A House of Hoops—Nike and Footlocker's concept store/temple to all things basketball—will open a second New York City location at 11 West 34th Street, between Fifth and Sixth avenues, according to someone involved in the transaction.

The first House of Hoops opened in Harlem, at 268 West 125th Street, in the fall of 2007, with a player-studded bash featuring Charles Barkley and Julius "Dr. J." Erving. At the time, Nike brand president Charlie Denson described the store in a press release as "a hub for all things basketball and a new home for consumers who live and breathe the game."

The release went on to say:

As the ultimate consumer experience, House of Hoops flagship stores will feature basketball product available nowhere else in the U.S., including coveted player exclusive footwear. These limited edition personalized performance shoes include the embellishments that All-Star players like Kobe Bryant, Jason Kidd and rookie Kevin Durant have on the shoes they lace up on court each night. These styles will be made available for the first time at House of Hoops. Other limited edition styles will also be offered, such as the China-specific colorways created for LeBron James and Dwyane Wade.

Neither Nike, nor landlords SL Green or Wharton Properties' Jeff Sutton, would comment for this article. The lease for the entire five-story building—only the bottom two floors will actually be used for retail—is estimated to be worth about $40 million.

drubinstein@observer.com

717 Fifth.

Lois Weiss at The Post has a sensational real estate scoop for the fashionistas about town:

[Dolce & Gabbana] just leased a massive 18,400-square-foot store at 717 Fifth Ave., taking over the space from Escada, which will move within the same building into smaller digs along 55th Street.

The stores are a portion of a retail condominium owned by deal maestro Jeff Sutton and real-estate investment trust SL Green Realty Corp. Sutton, who orchestrated both deals, previously moved out Hugo Boss and installed Armani/AX in the north portion of the space. No other brokers were involved.

Dolce already has a store on Madison, but this would be its first spot on prime Fifth. The deal, apparently, is worth $300 million, making it easily one of the biggest retail transactions of the year so far.

This handbag kills recessions.

Rip! SL Green and Jeff Sutton continue their collective tear through New York commercial real estate, contracting to buy the Valentino store at 747 Madison Avenue for nearly $65 million, according to Lois Weiss at The Post.

The luxury clothier's 10-year lease is up soon, meaning there's an opportunity to raise the rent something fierce.
So it's no surprise, then, that SL Green, the city's biggest commercial landlord (we know, we ran the numbers), and Mr. Sutton, perhaps the city's biggest retail landlord you've never heard of, would buy it.

It's all about the handbags on this little island of ours.

SL Green and Mr. Sutton have been on a tear of late: Last week, they signed Dolce & Gabbana and Escada to major leases in 717 Fifth Avenue (the Dolce deal might be worth $300 million); and they bought 1552 Broadway for $130 million.

Still, the latest deals seem less a capitalizing on a chastened real estate market than on an abiding faith in luxury retail and the shoppers which power it.

Even now, with cats and dogs living together economically: Wall Street is about to see massive layoffs. The city's housing market continues to recover in fits and starts. And the local and national unemployment rates have stayed so relatively high for so long now that Important People speak of a New Normal of near-double-digit joblessness.

Will New Yorkers need their $1,995 handbags much longer?

Well... Perhaps two of the city's savvier real estate investors know the answer.

tacitelli@observer.com :: Follow on Twitter @tacitelli

It was April 23, two days before SL Green’s first-quarter 2012 earnings were announced, and chatter was reaching a fever pitch: Would Viacom, which occupies about 1.3 million square feet at SL Green’s 1515 Broadway, choose to renew its lease or opt to follow its Times Square cousin Condé Nast in taking space in Downtown Manhattan?

Andrew Mathias and Marc Holliday.

At the same time, the real estate investment trust was looking for a loan to place on 100 Church Street, negotiating what would be the largest mortgage in recent history for 1515 Broadway, and wrapping up a 361,044-square-foot lease for Random House at 1745 Broadway. In short, last month was a busy one.

Add it all up—owned interest in 38.7 million square feet in Manhattan, a nascent focus on residential, the retail footprint—and the REIT can take on a weight and life of its own. To the uninitiated, running a company as massive as SL Green might appear as untenable as safely launching a torpedo.

Instead, in the hands of chief executive Marc Holliday and president Andrew Mathias, it’s more like watching a thoroughbred on the final stretch.

At the moment, however, Messrs. Holliday and Mathias were in a conference room on the 19th floor of the REIT’s headquarters at 420 Lexington Avenue. They looked a little distracted.

“I think it will come down to price at the end of the day,” Mr. Holliday said when asked about the Viacom lease. He went on to explain that, if SL Green were to get some part of the building back, it wouldn’t be a big deal. “We would be very successful in re-tenanting at pretty significant rents for that market right now, but our first effort is always on trying to retain the tenant on best terms.”

Days later, when those terms emerged, they turned out to be fairly unique—Viacom would not only stay, but it would be increasing its space in the building, eventually taking all of the 1.6 million square feet of office space. After 2015, when the current lease is up, Viacom will pay an increase of $5 per square foot.

Their start at SL Green began in the years leading up to the company’s 1997 initial public offering. Both had been at Capital Trust, a mezzanine lender. While there, they advised Stephen Green on the IPO, with Mr. Holliday ultimately joining the newly formed public company in 1998 as chief investment officer and Mr. Mathias coming on board the following year.

“The REIT formation was really the critical moment when the capital markets expertise came into play,” said one source, who requested anonymity. “They convinced him there were ways to leverage joint ventures, the capital markets and relationships. The ability to capitalize and recapitalize portfolios and individual properties enabled the company to get where it is today.”

“Steve Green was a client first and foremost—now a partner and friend,” Mr. Holliday said when asked what it was about the way that Mr. Green ran the business that attracted him to take on a permanent role. “He was a great entrepreneur and he had developed a great platform that we felt we could work with to convert it from what was then a smaller footprint.” In fact, the company went from two million square feet at the IPO to its current 27 million square feet.

“Usually that kind of asset accumulation is multi-generational,” Mr. Holliday offered. “That’s the storied land owners and building owners in the city—that’s a multi-generational process—this has all been pretty much amassed in 15 years.”

It’s no wonder that sources reached for comment used terms like “shrewd” and “smart” in describing the two, with “smart” by far outnumbering all others.

One of the few people willing to comment on the record, real estate attorney Stephen Meister, related the legal case surrounding 3 Columbus Circle.

“There was a case that I handled where Steve Ross bought the mortgage on 3 Columbus Circle,” Mr. Meister said. “SL Green partnered with Moinian and was able to write a very large check and they fended off Ross.

