to put a date on it,” Morgan Hook, a spokesman for the governor, said Monday. “There needs to be a consensus agreement between the governor, the president of the Senate and the speaker. They will make that decision as quickly as possible, but obviously they have to do their due diligence ...”

IF AQUEDUCT ENTERTAINMENT GROUP has its way, a passenger in an airplane making its final descent into J.F.K. might, through his oval window, spy an odd mix of the sinful (gambling and gluttony) and the pious (a green roof, a sustainable rainforest atrium, a LEED-certified casino and track). The proposal calls for a 300-room hotel, a community meeting hall, a 1,200-seat buffet and a 2,400-car garage. The complex would apparently be divided into seven sections, each representing a particular city neighborhood.

SL Green and Hard Rock would apparently erect a giant, fuchsia-colored replica of an electric guitar at the entrance to a Hard Rock bar; a complex of shops; a 425-seat buffet; and a food court. MGM and Peebles’ proposal calls for “delectable fine-dining restaurants,” a “sophisticated ultra-lounge,” a “luxurious 350-room hotel,” a meeting center and some kind of entertainment venue.

Neither Delaware North nor Penn Gaming would release details of their proposals, and Mohegan Sun’s point man couldn’t be reached for comment. For his part, Mr. Wynn has yet to release details, though one would hope his proposal would be outlandishly lavish, in a Vegas sort of way.

Queens Senator Joe Addabbo was succinct when describing the community’s preferences: “We have a unified opinion as to who we don’t want: Delaware North. Given the previous bidding process that went on late last year, Delaware was the one that never really reached out to the community, and we feel that its track record working with the governor’s office is not the best.”

After faulting a lack of transparency with the bidding, breeder Jack Knowlton, owner of 2003 Kentucky Derby winner Funny Cide, urged legislators to “just get it done.”

“The breaking point’s coming not too far down the road,” Mr. Knowlton said. “I would hate to be here three years from now without VLTs.”

Mr. Knowlton was part of a Monday rally at the Capitol by the New York Thoroughbred Breeders, who would get $4 million to $5 million a year in revenue from any new development. To underscore their sense of urgency, they hand-delivered aluminum horseshoes to legislators’ offices, and brought a filly named Free and Brave.

Said Breeders executive director Jeffrey Cannizzo, “This is a decision we’ve been waiting on for eight years.”

drubinstein@observer.com

—With reporting by Jimmy Vielkind

When do you see that happening?
I hope soon. It’s hard to project or put too much conjecture into when exactly that will occur. I look at things more trend-based. And I feel that’s going to happen sooner than later. In the near term. So whether that’s 12, 18 or 24 months, to me it doesn’t matter exactly when it occurs. What matters is that people’s perceptions are that it’s going to occur.

Will financial services remain the major underpinning of New York real estate?
I don’t think personally there’s any reason not to believe that these firms are going to come back leaner, stronger, healthier and continue to be a major growth engine here in the city. ... I think it’s gonna be as strong as it was in the past, and in the future, stronger.

Might not leaner and more efficient firms need less office space?
You know, profits will drive the need for office space, because profits are going to drive growth. And I think that the companies are going to use their space more wisely. But as they do that, they become more profitable and they add overhead and they start to grow. It’s kind of self-fulfilling. ... Your point that, well, maybe that will mean less jobs if they’re more efficient, that could be the case, but midtown Manhattan is such a draw, is such a magnet for businesses that ... if one of these financial service firms doesn’t need that space anymore, somebody else will be there to fill that void: a new business, somebody relocating in from a satellite market. Midtown is still the allure of this region, and of most major markets here in the country.

Are you worried about the fate of 388-390 Greenwich Street, which is 100 percent leased to Citibank?
Citi has been a great tenant for us. They are our largest tenant, I believe, today. And, they occupy the building, it’s a terrific building; they backfilled a lot of people into that space that they vacated from other buildings in Manhattan. So, as an investment, it’s performing lockstep with how we underwrote it, and in terms of Citibank as a company, we have a terrific relationship with them, and they seem to be fighting their battles; and we’re very hopeful that they’re going to continue to be a great and number one tenant for the company.
... There’s nothing available for sublet as far as I’m aware of in Greenwich. And in 485 Lex, there was some availability, but Citi has since reduced or eliminated entirely that availability over at 485, because they’ve backfilled with other uses. And those employees have typically come out of more expensive buildings in midtown, where they’re looking to shed cost. ... We were at a price point with Citi that they would consider generally affordable, by old standards and by new standards, as opposed to the very high rents of $70, $80, $90 a foot. ...

Speaking of 485 Lexington, why didn’t SL Green end up selling this building, which was in contract, reportedly to Murray Hill Properties? [Editor’s note: SL Green did not confirm the name of the buyer.]
We had a contract on that building, and the buyer wasn’t able to perform the contract and lost its deposit.

Are you still looking for a buyer for 485?
We’re still entertaining negotiations with various parties. We're in a position where if we think we can get a deal that makes sense, we will conclude one there. And, if we don’t, we’re very happy to own that asset.

What do you think is the new paradigm for building sales? Is it $600 a square foot? Three hundred?
I’m not a per-square-foot kind of guy.

What kind of guy are you?
You know, rate of return. I think people will pay whatever they have to pay if they think they can make an adequate rate of return on the equity they’re putting out. So, for fully leased buildings, that will translate to a higher per square foot. For buildings with vacancy, that will translate to a lower per-square-foot amount. And I don’t think that unto itself is a good barometer. I think yield is really what to look for.

