Not every day, however, does a requirement as straightforward as Dentsu McGarryBowen’s uncork such an elaborate and interconnected series of transactions as it did at the Starrett-Lehigh Building.

A longtime tenant in the 2.3-million-square-foot building and one of the property’s largest users, the advertising firm needed to expand. But there was a small problem: Despite its size, the building—an artsy, far West Side location popular among creative tenants—had virtually no available space.

Starrett-Lehigh Building. (Courtesy Property Shark)

Dentsu McGarryBowen occupied more than 100,000 square feet in the building with several years left on its lease, but it couldn’t imagine relocating elsewhere or subleasing the space.

“This building is exactly their style,” said David Hollander, an executive with CBRE who, along with colleague Sacha Zarba, represented Dentsu McGarryBowen in the transaction. “They didn’t want to be in a more conventional location. They couldn’t imagine being anywhere else.”

Mr. Hollander poked around and soon found an opportunity. The Harry Fox Agency, a tenant on the fifth floor, was looking to relocate and shed its 50,000 square feet—exactly the amount of space Dentsu McGarryBowen was hoping to accumulate. Adding to the luster of the potential deal, Mr. Hollander had been in conversations with the building’s landlord, RXR Realty, which was willing to cancel the Harry Fox lease so that it could sign one directly with Dentsu, an arrangement that offered advantages for the tenant.

But what seemed at first glance like a perfect swap turned into anything but.

Harry Fox, a musical licensing agent, subleased the space from apparel giant Tommy Hilfiger, an even bigger tenant than Dentsu McGarryBowen at Starrett-Lehigh, and the company had the right of first refusal to take space back for its own use. As it turned out, Tommy Hilfiger, too, was looking to expand just as Dentsu McGarryBowen was.

Mr. Hollander now had a problem on his hands: He had to convince Tommy Hilfiger to back off. At the same time, Harry Fox had to find a new home, no easy task in a tightening Manhattan office market.

“The transaction became like a series of dominoes getting knocked over,” said Greg Taubin, an executive at Studley who represented Harry Fox. “Once the transaction got going, every component triggered consequences for the other.”

Mr. Hollander needed leverage, and he quickly found a way to get it.

The Harry Fox offices were on the Starrett-Lehigh Building’s fifth floor and it wasn’t the only space there that Tommy Hilfiger had subleased.

Department store Lord & Taylor also occupied approximately 21,000 square feet of sublease space from Tommy Hilfiger and was negotiating to lease it back to the company. Dentsu McGarry Bowen stepped in. It would take the 21,000 square feet for higher rents than Tommy Hilfiger was willing to pay.

If the situation was turning into a game of poker, Mr. Hollander was bluffing. In reality, the Lord & Taylor space wasn’t good for Dentsu because the expiration came more than three years before the company’s lease for its existing space on floors 10 and 11 expires in 2024. When renewal time came for the expansion space, Mr. Hollander knew that the landlord would have a huge advantage negotiating an extension because Dentsu would be a captive tenant, with the bulk of its space upstairs.

In the meantime, Matthew Astrachan, an executive with Jones Lang LaSalle who represents Tommy Hilfiger, was busy trying to facilitate a solution. He was convinced Tommy Hilfiger didn’t need the Harry Fox space. It could seize the Lord & Taylor space at a more affordable price and retain nearly 20,000 square feet it was preparing to sublease on the building’s 17th floor. Mr. Astrachan said Tommy Hilfiger initially wanted to shed the 17th floor space because it sat outside the company’s primary envelope of offices on the fourth, fifth and sixth floors. Whether through Mr. Astrachan’s urging or its own reflection,

Tommy Hilfiger eventually realized that the 17th floor was actually ideal. Part of the reason the company needed expansion room was to use a portion of space to construct and test retail showrooms that it could then deploy in its stores.

“It was fine to have that up on the 17th floor because it was a separate operation they were doing that was different from the use they had in the rest of their space, which is all offices,” Mr. Astrachan said. “Once we figured that out, it uncorked the deal.”

Mr. Astrachan drew up a deal for Tommy Hilfiger to sublease 21,000 square feet of space back from Lord & Taylor, and Mr. Hollander and Mr.