“I do consider them to be powerful people,” Mr. Meister said of the two and their ability to swoop in with the check—for $258.6 million—and keep Stephen Ross from foreclosing on the building. The Moinian Group and SL Green went on to sell the 214,372-square-foot base there to Young & Rubicam, which leased an additional 125,000 square feet above for its New York headquarters.

“They don’t throw their weight around in an ugly way,” said another source. “But those two guys, when it’s necessary, they do what they need to do to succeed but all within the confines of doing the right thing.”
On a call a few days after the REIT’s first-quarter 2012 earnings came out, the two explained some of the timing involved in the past days’ flurry of activity.

The $775 million Bank of China first mortgage on 1515 Broadway had closed first, since it wasn’t contingent on a Viacom renewal. “That was a loan that we worked hard to arrange over the last couple of months, absent really knowing which direction the Viacom conversations were going to take,” Mr. Mathias said. Once those conversations started, though, they went pretty quickly.

“The entire deal, from negotiation to lease, was actually very compressed and moved very rapidly,” Mr. Holliday said. “At the point when we met and you asked the question I think Andrew and I looked at each other knowing that we were very likely to end up with a signed lease in the near term.”

Another recent Times Square invention—this one from SL Green and its frequent retail partner Jeff Sutton—also demonstrates the savvy and creativity the REIT applies to deals under Messrs. Holliday and Mathias.

Last summer the joint venture closed on 1552 Broadway for $135.6 million and leased the surrounding area in 1560 on a long-term basis. They’ll be breaking through and creating one large, 40,000-square-foot swatch of pricey retail. The spot and its corresponding signage are currently being marketed and drawing interest, though the two declined to name any prospective occupants.

Asked about the future and any possible headwinds the REIT might face as the office market continues to recover and tenants’ priorities vacillate between location, quality and price, the two were upbeat.

“New York is a fiercely competitive market,” said Mr. Mathias.

“There’s always the everyday headwinds that you face—competition for space, competition for capital,” added Mr. Holliday. “That’s not something that were facing today that we haven’t faced for the better part of 22 years.”

John Grotto has abruptly left the Durst Organization The Commercial Observer has learned.

Mr. Grotto was a top leasing executive at the company, which is one of the most prominent landlords in Manhattan, involved in overseeing deals at many of its top assets, including One Bryant Park, Four Times Square and 205 East 42nd Street.

John Grotto

According to sources familiar with Mr. Grotto’s departure, he left the firm this week with little official notice. A person who knows Mr. Grotto but didn’t want to speak on record because Mr. Grotto himself has not yet spoken publicly about his parting with the company said that he made the decision to leave and that it was done amicably. As of press time, it wasn’t yet clear what Mr. Grotto’s plans were or whether was going to join another firm.

Mr. Grotto could not be reached for comment by press time. Mr. Grotto’s older brother, Joseph Grotto, is also a leasing executive, at the services firm Cassidy Turley. Joseph could not be reached in his office.

A spokesman at the Durst Organization said he could not comment.

Mr. Grotto has overseen numerous leasing deals during his seven years at the Durst Organization and is well regarded in the industry. His tenure appears to have ended on a disappointing note however. Mr. Grotto was negotiating a blockbuster 30,000 square foot deal with the retailer Express for a store in the base of Four Times Square but the transaction fell apart late in the dealmaking process. Just weeks later, Express signed a deal at nearby 1552 Broadway, a building owned by Jeff Sutton, a retail specialist, and SL Green.

The source who knew Mr. Grotto said the collapse of the Express deal and Mr. Grotto’s departure were unrelated.

Anyone know the reason behind the split. Email us at Tips@commercialobserver.com.

Can The Commercial Observer party at its own party? You bet! The CO got down at its annual Power 100 celebration, which honors its picks for the top 100 most powerful, influential and successful real estate figures in the city. Held at the Core Club in Midtown on Monday night, the gathering featured a collection of the most distinguished owners, brokers, executives and politicians. After the jump, a minute-by-minute color commentary on the city's most powerful human beings.

Gary Barnett, Among the Most Powerful Men in Real Estate.

6:40: The Commercial Observer steps into the Core Club and bumps into a coterie of high-powered public affairs executives in the elevator, Michelle Adams of Tishman Speyer and the Committee to Save New York, Stephen Sigmund, formerly of the Port Authority now with Global Strategy Group and John Gallagher who just stepped down as a communications executive at Tishman Construction. The CO trusts its nose, top real estate executives must be near.

6:45: Bruce Mosler, Cushman & Wakefield’s chairman of global brokerage, bumps into his former brokerage partner Arthur Mirante, who recently left C&W to head Avison Young’s New York branch. Mr. Mirante pats Mr. Mosler on the cheek and the two give each other a hug.

6:50: The room is full of Power 100 executives, a who’s who of New York City real estate. Marc Holliday, the chief executive of SL Green, who along with colleague Andrew Mathias was ranked number one in the Power 100 makes his way through the crowded room. Jon Mechanic, chief of the law firm Fried Frank’s real estate practice, gives him a hug.

6:55: Jared Kushner, owner of The New York Observer and The Commercial Observer, takes the microphone. “For anyone who had a problem with their ranking in the Power 100, Jotham, please raise your hand so that they can talk to you,” he half-jokes, referring to The CO’s editor-in-chief Jotham Sederstrom.

7:00: Christine Quinn, speaker of the City Council and the city’s leading contender to become the next mayor, takes the mic and
addresses the room. She explains she’s on a tight schedule. “From here I’m going to Central Park to kick off summer theater and then down to the West Side pier for an LGBT event,” Ms. Quinn explains. “What could symbolize a great night in New York better than these three events?” She goes on to thank the city’s real estate industry, which she recognizes as the city’s biggest tax payer and a huge sector of
employment even in difficult economic times, for participating in the city’s rigorous land use review process. “I want to congratulate Marc
and Andrew,” she adds, referring to the SL Green chiefs.

7:09: The CO bumps into Jeff Sutton and asks him how he managed to woo the retail tenant Express away from a deal it was in talks to do at 4 Times Square and sign them at a building he owns in partnership with SL Green, 1552 Broadway. “That’s an incredible story actually,” Mr. Sutton tells us. “Give me a call.” Jon Mechanic chimes in: “Call him and tell him it’s new business!”

7:15: Howard Lutnick, chief executive of Cantor Fitzgerald and the public sister company BGC Partners, chats with Bruce Mosler, who was just elected co-chair the Intrepid Sea, Air and Space Museum, on which Mr. Lutnick is also a board member. “We bought Newmark only last October so it’s been an exciting few months,” Mr. Lutnick said, referring to his meteoric rise on the Power 100 list, entering the list this year for the first time at a lofty number 13. “We will make more acquisitions,” he added.

