Earlier this month we represented Tiger Infrastructure Partners (a seed fund of Julian Robertson’s Tiger Management) in a renewal at 717 Fifth Avenue.
The best brokers at CBRE often say that business always comes before the real estate. A key component of our job as real estate advisors is to help our clients align the two.
For various reasons specific to their business, the principals at Tiger thought it would be best to structure a short-term extension. However when we (myself and my partner, Ben Friedland, who has represented Tiger for many years), called the building agents to discuss this possibility, we were told that the only extension Tiger could do in the building would be to a fixed date of June 30th, 2021.
Why?, we asked. Between signing our last lease and our upcoming lease expiration, Anbang Insurance Group purchased 717 Fifth Avenue from Blackstone. In the brokerage community it has been rumored that Anbang is exploring the possibility of converting the building from office to a hotel or residential use. Given their desire to preserve flexibility for the building, Anbang instructed their agents that the only lease extensions or new leases able to be signed in the building would be through June 30, 2021.
Got it – Anbang won’t let a tenant extend beyond June 30th, 2021, but why wouldn’t they consider a shorter term renewal where they still could collect rent on the Premises AND maintain flexibility? Unfortunately, no one knew (in this case, there were likely discussions in China that were not made public to the agents on the ground in New York.)
Thinking that we couldn’t extend in the building for any term shorter than June 30, 2021, we toured 10 relocation alternatives and ended up short listing 780 Third Avenue and 410 Park Avenue. In dramatic fashion, the same day that we submitted a proposal for 780 Third, we got a call from Anbang’s agents that ownership would now consider a short-term deal. Since Anbang had gained a reputation in the market as being unpredictable and sometimes irrational with their leasing, we acted quickly on this new message and agreed to terms within two weeks. Other than the new rent to reflect new market dynamics, nearly everything about the lease stayed the same except that the size of the Premises increased. As I wrote about in this post, when buildings are sold the new landlord always remeasures the floor to make it consistent with market loss factors. Despite no change in the actual usable square footage, the rentable square footage of the Premises slightly increased.
While the process was unusual, ultimately this was a great outcome for Tiger as they were able to negotiate a short-term extension to allow their business needs to fully develop without any business disruption or other costs sometimes associated with a move (e.g. furniture, IT/wiring, etc.)