Zarba arranged a 50,000-square-foot direct lease with RXR Realty for Harry Fox.

Then everything hit one last nerve-jarring speed bump.

The deal that Mr. Taubin was arranging downtown for Harry Fox collapsed. It was early November, two months into a fevered tangle of dealmaking. That elusive window in which everyone’s interests had finally aligned was closing. Mr. Taubin, however, had smartly arranged a backup plan at the Donald Trump-owned office building 40 Wall Street.

“After our first deal fell apart, we literally drew up a deal at 40 Wall Street in a week,” Mr. Taubin said. “The Trump Organization was incredibly accommodating. They really wanted us as a tenant in their property.”

Harry Fox ended up signing a 37,000-square-foot deal for 40 Wall Street’s entire sixth floor. Although the space is smaller than the office it leases at the Starrett-Lehigh Building, Mr. Taubin said the firm is able to house the same number of employees because its offices will be tailored to the company’s real estate needs.

“The space at Starrett Lehigh was great for HFA five years ago, but through a new build-out, we’re getting tremendous efficiency now,” Mr. Taubin said.

On the Thursday before Christmas, both Tommy Hilfiger and Dentsu inked expansion deals. Tommy Hilfiger will occupy approximately 350,000 square feet, and Dentsu will take roughly 170,000 feet.

“This was seriously the most complicated deal I personally have handled,” Mr. Hollander said. “Every deal has its posturing, but in the end, it worked because we all cooperated and worked together.”
dgeiger@observer.com

Cushman & Wakefield's Matthew Astrachan, Mitchell Konsker and Steven Bauer represented the tenant.

Release after the jump.

- John Koblin

PHILLIPS-VAN HEUSEN LEASES 200,000 SF AT 200 MADISON

Cushman & Wakefield represents growing apparel company in corporate HQ lease

NEW YORK - Jan. 5, 2007 - Cushman & Wakefield announced today that Phillips-Van Heusen Corporation, one of the largest apparel companies in the world, has signed a 200,000-square-foot renewal and expansion at 200 Madison Ave. for its corporate headquarters.

Phillips-Van Heusen signed a long-term lease for 10 full floors at 200 Madison Ave., located between 35th and 36th Streets. It will renew the 150,000-square-feet it currently occupies on the 10th through 18th floors, and the 23rd floor. The firm will also expand by 47,629 square feet, taking the entire eighth floor.

Cushman & Wakefield's Matthew Astrachan, Mitchell Konsker and Steven Bauer of the firm's Midtown Manhattan office represented Phillips-Van Heusen in its site evaluation and in lease negotiations with the landlord, 200 Madison Associates, a partnership of George Comfort & Sons, Inc. and Loeb Partners Realty. The same Cushman & Wakefield team recently represented Phillips-Van Heusen in a 225,000-square-foot lease renewal and expansion in Bridgewater, N.J.

"This new lease allows Phillips-Van Heusen to accommodate its continuing growth while maintaining its operations within one office building," said Mr. Astrachan, a Cushman & Wakefield executive vice president.

"Phillips-Van Heusen evaluated its options for additional space, but ultimately found 200 Madison was the best alternative for it to expand its corporate headquarters operation," said Mr. Konsker, an executive vice president at Cushman & Wakefield.

In October, Phillips-Van Heusen agreed to acquire tie maker Superba for $180 million.

Phillips-Van Heusen was founded in 1876 and is headquartered in Manhattan. The company owns and markets the Calvin Klein brand worldwide. It is the world's largest shirt company and markets a variety of goods under its own brands, Van Heusen, Calvin Klein, IZOD, Arrow, Bass and G.H. Bass & Co., and its licensed brands Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, unlisted, A Kenneth Cole Production, BCBG Max Azria, BCBG Attitude, MICHAEL Michael Kors, Sean John, Chaps, Donald J. Trump Signature Collection and JOE Joseph Abboud.

Totaling about 600,000 square feet, 200 Madison Ave. is a 26-story office building located in Murray Hill. In addition to Phillips-Van Heusen, major tenants include Greater NY Mutual Insurance and Lally McFarland & Pantello.