7:19: Speaking of Newmark Grubb Knight Frank’s big moves in recent months, Jimmy Kuhn, one of the company’s top executives strolls by just as The CO parts ways with Mr. Lutnick. “We’re going to add to our capital markets and investment sales teams nationally,” Mr. Kuhn says, adding that the national Grubb platform has helped him branch out to other markets. “I’m doing a deal in LA right now.”

7:24: Gary Barnett, the enigmatic and ultra-prolific developer and investor who sat at number two on the Power 100, mingles in his
typical low-key style. So what is it like to be in a room with all the top real estate players in NYC? “No comment,” Mr. Barnett jokes with
The CO. Mr. Barnett is cautious but we’re starting to get the feeling he likes us. “No I find it amusing,” Mr. Barnett says. He mentions the
summer will not be quiet for him. “I have eight deals I’m working on right now so I won’t be taking a break,” Mr. Barnett says.

7:31: Ofer Yardeni, Bob Knakal and Bob’s beautiful wife Cynthia stop to say hello to Jared Kushner who is chatting with a swarm of guests next to his wife Ivanka Trump. “We have lunch in a few weeks,” Seth Pinsky, president of the New York Economic Development Corporation and number 30 on the list, says to Mr. Kushner. “I want to bounce a few ideas off you.”

7:40: Stu Loeser, Mayor Bloomberg’s press extraoridinaire, types away at his Blackberry. With his hands full, he manages to shake The CO’s hand with two fingers before going back to his phone. “I just heard about a real estate deal from a guy that I had heard earlier and I saw him again and he was talking about it with someone else... anyway, it was good intel.”

7:46: Frank Sciame is ranting about interest rates. “You can get a loan for practically a zero percent interest rate but you have to put
in 40 percent equity and who has that?” Mr. Sciame says. “You wind up making up for it by taking a 20 percent mezz loan, I’d rather just
have the banks start making regular loans again.” Gregory Fierce a banker with U.S. Bank turns to The CO. “If Frank wasn’t acting like
the world was coming apart I’d think he was sick,” Mr. Fierce says.

7:55: Shawn Rosenthal, an executive with Ackman Ziff, riffs on Bob Knakal’s golf clubs. “Those things looked like they were from the 1970s Bob,” Mr. Rosenthal jokes, referring to a recent game they played. “But Bob’s a great golfer.”

8:20: Michael Lehrman, a top executive at BGC Partners who has overseen the company’s acquisition of Newmark and Grubb & Ellis, chats on the Core Club’s outdoor deck space. He explains some of the key tenets of time management he’s picked up through the years. “We all do business with the people we love. If someone doesn’t love you, they just like you, you better come to them with a great idea. But if they don’t know you, don’t bother because they’re going to want to do business with the people they love.” Fair enough. So what if the city put out a big RFP because it wanted to dispose of 10 million square feet? “I don’t anyone at the city so I wouldn’t bother. Going after something like that is like trying to hit the lottery.” So he would just let a huge opportunity like that slip away? “No, I would buy a broker that the city loved.”

8:45: The party is winding down and Christopher Barnes, president of The Observer Media Group and one of the brainchilds behind The CO is hanging by the bar. “So... did you have a good time?” He asks.

Before Jeff Sutton and SL Green  formed a partnership to acquire 1552 Broadway last summer, the diminutive landmark was best known for the four female Broadway stars on its facade.

Theater buffs trolling the neighborhood often visited the two-story building for the stone figurines of Ethel Barrymore, Marilyn Miller, Rosa Ponselle and Mary Pickford mounted on its second level in the 1920s. But with a T.G.I. Friday’s restaurant as its tenant, the building had otherwise become virtually indistinguishable from the bonanza of big-ticket retailers that have come to dominate Times Square.

Nonetheless, SL Green and Mr. Sutton, widely considered one of the city’s most savvy retail investors, saw greater potential for the 15,000-square-foot asset—a fact indicated by the price they agreed to pay its owner, the Riese Organization. Indeed, at more than $136.5 million, the sale last year amounted to a shocking $9,100 per square foot, more than a dozen analysts and real estate executives told The Commercial Observer in a series of interviews last week.

1552 Broadway.

But because ground floor retail in the city is vastly more valuable than below grade or mezzanine levels, Mr. Sutton and SL Green could be said to have essentially paid well over $100 million for 7,500 square feet, a price that works out to a phenomenal $18,200 per square foot—dizzyingly higher than the $1,000 per square foot figure top-quality office buildings trade for, real estate insiders acknowledged.

“If Times Square is a 10-chapter book, we’re on chapter four right now,” said Patrick Smith, a retail executive and principal with the firm SRS Real Estate Partners who has followed the neighborhood’s evolution. “There’s no place that has more eyes on it and more consistent footsteps and TV coverage. Jeff gets that, and a deal like 1552 Broadway shows how he keeps pushing the area forward.”
Mr. Sutton’s Past

1552 Broadway was hardly Mr. Sutton’s first foray into high-wire real estate investments. In 2008, he purchased the retail component at the Soho building 599 Broadway for a hefty price. Mr. Sutton ended up reconfiguring the building, which has frontage on both Mercer Street and the much more valuable Broadway retail corridor. By knocking down walls and moving other impediments that had segregated the building’s retail space into a double-sided layout, he connected all the space to Broadway and the much higher rents that thoroughfare commands. Mr. Sutton eventually leased the space to American Eagle Outfitters in a deal valued at a whopping $120 million over several years, according to reports.

“He rented them Mercer Street space at Broadway rents,” one source familiar with that deal told The Commercial Observer last week.

But Mr. Sutton also understood the Times Square market, an area of the city that has seen rapid rental increases in recent years as it has evolved into a larger-than-life tourist attraction that brings loads of foot traffic and high store sales—and also into a central hub for media and entertainment conglomerates that retailers have seen as an increasingly attractive stage for branding.

“Rents have increased in Times Square by about 20 percent over the last year, which is very impressive—I don’t think there’s anywhere else in the city where you’re seeing those kinds of year-over-year gains,”said Mr. Smith. “Ground floor space in the bow tie comes with an asking price probably on average of between $2,000 to $2,500 a foot. You’re talking about space that five years ago was $500 a foot.”

Mr. Sutton was one of the first investors to grasp the new dimensions of income unique to the Times Square market that would push rents—and building values—mercilessly upward.
“It has to do with branding and eyeballs,” said Richard Hodos, a top retail dealmaker at CBRE. “It has to do with the ability to sell advertising on signs to help subsidize the rent. Jeff Sutton in particular makes a compelling case as to how a brand, with the right signage, can make the overall economics more affordable.”

