When in 2006 the real estate investor Joseph Moinian bought the office building 475 Fifth Avenue in partnership with the firm Westbrook Partners, the Eurasia Group—a tenant in the building—saw it as an opportunity. The company had years left on its lease, but word quickly spread among tenants that Mr. Moinian was going to offer handsome buyouts to empty the building so he could gut renovate the skyscraper and re-lease it at sky-high rents.
Mr. Moinian’s strategy hardly seemed audacious at the time. The economy was hot, Manhattan rents were rising by the month and prime office space was in strong demand.
149 Fifth Avenue. (Courtesy Property Shark)
Having grown rapidly since it moved into 475 Fifth Avenue, the Eurasia Group was flying high too. Executives at the firm were ready to take the money and use it to relocate into a larger office that could house the company’s expanding staff.
But as is often the case in both life and New York’s unpredictable real estate market, things didn’t go as planned. Mr. Moinian wound up buying most of the tenants out of their leases at 475 Fifth and embarking on a thorough overhaul of the property. But before he came around to a deal with the Eurasia Group, seismic obstacles knotted his plans. The economy collapsed, the real estate market tanked and Mr. Moinian’s grand vision for the property became one of the many unfortunately timed projects whose economic underpinnings rested on market conditions that had suddenly vanished.
Buyouts stopped and construction froze almost overnight. With little hope of leasing space at the rates necessary to justify the project’s cost, Mr. Moinian and Westbrook eventually were forced to walk away from the building, turning the keys over to the lender, the British bank Barclays.
The Eurasia Group couldn’t as easily be rid of the situation. It found itself in one of the most uncomfortable scenarios a tenant can experience: captive in a building with no true owner. Despite the horror stories of suspended services and maintenance so associated with foreclosures, Alec Allenstein, the Eurasia Group’s chief operating officer, said Barclays remained a responsible steward of the property.
What was problematic was the condition of the building after months of unfinished construction. Namely, 475 Fifth Avenue’s once beautiful lobby had been stripped down to the cinder blocks.
“We had this beautiful Art Deco lobby with glass and marble that we loved and it had been taken down to the concrete,” Mr. Allenstein said.
Being one of the sole occupants in an otherwise nearly vacant property was also eerie. “Going up to our floor, it would kind of feel a little shaky,” he said, noting the elevator’s sparse use.
The Eurasia Group put its head down and continued with its business. The firm consults with financial clients and other companies, providing analyses on the spectrum of risks associated with investing and operating businesses in foreign markets. Considering world events since the economic downturn, the firm has been thriving in recent years. “We added 44 people in 2011 alone,” Mr. Allenstein said.
The company’s success only heightened the inconvenience of its situation.
“Imagine being the head of recruiting here and every time you’re bringing in a candidate you’re telling them the address and warning them not to worry, they’re not stepping into a bombed out building,” Mr. Allenstein said.
Alexandra Lloyd, Eurasia Group’s director of communications, added: “We would joke with people that the building was going for industrial chic.”
In recent months, with the firm’s lease set to expire, it had one criterion that stood above all others in its search: a secure landlord.
The Eurasia Group tapped Nick Berger, a young executive at the real estate services firm Newmark Knight Frank, to head up its search. Mr. Berger knew what the company had gone through. He’d been a leasing agent at 218 West 18th Street, a building near Union Square that likewise was almost fully emptied during the boom years to undertake a plan to remake it into a higher end property. And, like 475 Fifth, that building also ended up in foreclosure.
Mr. Berger faced a tough challenge. The real estate market has tightened substantially since the recession. And while that meant fewer problem landlords, it also led to lower vacancy rates.
“A lot of the spaces that are out there right now have been picked over. They’re not the best offices,” Mr. Berger said.
Mr. Berger stayed focused, and his ears perked when he heard about a tenant at 149 Fifth Avenue whose brokers were putting out feelers to see if they could find a company to sublet the space. Mr. Berger kept track of the situation. The company, Cadogen, an investment firm, ended up ceasing operations. Instead of waiting to see if the space would become available, Mr. Berger approached the landlord. He knew that if there was one thing both the Eurasia Group and 149 Fifth’s owner would immediately appreciate it was stability.
“This was a space that wasn’t on the market and never hit the market,” Mr. Berger said. “But I knew that the landlord might be interested in a strong tenant like Eurasia.”
The asset stands in the heart of the Flatiron district, a neighborhood in Midtown South, not Midtown, where 475 Fifth Avenue is situated. The shift, however, was not a problem.
“When we started the company, our first office was in Midtown South so it was a neighborhood that we felt comfortable with,” Mr. Allenstein said.
A lease was quickly drawn up for 22,500 square feet, all of floors 14 and 15. The space is twice as large as what the company occupies at 475 Fifth.
“The family that owns 149 Fifth has put work into the property, has fully leased its space to a host of high-credit tenants and has very little debt on the asset,” said Jason Greenstein, who, like Mr. Berger, is also an executive at Newmark Knight Frank and is 149 Fifth’s leasing agent. “So demonstrating that this was a landlord in a very strong and stable financial position was not difficult.”
Included in the building’s overhaul in recent years was an upgrade to its lobby, a renovation that did not go unnoticed by the Eurasia Group’s executives.
“My due diligence told me that this was an owner that wasn’t heavily leveraged and that gave us the sense of stability,” Mr. Allenstein said. “Plus having a nice lobby again sure will be nice.”
dgeiger@observer.com