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Boston Properties' Unlikely New CEO Takes the Reins

Boston Properties' Unlikely New CEO Takes the Reins

ABoston race to Properties’the top unlikely NYC’snew sky-soaring CEO residential towerstakes are one-upping the each other atreins an unprecedented pace, butApril 01,can 2013 it continue? OctoberBy Guelda 01, Voien 2015 By Rich Bockmann he line of succession at Boston Properties, the $18 bil- lionfew realy today’s estate standards, investment Harry trust, Macklowe’s seemed clear Metropolitan to the real development marketing specialist Nancy Packes. “It’s a whole TestateTower industry: on West 57th When Street Mortimer seems quaint.Zuckerman stepped new genre of height and luxury.” down as CEO,The early surely 1980s-era the firm’s president stands would 716 take feet over.tall; its Butresale Zuckerman condos announced trade at prices his resignationaround $1,500 last monthto $2,000 and Tall, rich and thin Bperhis squarereplacement foot. But is not when Doug the Linde, spire toppedthe son out of his there longtime in 1982, ’s latest supertall spires are not only tall, they are itfriend set a andrecord business as the partner,tallest residential Ed Linde, tower who diedin the in city. 2010. also far more slender than their predecessors. Instead,Today, the Macklowe 75-year-old still ownsZuckerman a piece andof the the city’s company tallest board The ever-shrinking amount of development space in apartmentwent outside building, Boston but Properties it’s at 432 for its newAvenue, top andleader it stands — to has prompted developers to piece together postage- almostthe financial twice as world.tall. In addition, the most expensive penthouse stamp-sized sites and then pack on that allow them to thereTheir is under choice: contract Owen for Thomas, $95 million 51, who — or has roughly headed $11,500 Lehman build higher. perBrothers square Holdings foot. for the last year, successfully unraveling From an engineering standpoint, a building is considered manyIn a of game the bankruptof investment one-upmanship, bank’s real developers estate assets, are “slender” if it has a width-to-height ratio of 1 to 10, meaning surpassingafter nearly each a quarter-century other at an unprecedented of top jobs clip at toMorgan build the Stanley. next it rises 10 feet for every foot of width at its base. Today’s greatOn April “supertall” 2, Thomas residential started building a three-year — a term stint the withChicago-based Boston supertall towers, however, are testing the limits of width-to- Council on Tall and Urban Habitat reserves for towers of height ratios. Properties as CEO and board member. Zuckerman, perhaps at least 984 feet. Macklowe’s 432 Park, for example, has a 1 to 15 ratio. JDS bestAn known example as publisherof this race of to the the New top: YorkAt 1,396 Daily feet News, high, will 432 stay on as chairman until at least 2015, presumably to shep- Development and Property Market Group’s 111 West Park overtook Extell Development’s 1,004-foot-tall is pushing the envelope even further, with a ratio of 1:23, which earlierherd the this transition. year. But Extell is now on track to reclaim the title. “Linde seemed to be being groomed for [the CEO] role,” will make it the world’s skinniest tower when it opens in 2018 at Extell’s latest “supertall” building, dubbed Tower, 1,418 feet. ( in is currently the issaid scheduled Alexander to top Goldfarb, out at 1,550 an analyst feet in at2019. investment What’s more, bank theSan - Owen Thomas, the incoming CEO of Boston Properties planet’s skinniest residential tower with a ratio of 1:20.) towerdler O’Neill will reportedly + Partners. have a record $4.4 billion sellout. TheHowever, current Zuckerman real estate said cycle the is choiceon pace to to bring produce in fresh as FreshBy comparison, face the World Trade Center’s original North Tower, manyblood record-tallwas part of residential a plan to recreate buildings the as trio the of previous leadership eight that whichWhile soared Thomas 1,368 is feeta fresh high, face had ona ratio the ofREIT less than scene, 1:7 therebecause is itno decades.had existed when he, Ed Linde and Doug Linde ran the firm haddoubt a big that broad he base,knows as thereal estate from Museum the financing has noted. end. together.But with He a saidhistoric he was number attracted of über-luxury to Thomas’s condos “easy-going on the Today’sHis first slender job at towers Morgan are notStanley, just alteringin 1987, the was look with of thethe real market,style,” which and sources he felt ofmade foreign him capital an ideal in Chinamember and of elsewhere the trium - skyline,estate group they are within also relying the investment