According to retail brokers, Mr. Sutton helped establish the new paradigm of dealmaking in the area when he brought American Eagle Outfitters to 1515 Broadway, a lease believed to be worth $20 million a year and which brokers have said works out to one of the highest rents ever paid on a per-square-foot basis.

One critical element of the transaction was that American Eagle would receive about 14,500 square feet of total electronic signage in various locations on the building—billboards it could use not only to display its own brand but on which it could sell airtime to other advertisers in order to generate proceeds that would help lower the cost of its exorbitant rent.

“American Eagle might sell 10 to 15 minutes of every hour through a third-party manager,” Mr. Smith said. “We can’t know the specific offset, but it’s significant—it can be 20 to as much as 50 percent of your rent. But the sign business is also so fickle. One day you’re selling ad space like crazy, and the next it’s like you can’t get anything.”

 1552 Broadway

To complete the deal at 1552 Broadway, Mr. Sutton drew on components from both his American Eagle leases.

He didn’t have any tenants in hand when he purchased the property last summer. It was safe to assume, however, that no deal for the building’s space or signage alone could be valuable enough to justify its eventual price. So as he and SL Green negotiated with the brokers who were selling 1552 Broadway, a team from the services firm Jones Lang LaSalle, Mr. Sutton also began talks with the owners of 1552 Broadway’s neighbor, 1560 Broadway. 1560 Broadway is a 225,000-square-foot office building that wraps around 1552 Broadway, which is on the corner of 46th Street, a high level of adjacency that Mr. Sutton could see offered ample options to reconfigure and expand 1552 Broadway’s space.

“He saw he could create a huge piece of retail space in the heart of Times Square,” said Jeff Gural, a top executive at Newmark Grubb Knight Frank, which owns a leasehold interest in 1560 Broadway.

Mr. Gural said Mr. Sutton was the only bidder on 1552 Broadway who approached him to strike a deal to reach into 1560 Broadway’s retail, which is likely one of the reasons Mr. Sutton and SL Green were able to find a way to pay a higher price for it than any other potential buyer.

Taking 1560 Broadway’s space allowed Mr. Sutton to execute an increasingly common retail investment strategy in the city: lease out 1552 Broadway’s ground floor at exorbitant rents by partitioning it into several storefronts that act as entrances to the bulk of the retail space upstairs, a formula used to milk value out of other high-profile retail locations in the city, such as 666 Fifth Avenue. [Jared Kushner, president of Kushner Companies, which owns 666 Fifth Avenue, also owns The Commercial Observer.]

“He unlocked a ton of value in the 1552 Broadway space by connecting it with our building,” said Brian Steinwurtzel, an executive at Newmark who was involved in negotiating the deal on behalf of Mr. Gural. “And he will benefit from the upside of taking that risk.”

As Mr. Sutton and SL Green arranged to buy 1552 Broadway, they simultaneously struck a deal to lease about 40,000 square feet in 1560 Broadway, the bulk of the building’s retail space and the second- and third-story office floors, which Mr. Sutton would convert into retail space. Part of the retail space in 1560 Broadway is leased by McDonald’s, but the deal allowed at least 30,000 square feet to be tacked onto 1552 Broadway’s footprint.

According to city records, the partnership took out $94.4 million in financing to pay for the purchase of 1552 Broadway and a pair of loans—one $12.1 million, the other $18.5 million—to help cover the leasehold of 1560 Broadway’s retail as well as construction costs. The mortgage for 1552 Broadway indicates that Mr. Sutton and SL Green were borrowing at about 70 percent the value of the property. If they were using similar leverage levels in the other loans, it would suggest the group paid about $44 million in total to lease 1560 Broadway’s retail space and integrate the two structures as well as other capital expenses, such as updating the large signs above 1552 Broadway and converting them into digital displays.

Having invested at least $180.5 million, the partnership began to focus on the delicate task of locating a tenant willing to do a deal that would make their huge investment worth all the risk so far.

Scoring Express

Mr. Sutton is credited with having deep relationships with major retail tenants and a track record of wooing them into big deals.

“Jeff is very connected to the tenants and understands the market for a space and what retailers want,” Mr. Steinwurtzel said.

Few doubted he would be able to start conversations with stores, especially considering how many household names—retailers such as Forever 21, Walgreens, Swatch and Mac—have made their way into the heart of Times Square in recent years.

For almost a year, however, the space at 1552 Broadway sat quiet. But like other retail experts in the city, Mr. Sutton noticed that Express, a clothing and apparel store seeking to regain a foothold in the ultra-competitive discount fashion category, began to stall in negotiations involving a deal at 4 Times Square. According to people who declined to be identified for fear of betraying confidences, Mr. Sutton swooped in with a simple pitch: 4 Times Square was on the outer edge of Times Square, while 1552 Broadway was in the heart of the bow tie, a location impossible for passersby to miss and smack in the center of an area that billions of television viewers see each year during coverage of New Years Eve.

Express was quickly convinced and in May announced it was in the process of a major deal in Times Square. By June, a 30,000-square-foot lease was hammered out and signed at 1552 Broadway in what will likely be a front runner for next year’s REBNY retail deal of the year. The transaction is one of the richest retail deals ever done in the city, according to brokers with knowledge of its terms. Express will pay about $23 million a year for the space as well as rights to digital signs that will be installed above the building. The deal means that Mr. Sutton and SL Green could earn between eight percent to as much as 14 percent on their investment, depending on the structure, which is not public, of the Express lease alone.

Added Value

The Express deal likely won’t be the only revenue-producing lease that gets done at 1552 Broadway and 1560 Broadway.

In June, Mr. Sutton and SL Green entered into an agreement to buy 155 West 46th Street, a small building that abuts 1560 Broadway on the side street, for a little more than $8 million.

The plan, according to sources, is to relocate lobby space in 1560 Broadway that services its office floors above to 155 West 46th Street, allowing more of the building’s valuable Broadway frontage to be converted to retail. Mr. Sutton may also have plans to buy out McDonald’s to try to clear more room for another blockbuster deal.

dgeiger@observer.com

SL Green Realty Corp. said Wednesday that it had, along with partner Jeff Sutton, restructured and recapped the retail condo at 717 Fifth Avenue, home of Dolce & Gabbana, Armani  and Escada.

717 Fifth Avenue.

The REIT bought an interest in the 123,000-square-foot, four-floor property in 2006 for about $230 million. In this most recent transaction, it sold 50 percent of its interest there to Mr. Sutton, retaining a 10.92 percent stake. The price of that sale values the retail at 717 Fifth at $618 million.

