One-On-One with RXR Realty CEO and Chairman Scott Rechler
EisnerAmper Real Estate Services Group Chair Ken Weissenberg speaks with RXR Realty CEO and Chairman Scott Rechler in the inaugural video in the series. Rechler, referred to by Crain's New York as "the smartest guy in the real estate boom," shares his take on making a project re-imagining an important building work in the most famous part of New York, how doing business in New York appeals to office tenants, and the future of development in downtown Manhattan.
Ken Weissenberg: Scott, we’re on top of 75 Rockefeller Plaza, one of your latest projects. Can you tell us a little about some of the iconic projects that you're involved with right now?
Scott Rechler: Our view is around New York City and around Manhattan, there is more demand for 21st century office space than there is supply and today we have the same amount of office spaces we had 20 years ago. The average age of office space is 80 years old and if you can find gems like a 75 Rock, like a 230 Park, a 237 Park, Starrett Lehigh, Pier 57, that are these great buildings and repurpose and respect their past , accentuate their past , but at the same time bring them to the point where they work for the 21st century that I think is something that is going to be an extraordinary addition to the market for the tenants and for the community in terms of what New York is all about and the essence of New York.
The most important ingredient is talent and New York City is a magnet for talent from people around the world and the numbers prove that out. If you look at our work stats at the highest level record levels, population growth record levels, tourism growth record levels. As people come in, that attracts companies that want to take advantage of that talent. We've seen that with Google, we've seen that with the YouTube, with the Facebook. We've seen that with the Cadillacs and the Johnson and Johnson and the more traditional companies that want to capture that talent to help build their businesses. You know, capture their innovation and build their brand to sell their products throughout the world.
We purchased the Starrett Lehigh in 2010 for just under a billion dollars. Tenants like Martha Stewart, Tommy Hilfiger, and Hugo Boss still came to that building even though we didn't have good public transportation. Even though it was more treated like a Class B office building. Our premise was to re-energize the creativity that was taking place behind the doors of those tenants and bring it into the common area and make that building a magnet for more creative tenants that we want to go there.
KW: What do you think the future of downtown is?
SR: When you have companies like Connie Nask and Rupben downtown, there's this whole creative class of vibrancy and energy that's downtown and over the next 12 to 24 months as the World Trade Center site continues to finish its redevelopment and transportation hub opens and the parks open and more of the construction fences come down, it's going to become more of a reality for everyone.
This building was formerly leased by Time Warner and Time Warner moved out in July of 2013 and with our 99 year lease, the lease didn't commence until Time Warner moved out. So we actually had the advantage of being able to go through all of our design work and order all of our equipment and supplies to be in a position that we can be moving as quickly as possible. So this year we did a full gutting of the building and we're now in the process of actually putting the finishing in place and by the spring of 2016, we'll be open and the building is going to be extraordinary and it's going to be you know a true 21st century modern interior and this iconic landmark building. One of the things that was a big challenge for us was going to landmarks because this has so many historic elements to it and for the changes that we wanted to make to create better retail space to create this dramatic lobby that works its way through from Rock Center and 51st Street through to 52nd Street where you have the 21 Club and a series of also outdoor spaces and terraces so that people can actually not only get the benefit of being in the building, but really feel the Rockefeller Center presence and energy outside looking over the Plaza on 52nd Street looking over the 21 club.
KW: Wall Street Journal analyzed the numbers on the property and they thought that based on their analysis, you would need 80 dollars a square foot minimum rent in order to make the numbers work. Are you confident of getting that?
SR: I don't know how the Wall Street Journal does their analysis but from our standpoint, we are very confident that we're going to get it. Our first discussions were that proposal out started at low end of 80 dollars a square foot and as we work our way up to the top of the building, we will be into the hundreds plus dollars a square foot with those sweeping views looking downtown and at Rock Center.
KW: What makes New York such an attractive place for foreign investors and your company in particular such an attractive place for foreign investors to invest with?
SR: So while we operate locally, we've capitalized ourselves globally. Of the five billion that was raised, 99 percent of that capital is non-U.S. investors and their investors that are very sophisticated investors that typically would invest directly themselves into real estate. When they look at New York and the competitive nature of this market and the scale of the projects and buildings within this city, they recognize that's a challenge to do. These investors have invested alongside us as their local partner to be able to go and source the types of transactions that we source and then bring our expertise to create value in those assets. It's proven from an investor's standpoint that if you're a long term investor and you want to invest and have a safe haven but also out sized type returns through cycles, New York is a place that should be on the top of your list.