Along with his partner, Barry Gosin, Newmark Knight Frank Chairman Jeff Gural is responsible for the managing and leasing of over 8 million square feet of properties owned by the firm. Since joining in 1978, when its focus was New York, the real estate scion has overseen an expansion into international markets. The son of the late mogul Aaron Gural, and the nephew of Leon and Maurice Spears, Mr. Gural, 69, spoke about his deal with the Shubert Organization, last year’s mega-transaction with the Gap and the lessons learned from his father.
The Commercial Observer: Congratulations on last month’s contract with the Shubert Organization, which leased 20,738 square feet at 520 Eighth Avenue.
Mr. Gural: What happened is, I’m actually very friendly with Bob Wankel, who’s one of the people who runs the Shubert Organization. And my father and I were very friendly with Gerry Schoenfeld. Bob is actually the chairman of the Times Square Alliance, and we were representing him and we had a nonprofit tenant at 520 Eighth Avenue who had to give up half of their space because, as you know, a lot of the nonprofits are struggling.
And I saw Bob and I mentioned that we had space at 520 Eighth Avenue because I knew they were looking to relocate [some of their business]. He said, ‘Great, we want to be in one of your buildings,’ because they’ve been in a couple of our buildings before. So we showed them the space and it worked out. Believe it or not, we have a lot of theater people in that building.
The deal is part of an impressive leasing push at 520 Eighth Avenue. In the past several months, Newmark has inked about 76,000 square feet in new leases and renewals.
Well, we started about 10 years ago converting the building from manufacturing to offices and pretty much almost the entire building now has been converted over. The only reason we had this particular space is because we had the nonprofit that was shrinking down and gave us back half the space that they had occupied.
So Shubert filled that gap, but we had another big ad agency that merged with another ad agency. They didn’t need the space up on the top floor. It’s now 100 percent occupied.
You also inked a deal at 515 Madison. Can you tell me about what’s happening there?
That was a deal my father would have really been proud of because, as you may or may not know, my father’s uncles were the Spear brothers–the Spear of Helmsley-Spear–but the other brother was Aaron Rabinowitz, and he net-leased that building to my father when my father was just starting out, trying to get some ownership.
We had a net lease that was coming due in 2028, and we really had very little incentive, under the structure of the net lease, to spend a lot of money at the building. Barry [Gosin] was one of the people who kind of kept after me that we had this great building in a great location, but there was no reason to spend money to make it into a B-plus building, let’s say. But by buying the fee from basically our own family–because the fee was still owned by Aaron Rabinowitz’s children and grandchildren–it gave us a reason to spend the money.
It came at the right time because our major tenant was a law firm, and they had grown from one floor to nine floors, and when their lease came up they moved downtown to two floors. So for the first time, we had a serious vacancy problem and rather than to just make as-is deals in the mid-$30s, we decided it would make sense for us to bite the bullet and redo the lobby and the spaces and do prebuilts and go for much higher rents.
About a year ago, I met with your son, Eric, who told me about growing up in a real estate family. Can you tell me about the lessons you learned from your father, Aaron?
The first thing I learned from Aaron was not to sign personally. My father had three or four rules: Don’t sign personally; make sure you have good partners; don’t get in bed with the wrong people; and, also, have good relationships with your banks and get to know your tenants. That’s important. The advantage that family-owned real estate has over the corporate firms or the REITs is, you know, if somebody wants the meet the owner of the building, and often they do, they can meet the owner.
You and Barry Gosin began over at Newmark in 1978 …
I think that’s right. And Barry’s the best thing that ever happened to me–besides being born into a real estate family. And my wife, but she doesn’t read your newspaper so I can leave her out of this, I think.
After all this time, do you still work well together–meaning Barry, not your wife?
Yeah. We work perfectly together. Barry has built up the brokerage business and the third-party management and the consulting, and I’ve focused on the real estate that we’ve owned.
I think it was important to build up the brokerage, simply because it’s hard for us to pay the kind of prices that people are valuing these buildings at today. We really built up our portfolio back in the days when you could buy a building for 10 or 15 million; and call two or three people and raise a few million; and borrow the rest from a bank, and you’re in business. Today it’s much harder to do those kinds of deals, and you really need institutional partners, and most institutional partners typically want to sell in a couple of years.
And for my father, myself and most of the other real estate families, our philosophies have always been to hold on longterm. And we’ve learned that if you don’t put too much debt on your buildings, and you live long enough, all your mistakes become, you know, pretty good deals.
When Newmark Knight Frank first began negotiations on last year’s Gap office deal–a 265,000-square-foot transaction, the city’s largest–were you initially aware of just how significant the deal would be for both the firm and New York City?
Yeah, I knew it was a big deal because they were in two different buildings that are two blocks away from one another, and the assumption is they’d rather probably be in one building. They moved in on Monday, actually, and I was up there. It’s mostly designers up there–designers working in show rooms. So I think from a standpoint of a company like the Gap, the Gap has the corporate culture and I think they like the idea that all of their designers–from both the Gap and Old Navy–are all in the same place. There’s a synergy there.
Newmark took home the Real Estate Board of New York’s coveted Robert T. Lawrence Award for the Gap transaction. At this point in your career, is snagging an award like that still a big deal for you? [Editor’s note: This originally incorrectly stated that Newmark had won an Ingenious Deal of the Year award.]
Oh, it’s nice to win the award. I mean, we had an advantage because it was a year in which there weren’t a lot of big deals done. So I thought we had a reasonable chance, simply because I think that was the largest nonrenewal done all year. Plus, it’s a name tenant, and, you know, I think it’s good for the city to be able to retain that type of tenant. That’s who the city attracts: young kids that are into clothing design and marketing and stuff like that for young people. That’s what their market is.
You’re also chairman of the Alliance of Resident Theatres, the umbrella organization for Off Broadway nonprofit theater groups. Are you much of a theatergoer yourself?
Yeah, I like the theater. I went to the theater last night and saw a good play, actually.
What did you see?
It was at the Roundabout. A Brief Affair, I think it was called. [Editor’s Note: The play is called “A Brief Encounter.”] It was good. The best part about it, I like plays that are short. It was 90 minutes without an intermission. Those are my favorite plays.