Additionally, the property was recapped via $590 million in new financing. New York Life and TIAA-CREF provided a $300 million fixed-rate mortgage for a 10-year term, while RREEF originated a $290 million mezzanine loan for a 12-year term.

“Our joint venture investment with Jeff Sutton at 717 Fifth Avenue has been a resounding success, as evidenced by the realization of net operating income through creative repositioning and leasing over the past six years,” said SL Green president Andrew Mathias. “The result is a sizable gain in asset value, as recognized by our lenders, as well as our ability to monetize a portion of our position and generate substantial cash proceeds.”

The net proceeds for SL Green that resulted from the transaction were $85 million.

cgaines@observer.com

Some commercial real estate brokers are “kicking and screaming” about the audacity of some city landlords who they claim are disregarding their “exclusives” with retailers by attempting to land tenants on their own.

The idea of “skipping the middle man,” once thought of as a tool for efficiency, is enraging some brokers, who tell The Commercial Observer that large retail owners including  Joe Sitt, Jeff Sutton and Joe Moinian, are steering out of their way – but digging deep under their skin.

“Totally not kosher,” one perturbed president of a top city brokerage wrote in an email to The Commercial Observer.  “It puts the retail brokers in a difficult spot and it is morally incorrect.”

Joe Sitt

While acknowledging that the tactic is not illegal , he called the phenomenon a “continuing issue and it is making many of the retail brokers upset” while putting them in a “difficult situation because they try to place tenants in the owner’s buildings.”

“In several instances the large owners have flown to Europe to visit with the retail tenants in an attempt to bypass the brokers and sign the tenants,” he said.

The phenomenon, while not new, began to gain traction last year as the next generation of owners plows forward with in-house teams, feeling that they have the “prominence and dominance” to skip over brokers, said Faith Hope Consolo, head of Douglas Elliman’s retail and leasing sales division.

“The feel like they can do whatever they want,” she said, referring to the city’s new wave of landlords as the “new guard.”

But, she added, it’s a level that the city’s old-school landlords would never stoop down to.

“The Rudins and the Silversteins would never do that,” she said. “This new guard seems to feel like they’re invincible.  They feel they are immersed in Asian and European markets.”

Despite the uptick in such activities, Ms. Consolo is hardly concerned, noting that the headaches saved by using a well-established broker will always appeal to certain real estate owners who are turned off by the blow-by-blow skirmishes that often ensue during deliberations over retail leases.

“Brokers take the punches,” she said.  “The broker is the buffer, that’s what the broker is.  We take all the abuse… that has a lot of value for the old-time landlords.”

“There will be a lot of kicking and screaming… but ultimately the brokers will prevail,” she added.

While several brokers interviewed for this story declined to comment on the record, conversations yielded names Messrs. Sitt, Sutton and Moinian, for better or for worse, among the new wave of owners skipping out on brokers and transitioning to in-house teams when it comes to retail leases.

Whether it’s a good or bad – or neutral thing – depends on who you talk to.

For some owners, it’s simply the practical solution going forward, as rents and commissions rise along main thoroughfares.  Others blamed brokers, who often claim exclusivity with retailers when indeed that may not be the case, for pushing landlords and retailers away.

Mr. Sutton “hired some gal either in Rome or Paris” to poach tenants directly, said one broker who spoke on the condition of anonymity for fear of upsetting ongoing business ties with certain landlords.  “He feels he’s in the loop.”

Wharton Properties and Thor Equities, controlled by Mr. Sutton and Mr. Sitt, respectively, did not return calls seeking comment; both have called on outside brokerage teams in the past, though recent high-profile deals were apparently handled in-house.

In one example, a joint venture between SL Green and Mr. Sutton convinced Express last summer to ditch previous plans to lease part of the Durst Organization’s ESPN Zone at 4 Times Square in favor of a 30,000-square-foot, 15-year lease at 1552-1560 Broadway.  No outside brokerage was mentioned in the firms’ announcement and SL Green did not return a call seeking comment.

In October 2011, Mr. Moinian’s Moinian Group, hired Gregg Weisser to head commercial and retail leasing of the firm’s 20-building portfolio in New York, Dallas, Los Angeles and Chicago, though a spokesperson for the firm confirmed that Mr. Moinian “is working with a retail broker as exclusive agent on at least one property… but not portfolio wide.”

“Everyone’s gotten jaded by the numbers,” one broker said, referring specifically to the giant commissions spurred by rising rents along the city’s main thoroughfares.  “You’re talking millions of dollars of commission.”

Some city landlords are kicking and screaming back after an article published in The Commercial Observer yesterday morning cited sources who allege that a new wave of city landlords are leapfrogging brokers to get at retail tenants directly—but many continue to claim that the landlords do just that.

Wharton Properties’ Jeff Sutton, who sources name among several landlords, sought to set the record straight yesterday, claiming that “95 percent of the deals I do have brokers” and calling the implication that he does otherwise “disgusting.”

“Some deals where I've had relationships [with] tenants for many years, who don’t have brokers, I do myself, but how could you put me in that category,” he said.  “I’ve never ever gone around anybody.”

(Photo: The Real Deal)

He listed a number of recent deals he paid commissions on, including the Express deal at 1552-1560 Broadway, mentioned in this morning’s article.  The Commercial Observer had been unable to identify the brokers involved by press time, but Mr. Sutton said he worked with CBRE’s David LaPierre, who repped the tenant, on the deal.

“I paid a $7 million commission on the Express deal,” he said, adding, “I have no gal working in Rome or anywhere else in Europe.”

Mr. LaPierre, who is out of the country, according to a receptionist who answered the phone at his office, did not return an email requesting confirmation.  But Cliff Simon at CNS Real Estate, who worked with Mr. Sutton to bring Burlington Coat Factory to Harlem last summer, did call his experience working with Mr. Sutton “great.”

Mr. Sutton also said he worked with Jacqueline Klinger and Chase Wells at Northwest Atlantic to bring Whole Foods to the corner of 125th Street and Lenox Avenue; Susan Kurland from CBRE to bring Alexander McQueen to 747 Madison Avenue; and Laura Pomerantz from PBS Real Estate and Robert Futterman from RKF to bring Abercrombie & Fitch to 720 5th Avenue.

Ms. Kurland confirmed.  Ms. Klinger and Ms. Wells could not be reached.  And Ms. Pomerantz and Mr. Futterman were not immediately available for comment.

Even if a broker is involved in his deals, Mr. Sutton claimed he and his firm often give its own presentations to potential tenants because “we feel we are very, very good at doing it,” but that he in turn pays the “whole commission” to the brokers.

