Third Quarter Review

Real Estate Weekly, Oct 17, 2001

Real Estate Weekly: I would like each person from their own particular discipline to talk about how your company has been impacted by what happened on Sept. 11?

Leslie Wohlman Himmel: I'm Leslie Himmel from Himmel + Meringoff Properties. First I will say that from a standpoint of impact the general climate and environment both in our office and the community is one of everyone uniting--working together like I have never seen before. The Real Estate Board had issued a mandate for owners not to price gouge and I think our community as a whole has really banded together to help the many tenants that don't have space, find space. Many of us have looked into our hearts and have given substantial amounts of money to the Twin Tower Fund--Steve Green kicked it off with $1 million. In our firm many individuals paid over $50,000 each. We have all tried to ban together in horrible misery. Specifically, we have about 2 million SF and our units, where there was space being available, we have some units that we could make available at 50,000 SF -- we have been lucky enough to see, even on sidestreet buildings like 60 & 32nd Street, some major banks looking to come into that area. So, on a general basis, it is almost like a war climate and really sad. But, on the specific basis, I think the property owners and secondary office buildings have been able to upgrade the type of tenants that are coming to them. The third thing that I would like to add regarding people getting together, I run a committee for the Real Estate Board called the Economic Development Committee. We meet every two months. Last year we wrote a wonderful report for economic zoning and business incentive changes for tenants. We had a meeting last Wednesday, usually 15 people come and I had 34 people show up. Major lawyers, lenders, tops of all the companies, all saying what can we do to work together to continue to make NYC the best city that it is. Let's not let a threat, a horrible event, bring us down. It was amazing to see not only my committee, but also the sub-committees with people really working together. I think although this is probably the most horrific incident that has happened in my lifetime, I think this generation is going to really work together to make this city even better than it was before.

Richard Farley: I think, once again, the real estate community has risen to the occasion. The Real Estate Board of New York has done an excellent job of coordinating the efforts of real estate owners, brokers, and the space banks that they have coordinated. I think that we are a very important presence in the city, and the city's wellbeing depends a lot on what the real estate community does and how we respond. As owners, we have reached out to existing tenants who have immediate needs and tenants who had offices downtown that are looking for relocation. We have tried to do what we can to make a tough situation a little easier. We have reached out to our existing tenants in terms of making accommodations for their long-term needs and also for their short-term needs.

Anthony Malkin: First I will say that, even before the REBNY thing came out, we had said that deals before are deals now. Of course, there is a little fudge in that for a lot of landlords who were quoting old rents or had stop quoting rents and were just going into that "the market is going down, let's make an offer and they will respond" mode. I think we're going back to rents that were about 15% higher than they were before. The reality is that there are so few deals being done, they can go into those "I didn't do deals at those lower rates." I don't think that is very nice, but there is no one at this table who does that, that I am aware of. As far as responding to what has happened as a company we have had a lot of challenges. We have tried in many ways to have a focal point for our employees to participate in the catharsis, if you will. We arranged to do shifts at the Real Estate Board space bank, but at the last minute, our workers were told that they were not brokers so they could not man the phones. W e were going to be working with Tyson's helping to staff a kitchen near Ground Zero. Then, Tyson's were not allowed to open up a kitchen and instead they donated chickens to the Red Cross. So, in that way, we were really shut out. What we are doing as a family is establishing scholarships for children of firemen at Poly Prep, which is actually where my father went to school in Brooklyn, where an awful lot of firemen who were lost were from. As far as what we are seeing in our business, there are two waves. The first wave is large blocks of space. We signed a 150,000 SF lease with the city for the space of 7 World Trade Center on Friday night (Sept. 28) at midnight. We had a fair amount of competition for the space, but we worked doing deals exactly at the same terms that we had done a deal about 2 1/2 weeks prior. This is out in Stamford, Conn., by the way, for a property we bought out there. These are the large block users. We are seeing the smaller companies that don't have a facilities department, who are a 3,000 to 7,000-SF user range. Now they have been allowed access to their offices and are looking to regroup. They have gone in and done air quality standard and found that the particular amount of asbestos and lead in the air is off the charts in lower Manhattan. These are people who are looking to live midtown - primarily moves within NYC with some moves out of NYC. We have property both in and outside of New York. The most interesting thing is that, to date, there has been a lot of talk about moves to Westchester and Fairfield County and very little moves themselves. There has been much more movement in what has been defined as the Manhattan market, which I would consider to be Manhattan and Jersey City on the waterfront.