Square Feet | The 30-Minute Interview: Scott Rechler
January 9, 2011
The company was formed after the 2006 sale of the Reckson Associates Realty Corporation, where Mr. Rechler served as the chief executive, to SL Green Realty in a deal valued at $4 billion.
Interview conducted and
condensed by
VIVIAN MARINO
Q Looking back, your timing in the Reckson sale was pretty good, no?
A We sold at the best time — two weeks before the top of the real estate market on the commercial side of things. We felt that the market was speculative and overpriced.
Q The deal with SL Green allowed you to buy back suburban buildings, though you’ve waited to buy or invest in anything else.
A We had a noncompete agreement for Manhattan — I think it was for a year — and so we sat out.
By the time the noncompete ended, the market still wasn’t at a point where it seemed attractive enough for us to come back in. It was probably in August 2009 that we began to actively invest again, and then, subsequent to that, have grown the business by buying into the city and buying debt around the tristate area.
Q How big is your current portfolio?
A It’s about $4 billion worth of assets; it’s about 11 million square feet right now.
In the city we started off by buying debt — with the view that we’d ultimately be able to get to the real estate. Then we bought a partnership interest of 340 Madison Avenue with Broadway Partners, and now 1330 Avenue of the Americas.
Q Are you satisfied with the $400 million sale price for 1330 Avenue of the Americas?
A I haven’t bought a building in Manhattan — ever — where it hasn’t felt as though I’ve overpaid or underpaid. But time tells.
I’m a big believer in Midtown and of buying big discounts for replacement costs, particularly for trophy buildings like 1330, with its Central Park views, great location, boutique-type floors, great renovation.
Q How much debt will you have?
A It’ll be less than 50 percent.
Q And what are your plans for that building?
A Harry Macklowe bought it in 2006, began a renovation plan before it was foreclosed on, and we’re going to try to finish what he didn’t finish, particularly at the plaza. We’re going to redo that plaza and even add some distinctive fountains. We’ll do some more prebuilts upstairs. It’s an 800,000-square-foot building; we have about 200,000 square feet available.
At Reckson, we owned 1350 Avenue of the Americas, which was a block up from this building, so we know that area extraordinarily well.
Q Was it bittersweet letting 1350 and the rest of Reckson’s Manhattan portfolio go?
A It was definitely a bittersweet sensation, but once you make that determination, then it’s about executing as best you can — and rebuilding the company.
Q Would you ever consider making RXR a public company like Reckson?
A Maybe one day we might go public, but that’s not in the near-term horizon for us right now.
Q What are your plans for 340 Madison?
A We’re the day-to-day manager here. We have the top floor still open — about 30,000 square feet available. We actually have been holding it off the market because we’ve seen the rents climb. Once you sign a long-term lease, you’re locking that in. While we’ve talked to people, we’re holding pretty firm on pricing.
Q Are you pretty bullish on Manhattan’s office market over all?
A Yes, definitely, particularly for Class A buildings in Midtown. We have a very strong belief that you’re going to see — and have already started to see — accelerated rent growth. I don’t know if that’s going to be 12 months, 24 months or 36 months, but there’s going to be somewhere in that period a meaningful spike, because demand is coming back into the marketplace and supply has been really constrained.
Q Where do you expect RXR Realty to be a year from now?
A From a portfolio standpoint, I think we’ll continue to be investing in Manhattan. My guess is our portfolio will be at least twice the size that it is today in Manhattan, because we think we’ve been planting seeds and buying the debt and preferred equity, and I think we’ll continue to do that in other transactions that we’re working on along the way.
Our objective over the next 12 to 24 months is to be the same size we were when we sold. I think this is a good point to be in the market.
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