Sl Green Realty Corp

Real Estate Weekly, Dec 20, 2000 by Elaine Misonzhnik

Two men, two roads to the top

For two men who work together on a rather close basis, the executive vice presidents of SL Green Realty Corporation seem to have little in common when it comes to their backgrounds. Gerard T. Nocera, who is in charge of leasing operations, came to be in the industry almost by accident, because a cousin of his suggested that he would be a good fit for the profession. Marc Holliday, on the other hand, the company's chief investment officer, is an heir apparent -- his father is a partner at Sonneblick-Goldman and he himself holds a degree in real estate development from Columbia.

What brought the two together, however, was Stephen L. Green. In the late 1980's, Nocera was living in California, and looking for an opportunity to come back to the East Coast. He has dabbled in quite a number of things before -- got a degree in journalism from Duquesne University, which he never used, worked as a salesperson for IBM, and even had a brief career as a broker with Coldwell Banker for seven years. But now his cousin, an owner of a small real estate firm in New York, came up with a rather obvious proposition "Why don't you go into real estate?"

"He just thought I would fit in," Nocera recalls. "I like selling a lot, and I get along well with people. And I wanted to come back to the East Coast -- I didn't care for California." Within a few months, Nocera began his career at SL Green as a leasing agent. "When I started here, we had about three leasing agents and 1 million SF of space," he said. "And as the company changed and started to expand, I changed with it. That's what I like about Steve -- he is always fair when it comes to giving others opportunities."

Holliday, on the other hand, started right at the top. At his first job, as an investment consultant with the Victor Capital Group, Holliday got aquatinted with Green, who was one of the company's clients. "Back then, we were helping him take the company public, so I had experience with the firm even before I started working here," Holliday explained. "And then he offered me a job as his chief investment officer."

Unlike with Nocera, the fact that Holliday ended up in real estate was no accident. "It is something that my family has been involved in for quite a while," he explained. "And in New York City, real estate is one of the most exciting industries because it dominates, the financial world."

According to Holliday, what SL Green had done in the past ten years is exciting enough for him. "To take a company which had six properties or 1 million SF and within three and a half years to see that portfolio grow to approximately 10 million SF is, I think, unprecedented growth within this City," he said.

Indeed, SL Green Realty has found for itself a rather unusual niche -- unusual not because no one has ever though of it before, but because it is so narrowly defined. The company's specialty lies in buying large, Manhattan, class "B" properties in prestigious neighborhoods and repositioning them.

"Class 'B' properties are well positioned, they have large floor plates, and their infrastructure is basically in place," Nocera explained. "Plus more than 90% of our buildings are within a ten minute walk of major transportation points. And what we found is that in good markets and bad markets floor plates and location sell."

According to Nocera, what SL Green has done is create a new class of property -- one that is "better than 'B' and cheaper than 'A.'" "Our elevators are fast, but maybe not really fast, we have a concierge service, but maybe one person at the desk, instead of three. What we basically do is provide business tenants with good working environments, at prices 40-50% cheaper than in class 'A.'"

"The value of our buildings has increased dramatically in the past few years," Holliday added. "We try to pursue long-term growth, so a lot of the buildings we purchase have very low in-place rents, but with great embedded growth. At the same time, we are not only aggressive buyers, we are aggressive sellers of property. Lately, we have been selling a lot of our smaller side-street buildings and using the capital to buy larger, avenue properties."

At the current moment SL Green has about 9 million SF of space, at some of the most desirable locations in Manhattan -- 100 Park Ave., 420 Lexington Ave., 633 Third Aye, etc. Trying to explain the success of SL Green's strategy Nocera said, "The fact that these buildings have been around for 80-90 years is itself a testament that class 'B' buildings are extremely flexible. A big problem for 'B' properties is that they are often owned by small family-operated businesses. They charge discount rents, so they don't do any upgrades at the building.

"But with our strategy we consistently outperform them."