Public-private partnerships key to success with LCOR

Real Estate Weekly, Dec 26, 2001 by Elaine Misonznik

Although it hasn't been in the news as much as Vornado Realty Trust or Forest City Ratner, LCOR Inc. has earned a rightful place among New York City's development elite. With its JFK airport terminal completed, its 505 Fifth Ave. project under development, and the negotiations for office space at Queens West already taking place, it might end up as one of the few real estate companies positively affected by Manhattan's rising vacancy rates.

Part of LCOR's success, or luck, depending on how you choose to see it, might have to do with its commitment to public-private partnerships. Just a few months ago, an agreement with the Empire State Development Corporation to undertake the development of the commercial component of Queens West, a long-forgotten, virtually vacant piece of land across from Midtown Manhattan might have seemed like a gamble. After all, even with the overcrowding and the exorbitant rents of the City, there are some neighborhoods that just never take off as primary business districts. But LCOR saw the potential in a City-sponsored, mixed-use development that would offer both the developers and the tenants significant tax breaks. And it seems like the gamble is going to pay off - many expect that the new "decentralization" phenomenon will bring not only small businesses, but big corporations into the outer boroughs.

But even though it has already undertaken a number of high-profile state-sponsored developments, LCOR has been actively pursuing public projects for only a few years. Run by the brothers Kurt and Eric Eichler, the firm shifted its direction toward public-private partnerships in 1992, much under Kurt Eichler's influence. So far this strategy has paid off - LCOR is responsible for the design and construction of the Foley Square Federal Office Building in Manhattan, the $500 redevelopment of a mixed-use project for the Washington Transportation Authority in Washington, D.C., and the U.S. Patent and Trademark Office campus.

According to David A. Sigman, a senior vice president in the firm's New York office, LCOR gets choice projects such as Queens West because over the years it has learned what government agencies are looking for when choosing a private developer.

"A few years ago we bid for the privatization of the retail space at the World Trade Center with the Port Authority of New York and New Jersey. That project didn't go ahead, but we got to know the PA pretty well and learned what they were looking for. So when the JFK terminal bid came out, we were selected for the development. We know how they want their packages structured."

Sigman is the man in charge of both the JFK project and the Jamaica train station development, which will link Jamaica to JFK airport via the airlink train. According to him the leasing campaign for JFK is pretty much over - "When it comes to retail, we already have stands by WH Smith and Restaurant Associates is doing all of our food and beverage operations for us," he says. "As for the building, it saw about 65,000 passengers a year before we took over. So there is a core group of international clients who lease the space and then we will continue to lease the rest of it to new arrivals at JFK."

He also has high hopes for the Jamaica station. "It was a natural for us because it has an air train link to JFK," he explains. "We are estimating that it will provide anywhere from 300,000 to 400,000 seats and most of the clients who will use it will be travelers to the [airport]. We hope to start construction at the end of 2002 and the building would open sometime in 2004.

Although Sigman tries to downplay his role at LCOR as much as possible - "Kurt and Eric are really the guys in charge," he repeats, - real estate development should feel natural to him. His father used to run a consulting engineering firm on Long Island and his sister has worked for Larry Silverstein himself. As for David, he has at least a decade of experience in public-private partnerships - he used to serve as a project manager for the Zeckendorf Company on the World Wide Plaza development and the Ronald Reagan Federal Office Building in Washington, D.C.

According to Sigman, what attracted him to LCOR was its focus on public projects and its working relationships with firms such as Lehman Brothers and JP Morgan. So when the firm's head hunter made him an offer in 1994 he decided to come back to New York.

"Our focus is not only on public-private, but also on transit-related developments," he explains. "That's what the Jamaica station is all about and we were recently selected by the New Jersey train to develop a mixed-use project next to the Hoboken station. Those are the projects that really make a difference in a neighborhood."