A spokesperson for Joe Sitt, who was also mentioned by brokers as among the offenders skipping over them, provided the following in a prepared statement.

"Thor Equities is involved with a tremendous number of leasing deals every month, and we utilize an intermediary in nearly every single transaction," it read.  “We pride ourselves in having strong and respectful relationships with brokers throughout the city."

Despite the push back, brokers speaking anonymously—as well as some retailers—continue to claim that Mr. Sutton and Mr. Sitt are skipping the middle man, and even going the extra mile in that regard, although perhaps in the wrong direction.

“We happen to be one of the companies approached by both of the landlords you mention,” said Eleonora Parkinson, retail director of strategy and development for clothing company DSQUARED2, referring specifically to Thor Equities and Wharton Properties.  “It would be fine if they would just offer to deal directly without a broker in the middle for the properties they own."

"The more ‘dishonest’ part is that they ask for a broker fee of 3 percent on their own buildings,” she added, referring only to Thor Equities.

One broker, speaking anonymously, added, “There will be a backlash.  Brokers have been relatively quiet and content to moan loudly about it to each other, but the controversy is bubbling to the top."

Know of any other landlords leapfrogging retail brokers? Send us an anonymous tip at tips@commercialobserver.com. As always your identity will be protected.

American Eagle

American Eagle will be expanding in Harlem.

The preppy teen retailer has signed a deal for an 8,500-square-foot lease at 100 West 125th Street, the brand's most northern location in the city. American Eagle will join Burlington Coat Factory and Whole Foods in the soon-to-be-built development on the corner of Malcolm X Boulevard and 125th Street.

The project is a venture of Jeff Sutton-led Wharton Properties. The prominent retail developer is behind many prime locations in the city such as 724 Fifth Avenue, 720 Fifth Avenue, 1551 Broadway, 15 West 34th Street, and 747 Madison Avenue, among many others.

100 West 125th Street is the latest to come to Harlem and will span the entire block between 124th and 125th Streets on Malcolm X Boulevard, otherwise known as Lenox Avenue. The development will feature 180,000 square feet of retail space in which Whole Foods will take 39,000 square feet on the ground and lower levels and Burlington Coat Factory will take 70,000 square feet on the top three floors.

Construction is expected to start in May with store openings in 2015. Not only will American Eagle be opening their first location in Harlem, but it will be Whole Foods' first as well. The grocery store is on expansion mode, opening two locations in Brooklyn and crawling up Manhattan island with a location on the Upper East Side at 87th Street and 3rd Avenue and now Harlem.

The asking rent was $160 per square foot and the 15 year lease should bring in $30 million, the Post reported.

New York City Prime exclusively represented American Eagle in their expansion. Jeff Sutton represented himself on behalf of his development company.

Fashion retailer Alexander McQueen has signed a 15-year lease for retail space at 747 Madison Avenue totaling approximately 3,400 square feet, it was announced yesterday. The tenant is expected to move into the space during the third quarter, according to a statement from SL Green, part-owner of the retail co-op.

A joint venture, which also includes Jeff Sutton and Harel Insurance Company in addition to SL Green, acquired the retail interest in September 2011. A second-floor residential co-op unit was subsequently acquired for redevelopment and ceiling height expansion.

Additional retail space, adjacent to the Alexander McQueen space, at the corner of 65^th Street and Madison Avenue, is currently available for lease.

“The acquisition and repositioning of 747 Madison is a classic SL Green/Sutton initiative to unlock significant potential value from a prime retail location,” said Andrew Mathias, president of SL Green, in a statement. “We believe the Alexander McQueen lease announced today confirms that our vision for this property was right on the mark, and we look forward to continuing our efforts to complete the lease-up next door.”

Also yesterday, SL Green announced 35 offices leases in Manhattan, totaling 457,677 feet, were signed in the first two months of 2013, surpassing the totals for the first quarter of 2012.

Susan Kurland of CBRE brokered the deal. Calls to SL Green were not immediately returned.

The owner of an upcoming Harlem burger joint must be hoping that a current YouTube meme has long legs. Jelena Pasic settled on the name Harlem Shake for her restaurant six months ago, well before a series of amateur videos riffing on Brooklyn d.j. Bauer's song of the same name went viral, quickly racking up hundreds of millions of views.

The New York Post's Steve Cuozzo writes today that the happy coincidence has prompted a big spike in neighborhood interest in the humble eatery, with proprietors telling him they "never [had] in the back of our minds this whole phenomenon." Ms. Pasic hopes that the enthusiasm lingers when Harlem Shake and its proposed 65-seat sidewalk cafe open in a few months on the corner of Lenox Avenue and 124th Street. 

A clip from a video of Harlem residents watching a "Harlem Shake" video.

But the craze isn't the only thing that should bring customers in. Harlem Shake will operate just south of Jeff Sutton's 190,000-square-foot retail development, which The Post reports has attracted tenants like American Eagle, Burlington Coat Factory and Whole Foods. There's also a mall anchored by Marshall's at 317 Lenox Avenue between 125th and 126th Streets. And a flurry of smaller local retail and dining businesses have recently shot up in the area.

The Commercial Observer yesterday reported that five retail spaces totaling 4,000 square feet are being marketed on Harlem's southeastern border.

It's been a busy month for Urban Outfitters. The trendy apparel retailer is said to have inked a deal for 21,000 square feet at 180 Broadway in the Financial District.

Jeff Sutton, who with SL Green Realty Corp. and Harel Insurance owns the building, represented the landlords. Stephen Plourde and Wade McDevitt of the McDevitt Co. represented the tenant, reported the New York Post's Lois Weiss. Since its inception 42 years ago in Philadelphia, Urban Outfitters has grown to over 400 American locations.

180 Broadway (Credit: Flickr)

The Commercial Observer reported last week that Urban Outfitters had signed the lease for a 61,926-square-foot store at Malkin Properties' 3 Herald Square. And earlier this week, Kim Vesey of The New York Observer wrotethat the retailer had reportedly struck a deal for 10,000 square feet at 242 Bedford Avenue in Williamsburg, a neighborhood whose occasionally alternative street style the mainstream chain attempts to mimic.

The 15-year lease at 180 Broadway is for 1,500 square feet on the ground floor, 6,700 square feet on the second and third floors, and 6,000 square feet in the basement.

Courtesy of Waiterpay

TGI Friday's will be relocating its Times Square restaurant.

The popular chain restaurant will be moving to a 10,872-square-foot space at 147-149 West 46th Street from its current outpost less than a block away on the corner of Broadway and 46th Street, officials said.

