SL Green at IDCNY: 'We're still studying.'

Real Estate Weekly, May 19, 1993 by Lois Weiss

While they are still studying their new charge, Steven Klein, executive vice president of S.L. Green, said his firm intends to' maintain the focus on the contract office furniture market at Long Island City's International Design Center of New York while capturing other related industries, such as the home office market.

The Bank of New York, which has started a foreclosure action, has appointed S.L. Green asset manager for the beleaguered two-building complex, which is facing lease renewals and Manhattan competition.

"We're still in the discovery phase," he noted, since they have been officially on the project for only the past month.

Daniel Kurtz, a senior vice president of the New York City Economic Development Corporation, a subordinate lender in the center that stands to lose $25.5 mill ion, called the Green appointment "a positive development that will give new impetus to the project."

Located minutes from the 59th Street Bridge and the nearby Citicorp tower, the two-building IDCNY complex sits on a 10-acre assemblage. A portion of LaGuardia Community College is housed in an adjacent 1 million-square-foot building whose management will remain in place. Another 90,000 square feet off and on the site has been approved for future development.

The buildings, with white, airy atriums and exposed stairs connecting the levels, were converted from a former factory The large showrooms primarily sell office furniture and fixtures to the trade and is a site of the industry's major October Design Week promotion.

Some ideas, such as improving the cafeteria to draw in more people, have been tossed around but a full marketing plan is not yet formulated, Klein said. Free shuttle bus service is being maintained from Manhattan and the Citicorp subway stop is nearby, Kurtz said to dispel the perception of the IDCNY being "hard to get to." Kurtz suggested that one large anchor tenant could revitalize the showroom mall although the space was never meant to act as a retail center.

Green is also reviewing operational expenses and where prudent, Klein noted, they will reduce them without diminishing services to the tenants.

Current tenants in the 950,000-square-foot complex include Steelcase, Herman Miller, and Knoll Westinghouse. The School Construction Authority also leases 195,000 square feet.

While Klein admitted building tenant relationships does not happen overnight, he said, "The tenants are getting to know us and they are pleased someone is out there replacing light bulbs and paying attention to them."

Green has placed seven people in its on-site office to run the project. "It's a very important piece of real estate and the Bank of New York is supporting us, he added.

The IDCNY was to be a refuge for people in the industry facing rapidly escalating rents, explained Kurtz. "They attempted to compete with a concept and a first-class facility, he said.

The real estate market and the economy soured shortly after the IDCNY's gala opening in 1985 leading to a decline in the contract furniture industry and in the Manhattan rents the designers were fleeing.

BONY and its consortium of lending institutions was never able to be replaced as the construction lender. Neither the banks who kicked in $105 million or the City of New York, which used an urban grant from the Federal Urban Action Development Program to fund a $23 million subordinate loan for the project, has been paid for quite some time. A portion of the interest was accrued and the loan was recapitalized at $25.5 million, Kurtz said.

The balance of the project's equity was provided by the IDC owners, Thom Rock Realty, whose general partner is Schulweis. The $150 mill ion project was developed by Lazard Development Corporation, a subsidiary of Lazard Freres.

Kurtz said it is possible that as the foreclosure is completed the city's economic interest in the loan will be wiped out.

As a subordinate lender, the city will have no formal voice in the management of the property since it is now in the control of the bank, which is acting as a mortgagee in possession. "The city has certain legal rights which it is pursuing through the foreclosure action," Kurtz explained.

The IDCNY is assessed at approximately $18.2 million but has a partial exemption from real estate taxes.

Kurtz, stressed, however, the city still considers the project a vital economic force with hundreds of people employed there. "It's gorgeous and it is still an attractive economic development resource," he said. "Hopefully it will continue to be used and Green and the bank will provide sufficient funds to maintain it in a first-class manner."