The owners were represented by Peter S. Duncan and Matt Coudert of George Comfort & Sons, Inc.

The building, known as Rodin Studios, is located at 200 West 57th Street at the corner of Seventh Avenue, and is in contract to the Feil Organization, the company’s C.E.O., Jeffrey Feil, confirmed Monday.

Although the building was commissioned a landmark in 1988, and has a pedigree as strong as any other in the area, it’s not the type of prime office space that commands unusually high prices.

But, in this real-estate market gone mad, the 120,000-square-foot building will sell for more than $1,000 per foot.

The building was constructed in 1917 to provide living and studio space for artists.

Maybe that’s a reason the building is such a head-scratcher for office space.

Floor plans indicate that there is 9,000 square feet per floor, and windows on only two sides of the building—not exactly winning features that bring in anchor tenants. Current tenants include small law firms, doctor’s offices and personnel offices.

Rodin Studios is, however, a pretty building. Cass Gilbet—the man who brought the city the Woolworth Building—designed it, and the building has a concrete frame faced in polychromatic rough brick with a French-gothic terra cotta.

But still: an asking price over $1,000 a foot for a class-B building? Maybe that has to do with the area, right? After all, it’s next to the Vornado-controlled 888 Seventh Avenue and across the street from Carnegie Hall.

“This building is benefited by its surroundings and it is surrounded by all the nicest houses on the block,” said Matthew Astrachan, an executive vice president at Cushman & Wakefield. “Well, except this one.”

If anyone has a plan, however, it’s the Feils, a family with a notoriously low profile but one that has been actively buying since the 1930’s.

They own more than a dozen buildings in Manhattan and control more than three million square feet of office space (to say nothing of their residential properties, mostly on the East Side).

Mr. Feil would not comment on his future plans for the building, but with asking rents in the building in the relatively anemic range of $50 per square foot, common sense says he’s got to do something new to it.

“Feil owns a lot of buildings, and he’ll work his machine,” said Mr. Astrachan. “They’ll use their expertise to move people around to increase rents.”

Or maybe even return the building to its original purpose: residential units.

The building has an additional 50,000 square feet available for development, according to PropertyShark.com.

The happy seller is the Trump Group—and that’s Eddie Trump, who is not related to the famous family. He would not comment on the deal.

Representing the sellers is the venerable one-two punch of Darcy Stacom and Bill Shanahan of CB Richard Ellis. Neither would comment.

THE BALLOTS ARE IN AND THE VOTES are counted. The Young Men’s/Women’s Real Estate Association has a new governing board!

Like a Key Club for growing real-estate brokers, it’s a big deal for these ambitious, résumé-padding youngsters.

So much so that the results were announced yesterday in a closed-door, members-only lunch in midtown.

Beef, asparagus and chocolate cake were served to some 100 members.

The kids who won this year are already known in the industry, but these positions are seen as a springboard for that next career jump; the move that separates a merely good broker from the likes of Stephen Siegel. And to be sure, some big names, such as Jimmy Kuhn, Mitch Rudin and Barry Gosin, have previously served on the board.

Like all major leasing deals that seem to get gobbled up by the big boys—CBRE, Cushman & Wakefield, GVA Williams, Studley—the winners’ circle is a list of those already at larger firms.

So, the results! Sloane Rhulen, an art-collecting Crain’s “40 under 40” power player formerly of Newmark Knight Frank and currently of CB Richard Ellis, is the new chairman.

Bill Montana of Studley, the 42-year-old tenant-rep avid skier, will be the new vice chairman. Paul Milunec, a GVA Williams broker who spends his downtime in the pool playing water polo, will take over as treasurer, and Brandl Frey, junior broker of Cushman & Wakefield, is the new secretary. Robert Fink, of Equity Office Properties, will be in charge of membership.

The new governors include Paul Amrich, the CB Richard Ellis broker Mary Ann Tighe plucked away from Cushman less than a year ago, David Green of Vornado and Danielle Zimbaro of Cushman & Wakefield.

To this new board, it couldn’t be more exciting.

“I think anything that raises your visibility and shows you’re in the community is something that people respond do,” said Mr. Montana, of Studley.