"Their previous location at 1552 Broadway was sold and they were losing the corner of 46th and Broadway," said Brad Schwarz, a managing director at Lee & Associates. The restaurant had been located there for over a decade but new management had a different idea for the retail location.

Jeff Sutton and SL Green formed a partnership to purchase the building for a whopping $136.5 million dollars, coming out to about $9,100 per square foot, the Commercial Observer reported. The building, in combination with leased space from the nearby building, will welcome a 30,000-square-foot Express location. The deal is expected to bring in upwards of $23 million a year and is similar to American Eagle's recent deal in the neighborhood. Mr. Sutton, having strong connections to household retail names, lured the teenage apparel company to a deal believed to be worth $20 million a year at 1515 Broadway.

The prices are reflective of the recent surge of asking rent in the neighborhood. The center of Times Square, known as the bow-tie, has seen rents topple $2,000 to $2,500 per square foot in recent years.

TGI Friday's, on the other hand, will move to another location. The new space isn't a substantial difference as the new restaurant is approximately the same size as the old one and is merely 120 feet away.

The landlord, SBP 46th Street LLC, did not have external brokerage representation. Mr. Schwarz represented the tenant in the transaction.

Brokers who brought big name chain retailers to a pair of Jeff Sutton properties won big last night at the Real Estate Board of New York's Retail Deal of the Year Awards at 101 Park Avenue.

David LaPierre of CBRE nabbed the prize for  "most ingenious and creative retail deal that demonstrates exceptional broker acumen" for a transaction that brought Express to 1552-1560 Broadway. Jacqueline Klinger and Chase Welles of SCG Retail's success in landing Whole Foods in Harlem (at 100 West 125th Street) were deemed the brokers behind "the retail deal which is most significant in its overall characteristics and importance to the New York City Retail Market"

From left to right: David LaPierre, Jacqueline Klinger, Chase Welles

Mr. LaPierre was recognized for his swift work in bringing Express to a 30,000-square-foot right by the Times Square Bowtie. The apparel tenant had grown frustrated with the pace of negotiations at 4 Times Square. Ms. Klinger and Mr. Welles won plaudits for their patience in dealing with the notoriously picky Whole Foods.

As Mr. Welles said in his acceptance speech to a well-fed and well-lubricated crowd at the 101 Club, when dealing with Whole Foods "patience is not only a virtue, but a requirement."

The first of at least two major dormitories in the pipeline at Pace University is open just in time for the beginning of the school year.

DNAinfo reported that 600 Pace University students have a new home in Lower Manhattan after the university’s 24-story dormitory at 180 Broadway opened this past weekend.

(Photo: graduateguide.com)

The high-rise, reportedly owned by SL Green Realty Corp., Jeff Sutton and Harel Insurance, and sitting at the corner of John Street and Broadway, opened after a two-year construction process and includes a fitness center, staff offices and fourth-floor student common areas.

The lower levels of the building will be home to an Urban Outfitters and a TD Bank, according to the Lower Manhattan Construction Command Center.

Pace University is also building a dormitory at 33 Beekman Street. Last year the Wall Street Journal reported that SL Green signed a deal with the school to develop a new 29-story residence hall at that Downtown location, slated to become a 129,000-square-foot building for another 600 students.

That development is slated for completion in the fall of 2015. Both new buildings will feature amenities such as kitchens, fitness centers and recreational lounges with televisions, couches and pool tables.

Pace University currently provides housing to 2,565 students, including the 600 that packed into 180 Broadway over the weekend.

Pace signed a 30-year lease for both new buildings, according to the Wall Street Journal.

The school’s first residence in downtown Manhattan opened in 1970.

The court-appointed federal monitor and interim trustee of the controversial commercial tower at 650 Fifth Avenue has negotiated a deal for the retail space at the building.

SL Green Realty has partnered with Jeff Sutton to acquire a 49-year leasehold interest in the retail portion of the Midtown property which has previously been linked to the Iranian government.

The deal includes control of the building’s basement, ground-level and second and third floor retail spaces. The current retail tenant roster includes Juicy Couture, Godiva Chocolate and Devon & Blakely.

“Situated in the heart of Fifth Avenue’s prime retail corridor at 52nd Street, 650 Fifth Avenue is a perfect fit for our expanding retail investment portfolio in partnership with Jeff Sutton,” Andrew Matthias, president of SL Green, said in a prepared statement. “Our retail investments have proven to be a profitable complement to our core office and structured finance businesses and we will continue to seek new opportunities in New York City’s best retail locations.”

Financial details of the deal were not disclosed, but a court document viewed by The Wall Street Journal indicated the long-term lease would bring the building more than $30,000 a day in additional revenue, or more than $10 million per year. Retail space at nearby 666 Fifth Avenue sold for over $8,000 per square foot last year, the Journal reported.

In September, U.S. District Judge Katherine Forrest ruled that Assa Corp., Assa Co. Ltd. and the Alavi Foundation must forfeit all assets, including ownership stakes in 650 Fifth Avenue. As far back as 2008 Federal prosecutors had alleged that the respective entities were fronts for the Iranian government and were in violation of sanctions against that country.

Jeff Sutton is the buyer of SL Green's 33.3 percent stake in the retail co-op at 747 Madison Avenue, according to a New York Post report. The deal makes Mr. Sutton the sole owner of the space.

SL Green announced earlier this week it had agreed to sell its stake in the co-op in deal valuing the space at $160 million. In conjunction with the sale, the real estate investment trust agreed to make a $30 million preferred equity investment in the property.

The 2,800-square-foot retail space at 747 Madison will be occupied by Givenchy, according to the Post report. The 15-year deal carried asking rent of approximately $1,700 per square foot.

SL Green previously announced it had reached a 15-year deal with a “major European fashion house,” without naming the tenant.

“The lease signed at 747 Madison Avenue, coupled with the Alexander McQueen transaction at the property announced earlier this year, perfectly demonstrates the power of our partnership [with Jeff Sutton,]” said Andrew Mathias, president of SL Green, in the earlier statement.

Givenchy, owned by luxury conglomerate LVMH, will take space previously occupied by Valentino. The Italian designer agreed to take 20,000 square feet at 693 Fifth Avenue earlier this year. 

On June 17, 2013, the head of SL Green’s in-house legal team, Neil Kessner, hopped on the subway with the firm’s president, Andrew Mathias, and headed to 1 Saint Andrews Place to meet retail bigwig Jeff Sutton for a meeting with the U.S. Attorney’s Office’s head of forfeiture, Sharon Cohen Levin.  

The SL Green/Sutton team had won an RFP issued in October 2012 to purchase the 49-year leasehold interest on the roughly 32,000-square-foot retail condo at 650 Fifth Avenue, signing a letter of intent for the leasehold on January 2013. 