What is a respectable yield then?
What the market is demanding is still a bit of a question mark, because you have no buildings trading. ... Instead, what you have are well-capitalized property owners retaining for the most part what they own; you have less-well-capitalized owners making deals with their banks to extend their loans; and the universe of players who feel that they either should or have to sell at this point in the market is very few, and as a result you have few buyers and few sellers and there’s no real price discovery going on right now.

Is SL Green looking for properties to purchase?
I think you have to assume we see almost every property deal in midtown. Are we looking at deals? We look at every deal.

So you looked at Worldwide?
We look at every deal. ... We’ll get to that inflection point where we’ll become a net buyer again, but I don’t feel any pressure to be at that point now.

What’s going on at your 317 Madison development site?
We have terrific assemblage that we’ve put together over the years, and I think it’s probably one of the best, if not the best, development prospects in midtown right now. With that said, it’s a next-cycle development, in my mind.

You said in March that SL Green’s tenant retention strategy is ‘nobody gets out.’ How does that work?
I ensure by making sure that my leasing and operations team on a daily basis knows the importance in a market like this of the meaning of keeping your tenants in place and satisfied, where you can ... You have to be a more flexible landlord in times like this and customize new lease deals or renewal deals tailored to situations that are specifically affecting the tenant base.

So if I were a 50,000-square-foot tenant, could I really get whatever I wanted? How low would you go to keep me?
Should I get my leasing guys up here? You’re ready to sign up?

I’m not credit-worthy as a tenant.
Dana, if you want 50,000 feet in our portfolio, we’ll make a deal with you.

For $30 a foot?
Well, that’s, uh, you know, we will tailor it in any possible way. By the way, for $30 a foot, we have space in the suburbs.

I don’t want to work in the suburbs. ... Right, now your stock is trading at about $20, which is less than its 1997 IPO level. What are you doing to bring institutional investors back?
There’s what we can do and I can do, and then there’s people who need restored confidence in New York and in the financial services industry. The vast majority of our revenues come from midtown Manhattan and the near majority of that is from financial services firms. I think we can certainly take certain steps with our shareholders to demonstrate to them that we’re serious about taking any balance sheet issues off the table, whether it be through sale of stock to raise equity or early retirement of bonds at discounts to deliver the portfolio in that respect. I think that those steps we have taken, and shareholders have been very favorably inclined toward those steps. ...
I think there will be a point at which people will feel comfortable about investing new monies into this market, but I think that’s not a market issue as much as a timing issue. There’s a lot of money on the sidelines, and people want to invest their dollars into midtown, and people love midtown Manhattan office for a long-term investment thesis; they just have to believe they’re getting it at the right time. And when they feel that time, I think there will be a lot of capital coming back into this market.

Give me some idea of when you see the market returning.
I gave you some idea. I said it’s not relevant.

It is relevant.
Everyone gives dates. I’m giving you something better. I’m saying it doesn’t matter. It doesn’t matter. It doesn’t matter. If I said six or 18 months, what’s the difference? It’s just knowing that in six or 18 months, it’s gonna happen. ... I wouldn’t get so focused, because who knows. Near-term, that’s the best I can give. It’s a year or two. It’s not three or five.

You don’t see Manhattan languishing in some horrible postapocalyptic state for the next 10 years?
No. We’re signing a lot of leases. There’s companies out there that, some it’s consolidation, some its relocation/expansion, but there’s activity. I’ve been in markets before where there’s just nothing happening. Zero. No leases being signed.

Like three months ago.
Well, yeah, January, February was very quiet. But you know what, traditionally, January and February in Manhattan is always quiet. That’s sort of to be expected, but sort of a reflection of the times. I can tell you that in 2002, 2003, we had less activity than we have now. We will sign or have signed through the second quarter in excess of 300,000 square feet at prices that will represent an uptick to rents that they are replacing, and that’s positive momentum. It’s not as good, clearly, as it was, and the rents have come down quite a bit, but we’re getting deals done.

drubinstein@observer.com

Marc Holliday, SL Green’s CEO, let the news slip during remarks Wednesday morning in a well-appointed, packed room full of real estate types on the fourth-floor of the Waldorf Astoria. The occasion was a conference hosted by NAREIT (The National Association of Real Estate Investment Trusts).

“Rents in the city have gone down fairly significantly but with that said, if you have the ability to meet the market and the balance sheet to meet the market, there’s still velocity,” Mr. Holliday remarked.

“Monday we signed a lease with Aetna insurance company over at 100 Park Avenue for 40,000 square feet…a brand-new lease,” he said.“And we announced several weeks ago the leasing of 60-some-odd thousand square feet to Marcum & Kliegman, which is an accounting firm, [at 750 Third Avenue]."

( Bill Korchak of Jones Lang LaSalle represented Aetna in the 100 Park transaction, while SL Green was repped by Cushman & Wakefield's Tara Stacom, Mitt Liebersohn, Alexander Chudnoff, Jonathan Tootell, and Andrew Ackerman).

In fact, Mr. Holliday and his colleague Andrew Mathias, the president and chief investment officer for SL Green, were veritably bullish on the prospects of the midtown rental market, perhaps to be expected from a publicly traded real estate firm. But still…

On the likelihood of a return of foreign investors to New York, Mr. Mathias said: “There’s still a tremendous amount  of worldwide interest in New York City. Maybe domestically, people’s impressions of New York were more dire than they were worldwide….[But] nobody wants to take the leap, jump in, and wind up acting too early and feel foolish a few months later."

Mr. Holliday added: "As manahttan rents reset themselves, pretty sizably to rents that will be considered affordable, I think [midtown] will retain a large part of our base and see inflow. …I think you see migration out when rents get to $100 to $150 a square foot."

drubinstein@observer.com