on more sophisticated banking division. engineering By showingvirate. volatility, industry observers are increasingly tossing along1995, with he had high-tech jumped features up to managinglike sound attenuation,director of thehigh-speed firm’s the “Weword did “frothy” not do around this casually,” these days Zuckerman in discussions told aboutThe Real the elevatorsreal estate and investing wind turbines. business. And from 2000 to 2008, he led NewDeal. York luxury market. Morgan“Slender Stanley towers Real require Estate special Fund. measures Next, Thomasto counteract wore the two That raises the question: Will this trend of building supertall Neither Thomas nor Doug Linde could comment for this exaggeratedhats — CEO forces of Morgan of wind Stanley on the vertical Asia and cantilever,” chairman according and CEO luxury towers start slowing anytime soon? Developer to a New York exhibit. “This can include Ianstory. Bruce Eichner — whose CitySpire tower became the city’s of Morgan Stanley Real Estate Investing. By the time he left “The team-oriented approach is very much a part of the additionalthe company structures in 2011, to hestiffen was thechairman building of or Mitsubishi various types UFJ of tallest apartment building when it surpassed Macklowe’s Metro dampers to counteract sway.” towerculture in atthe Boston late 1980s Properties,” — says yes. said Michael Knott, an analyst Morgan Stanley Securities, a large Japanese investment bank at commercial real estate research firm Green Street Advisors. . HeThat is even sway a doesformer not chairmanseem to be of impacting the Pension the buyers,Real Estate who are “I don’t think you’ll see another 1,000-foot building in the plunking down eight- or sometimes even nine-figure prices for immediateFor the future,”REIT, insiders Eichner told said. TRD, “Right “slow now and it would steady be wins very the Association, a trade group. these units. They seem to be more concerned about views and challengingrace.” But they because noted lenders that Thomas are very isconcerned used to a about quicker the pace And Thomas, with a mechanical engineering degree from absorptionand short-term at the deals, high end.” the hallmarks of corporate investing. exoticthe University bathtub marbles. of Virginia and an M.B.A. from Harvard Busi- WhileSo now Eichner the question may be is: right What, about if anything, future construction, will change ness“The School, people has who been are described buying in asthese “cerebral buildings and are understated,” generally byunder The Thomas’sReal Deal ’sleadership? count, there are at least 20 New York livingthough in analystsor have bought are concerned in tall buildings that he before,” still might said Sothebymake deals CityThe projects answer at mayleast be 900 found feet bytall looking that are at either how heunder ran opera- International’stoo fast for Boston Nikki Properties,Field. known for its long view of the constructiontions at Lehman or in and the Morganplanning Stanley. stages today. Of that batch, marketField —added even that among buyers’ REITs. attorneys review condo-offering plans 14 are“Everyone 1,000 feet wants or taller. to learn more about Owen,” Goldfarb withThe information company on is sway-preventingregarded as a smart, dampers. yet careful Plus, she player said, said.“Never “He isbefore very havenew towe the seen street.” anything like this,” said new “Thethat hasview assets far outweighs like the iconicany concern GM Building about height.” and Boston’s Puzzle pieces Assembling the puzzle pieces for these sky-high residential buildings is another equally complicated challenge and often requires collecting multiple sites (sometimes dozens) along with air rights. Not only does that process require adroit negotiating skills, but it also takes serious patience. Barnett, for example, spent 15 years assembling the site for One57, originally starting with a plan for a 300,000-square-foot building. But as the market rose, so did his aspirations. The final product was nearly three times what he had originally planned. “There may be great rewards to New York real estate but you have to have the vision and the patience and the legs to put it together and figure it out,” said Michael Sillerman, co-chair of the land use department at the law firm Kramer Levin Naftalis & Frankel, who along with colleague Paul Selver has worked on many of the 57th Street-area sites. “It’s a very sophisticated game to figure out how to get all the pieces.” He added: “It’s no accident. You look at the cast of characters who end up doing these. These very tall buildings only resulted from the resourcefulness and expertise of sophisticated builders who put these assemblages