Photo by Mike Nagle

The meeting would be a crucial step toward gaining final approval after a U.S. Marshals Service-appointed appraiser unexpectedly urged the U.S. Attorney’s Office not to approve the deal, arguing that it would not generate enough income to maximize returns on an eventual sale of the government-seized property.  

“They failed to recognize that a long-term leasehold held by a credit-worthy entity such as ourselves would actually maximize the price, given the strength of the current market,” Mr. Kessner said. 

Mr. Kessner and his cohorts would have to convince Ms. Levin, who has raked in billions on behalf of the U.S. Attorney’s Office, attacking everyone and everything from Bernie Madoff to banks and drug cartels, that the U.S. Marshals’ appraiser had been mistaken.

“We tried to articulate why we felt that the U.S. Marshals Service missed it,” he said, recalling the deal and the complex negotiations as a “complex maze.”  

Mr. Kessner and company offered prime examples of similar retail deals that had actually boosted the values of their respective buildings, including a Crate & Barrel renewal at 650 Madison Avenue and the Simpson Thacher renewal at 425 Lexington Avenue.  

“Those had resulted in very, very effective sale executions at remarkably low cap rates,” Mr. Kessner said. 

The evidence was convincing, but Ms. Levin wouldn’t budge—not yet. 

Meanwhile, other prominent real estate firms hovered, seeking to hijack the deal. They attempted to convince now-retired U.S. Magistrate Judge Kathleen Roberts, who was behind the seizure of the property, that they would bring the greatest value to the building, which had alleged ties to Iranian-sponsored terrorism.

“It was a very, very, very ugly situation,” Mr. Kessner said. “Very ugly.”  

But the meeting ultimately swayed Ms. Levin to reappoint a second appraiser for the SL Green/Sutton plan, and within a month’s time, that appraiser had determined that Mr. Kessner’s assessment and approach would in fact boost the building’s value in the event of a sale. By September 2013, Ms. Roberts ordered Alavi Foundation and Assa Corporation, the building’s owners, to forfeit their ownership stakes in the building.

The Shah of Iran built the building in the early 1970s, and its subsequent owners had allegedly laundered money for the Iranian government, with the minority stakeholder allegedly tied to horrendous acts of terrorism, including 9/11, embassy bombings throughout Africa, various assassinations and bombings in Jerusalem. 

The list of horrors, which goes on, landed the organization on the U.S. Department of the Treasury’s Office of Foreign Assets Control list, which names properties tied to “mass destruction proliferators and their supporters,” resulting in a string of public and private lawsuits filed by victims’ families. 

“It was for our benefit and for their benefit as well that we went through this ordeal,” Mr. Kessner said, reflecting on a transaction that his team structured and negotiated and which ultimately took on a deeper meaning when the forfeiture was officially announced on Sept. 11, 2013. “We were happy to be a part of this.”  

Mr. Kessner, who joined SL Green in 2000, sits on the ground floor of some of the company’s biggest and most complicated transactions, directs all legal activities associated with the leasing and management of the buildings in SL Green’s vast portfolio; and works hand in hand every day with Steve Durels, the director of leasing, as well as the firm’s acquisition/disposition and accounting teams.  

“Once the term sheet is signed, the ball is handed over to me and my team, and our job is to get the ball over the goal line,” he said. The more complicated term sheets are also called to his attention, in addition to the negotiations of lease agreements, associated consents from (and negotiations with) lenders and more. 

Mr. Kessner, a Long Island native, got his start as a real estate litigator in federal court after graduating with a J.D. degree from New York Law School in 1982. He later transitioned into leasing, having taken a liking to its various moving parts. From 1998 to 2000, he was the associate general counsel for Williams Real Estate Co., a leading New York City real estate management and brokerage firm. Prior to that, he was a co-partner at Kessner & Mass, where he represented a large client base of prominent commercial landlords, office and retail tenants, some of whom—230 Park Avenue and 140 Broadway, for example—were tied to Helmsley partnerships. 

As executive vice president of the general counsel of real property at SL Green, Mr. Kessner has worked on a string of recent transactions that have proven to be among the largest and most complex of his career. They include the 650 Fifth Avenue deal, as well as Citigroup’s massive extension of a triple net lease at SL Green and Ivanhoé Cambridge’s 388-390 Greenwich Street. The latter saw the top-tier banking institution holding onto the 2,634,670-square-foot building through the end of 2035, with an option to purchase the property between Dec. 1, 2017, and Dec, 31, 2020. Mr. Mathias, the firm’s president, has referred to the deal as a “crowning achievement.” 

“That was a deal we had been working on for 18 months that was complex because of the size of the transaction, the nature of the tenants and the fact that we had many competing landlords that were trying to coerce Citi to relocate elsewhere,” Mr. Kessner said. “As a nimble company, we can sprint to the finish line … but we also can handle the marathon deal.” 

Another “marathon” deal went down at the Graybar Building, where the Metro-North Commuter Railroad Company signed a 20-year, 265,903-square-foot lease at the classic 420 Lexington Avenue property. The subsidiary of the Metropolitan Transportation Authority renewed its space across the entire 11th, 12th and partial 22nd floors and expanded into an additional 132,400 square feet on lower floors. 

“The first critical challenge was if we could provide enough space,” Mr. Kessner said of that deal. “The secondary challenge was if we would be able to create a commercial condo that would allow Metro-North to take advantage of a tax exemption pursuant to a statute specifically designed for them.”  

Mr. Durels, the firm’s director of leasing, has called that deal an “exceedingly complicated transaction, which took nearly 20 months to complete and involved a plethora of moving parts, including the participation of numerous stake-holders.” The firm ultimately assembled 34 separate spaces and relocated or recaptured 15 occupied spaces, assuming responsibility for construction of upgrades and the tenant’s build-out. 

“Steve [Durels] worked extensively and spoke with me about it at the term sheet stage to see if we could possibly create the ground lease condo structure,” Mr. Kessner said. “I advised him that, yes, we could. It would be difficult and time-consuming, another ‘marathon,’ if you will, but we could do it.”    

The deal required a simultaneous lease with Metro North and the building’s fee owner, as well as negotiations with each of SL Green’s lenders. The firm also had to exercise an early renewal option on the ground lease and a new ground lease to create a new condo among other hoops. 

“These were fairly atypical deals in the sense that it’s not the bread-and-butter deals that my team typically handles because of the nature of the complexity,” Mr. Kessner said. “Having said that, SL Green is known in the real estate community as a company that is well versed in working on complete real estate deals.   

“It’s an enormous challenge and a lot of fun, and it certainly keeps you on your toes.”