together.” Barnett, who is widely considered an assemblage master, began negotiating to buy the site for his next supertall, at 217 West 57th Street, around 2003. The complicated land-grab included nearly a dozen different transactions. Meanwhile, spent a decade assembling the site where it is building the 950-foot-tall . It purchased the first puzzle piece, a 20-story rental building that it later demolished, in 2005. And, after a fierce battle, it also bought Extell out of land and air rights to the tune of $194 million. A few blocks east and one block north, the Zeckendorfs also pulled a complicated assemblage out of their hat to develop the 33- unit 520 , which will top out at a mere 781 feet. As TRD has reported, the brothers pieced together six parcels to create the 178,000-square-foot site. They made their first move back in 2005, buying air rights from the Grolier Club and Christ Church, and completed the assemblage in 2013. For his part, Macklowe first got his hands on the Drake Hotel, future site of 432 Park, in 2006. Assembling all of the pieces needed for a top-notch site is a complicated and strategic process. Instead of putting adjacent puzzle pieces together, a savvy assembler will often grab a piece from the far end of the board. Sometimes a developer will snap up rights simply to prevent a rival developer from making a play. The process can also be shrouded in secrecy as some purchase these sites through LLCs to hide their identities. “You try to get what you can and tie it up,” said air-rights expert Bob Shapiro, who has worked on a number of high-profile assemblages such as 432 Park. “Someone like Macklowe doesn’t think linearly. To Harry, it’s a chess game, a three-dimensional chess game.” Recently, some top developers have also looked to the baron businessmen of a different age for inspiration, creating “vertical tax lots” — which railroad magnates used in the late 19th Century when they assembled the subterranean real estate for projects such as and what is now the Metro-North line. These vertical tax lots simply exist on paper, acting as a sort of virtual lockbox or cloud for stowing air rights. Kramer Levin’s Sillerman said using these vertical tax lots is a “relatively new innovation” when it comes to assembling development rights for tall towers. developer to tear the top down before the two sides hammered Barnett used one to store the rights he was collecting for out an agreement. Central Park Tower. That was particularly crucial because a Next up was ’s 861-foot-tall Trump World number of the sites he purchased air rights from were separated Tower near the United Nations, which opened in 2001. from his development site by the landmarked home of the Art While these buildings pushed the height envelope, it wasn’t Students League. Yet Barnett “stationed” his vertical tax lot until One57 that the 1,000-foot marker was passed in the over the art institute’s property, allowing him to complete his residential world. assemblage. Pushing prices Shorter shoulders Not surprisingly, these sky-high towers are also shooting for sky- Developers, of course, are not just building tall for the sake of it. high sellout prices. They are doing so to create buildings with sweeping city views, One57, which launched sales in 2011, has a projected sellout of which bring them higher prices for their apartments. $2.39 billion. But while it now has about 70 percent of units sold, And, the higher that buildings in one particular area rise, the there is more competition entering the market and sales have taller the next developer must build in order to best those views. cooled off. While One57 — which sold a record-high $100.4 million Meanwhile, Vornado’s 220 Central Park South, which has penthouse — was the first building to cross the supertall raised its total sellout five times since the beginning of 2015, threshold, it was actually Forest City Ratner’s 8 Spruce Street that now has a projected haul of $2.99 billion. Its penthouse alone ushered in a new era of tallness for this economic cycle. will ask between $150 million and $175 million. “It’s four stories The -building became the city’s tallest residential out of the ground, and I’m saying it’s stunningly successful, and tower in 2011 when, with the help of some $200 million in federal it is,” Vornado CEO Steven Roth said in July during a company bonds, it reached its peak of 891 feet near the foot of the Brooklyn earnings call, when he also predicted the project would hit $2 Bridge in . billion in sales by the end of the year. But all of these towers stand on the shoulders of their shorter There is also a wave of new supertalls coming down the pike. predecessors. The race to the sky took off in force in the late Developer Steve Witkoff, along with Douglas Elliman’s 1920s, and arguably would have grown even fiercer were it not for Howard Lorber and other investment partners, plunked down the . $650 million two years ago to buy the Park Lane Hotel on Central In 1927, the Sherry-Netherland Hotel — which both Park South. They are now planning a roughly 1,200-foot-tall hotel rooms and apartments — became the tallest when it opened tower overlooking Central Park on Billionaires’ Row, where the at the southeast corner of Central Park at 560 feet tall. It did not number of development sites is quickly dwindling. hold the bragging rights for long, however. Just four years later, in “Everybody wanted that site,” said Roy Kim, a new- 1931, the Waldorf Astoria, which also has apartments, topped it development specialist at Elliman who looked at the property by 65 feet. when he worked at Extell. “If you could ever describe a blue-chip After that, another 51 years passed until another apartment site in the city, that would be it.” building topped the Waldorf: In 1982, Macklowe’s Metropolitan Other 1,000-foot-plus towers in the works include the Related Tower clocked in at 716 feet. Companies’ , the MoMA Tower on West 53rd Five years later, Eichner bested that with his 814-foot CitySpire Street and Michael Shvo’s — which was on 56th Street. Eichner infamously constructed 11 feet originally announced at 1,358 feet tall but is now considering taller than allowed, and the city threatened to force the a haircut. Meanwhile, Barnett has at least two more supertalls in the Benaim noted that PMG’s tower — a rental-condo hybrid works. He’s said to be putting together another assemblage at 123 — benefits from a low basis because the developer acquired a West 57th Street with air rights left over from One57 that could large block of air rights from the Metropolitan Transportation result in a tower somewhere around the 1,000-foot mark. Authority. “With those tall heights, the construction costs are And in August he bought a stake in C&K Properties’ super-expensive. You’d have to average [condo prices] of $1,500 or development site at 1710 just south of the swanky $1,600 a foot,” Benaim said, adding that condo prices in the area Billionaires’ Row, which is shovel-ready for a 1,000-foot mixed- now average about $1,100 per foot. use skyscraper. Developer Izak Senbahar, whose Alexico Group is building 56 Leonard in Tribeca, agreed with Eichner that there will not Next Billionaires’ Row? be many more 1,000-foot-plus towers in the cards for a while.“At With land on Billionaires’ Row scarce and land prices in prime this point I don’t see the demand for even higher buildings. I Manhattan through the roof, developers are looking further afield think that for somebody to come and say, ‘I’m going to build even for their next mega towers. higher,’ it may be a little bit of an ego play,” he said. They are indeed turning to unlikely parts of Manhattan and to Still, whenever the next tower does break the height record, it the outer boroughs. will be sure to have one thing in common with its brethren. “It’s Carol Willis, director of Museum, pointed to views, and that’s the thing that will make these slender towers pop Extell’s 800-foot tall 250 South Street in the neighborhood by the up around the city,” Willis said. foot of the Manhattan Bridge. While the building’s height is short of the supertall mark, it does exemplify how the demand for views Correction: A previous version of this article incorrectly stated the is transforming the development landscape. “It’s an astonishing number of units in 520 Park Avenue. The building has 33 units. anomaly in the history of real estate to see a building that tall, that much out of the traditional areas of value,” she said. “What is making it worthwhile, presumably, to go 70 stories, is the views.” In the outer boroughs, Michael Stern’s JDS along with partner Joe Chetrit are reportedly in contract to buy a $90 million property in Downtown Brooklyn that, when combined with an adjacent development site they own, could produce a tower as tall as the Building. In Queens, meanwhile, Kevin Maloney’s Property Markets Group and the Hakim Organization are planning the tallest building outside Manhattan in Long Island City. At a projected 915-feet tall, however, the building will fall short of the “supertall” mark, a tough barrier for that neighborhood.“You definitely need the condo market to rise to get that,” said Eric Benaim, the CEO and founder of the residential brokerage Modern Spaces, which has worked on a slew of Long Island City buildings.

A rendering of 220 Central Park South

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