What it Takes to Wear the Crown as New York City’s Largest Office Landlord
SL Green COO Edward Piccinich Provides a Development Update on One Vanderbilt, and a Peak at Investments the REIT's Making This Year
"Everyone wants to know if we are moving to One Vanderbilt. I’ll leave that decision to the CEO," remarks SL Green’s new COO Edward Piccinich when prodded upon whether New York City's largest office landlord will take space in its flagship 1.7-million-square-foot office tower rising adjacent to Grand Central Terminal.
Following 16 years of service with the REIT, Piccinich was elevated to chief operations officer effective January 1. He formerly managed its portfolio as executive vice president of operations and construction.
"Ed tackles the difficult challenges and ensures the portfolio runs smoothly, and we are extremely proud to have him continue to take on more responsibility," SL Green CEO Marc Holliday said of the Piccinich’s promotion, sharing the sentiments of company president Andrew Mathias, who added that, "Ed is someone we can always count on to get the job done, from complex construction projects to implementing new technologies across numerous properties."
CoStar News caught up with Piccinich to hear more about his career and gain insight into SL Green’s agenda for 2018.
CoStar News: Tell us more about the career path that led you to the C-Suite of SL Green.
Ed Piccinich: » I’ve had a 16-year career here, but the springboard would be almost 10 years spent at the Port Authority managing a range of different facilities, from transportation infrastructure to industrial yards. I also managed the former World Trade Center and worked there during the 1993 terrorist attack, in which I lost friends near and dear to my heart. That remains with me.
For six years I worked at J.P. Morgan, which had a satellite office at the former trade center and was fortunate to have gone to an impromptu meeting on the West Coast - who would’ve thought the following day would be 9/11. I found myself at SL Green a few years later and rode through the ups and downs of the stock, from $28/share to $157/share and $7/share. Now our stock has gone back up. (Editor’s Note: SL Green’s stock closed January 17 at $95.07 per share.)
I joined SL Green as head of operations and construction department, overseeing property management and building operations. We expanded into capital repositioning and built a team to handle development from top to bottom. I oversee about half of the 320 white-collar workforce at SL Green including construction, operations, property management, capital underwriting, engineering, IT, HR and administration. SL had a banner year in 2017, so I’m excited to keep moving the needle forward and hiring.
What initiatives are you spearheading on behalf of SL Green this year?
» Emerging cybersecurity trends - identifying and protecting networks. With public REITs, primary security threats and the evolving threats are very broad. We are thinking more strategically and have invested in training for our corporate and satellite offices. We’ve established stricter controls over user activity and made investments from an organizational standpoint. So we are continuing our cybersecurity initiatives through 2018. We are currently conducting a risk assessment for our building systems and our property management systems, holding everyone accountable for cyber awareness and security, including our vendors.
With the building management system and operations system, you have to look at complexities brought by the logic systems of new technologies. These systems are not co-mingled - a lot of people touch them. We are merging quite a number of groups from top to bottom and looking at how we can operate in a more streamlined way, such as strengthening collaboration between our underwriting and capital repositioning teams and communicating with our capital folks. When you take over a building there are also HR considerations - addressing union and non-union building staff and specialties together and rolling them into one number of what it costs to run the asset. So this year we have many different protocols underway in an effort to understand the variety of work space amenities and settings within our portfolio.
What is the status of development and leasing at One Vanderbilt Avenue (OVA)?
» Everyone knows our big-name vendors like Hines and KPF. But we have about 200 professionals on the OVA team supporting the project. With the amount of hands and folks behind the scenes, we have to take ownership and concentrate on how to combine the creativity of our teams in a collaborative way, make sure the right folks are doing right tasks including cybersecurity, and establishing and revisiting standards.
One hundred years ago, Grand Central was built. We want to make sure the design of OVA has all the benefits of advanced systems and connectedness. We are the first building coming up after the Midtown East rezoning. That rezoning covered a 78-block radius [39th Street to 57th Street and 3rd Avenue to Madison Avenue]. Being the first there brings future development opportunity.
The TCO [Temporary Certificate of Occupancy] is scheduled for September 2020. MTA will follow with the completion of Eastside Access and the LIRR’s integration into Grand Central and OVA.
The OVA project is providing $220 million in public transit improvements to integrate the transit connection with 42nd Street / Grand Central station. There will be new entrances on 42nd Street for the 4, 5, and 6 subway lines and the shuttle to Times Square, as well as a new transit wall for access via 43rd and Vanderbilt. We will be responsible for pedestrian-flow corridors and widening platforms and stairs around the building. Within Metro North we will build another area for our occupiers to check commute status.
When we started, we had one of the largest concrete pours ever done in New York City - 27 hours straight. Then in June 2017, we bottomed out the steel. Currently we have erected steel up to the 6th floor. By next December, we will have steel up to the 35th floor. Concrete filling is right behind that, then the curtain wall will follow. One thousand construction workers are on this project and 200 work on the project management side.
With this project we are utilizing a new technology - Tekla software for modeling steel. The technology allows us to identify flaws early in the process to avoid project delays or unexpected costs.
In terms of commitments, TD Bank has agreed to take 270,000 square feet on the sixth floor and on floors 13-18, DZ Bank is taking 35,000 square feet on the 26th floor. Preleasing is on pace to meet our pro forma, we should be announcing new tenants in the near future. Timing has to be perfect - all of the leasing is being done at the same time as we have to meet deadlines for construction loans and budget estimates - it’s all taking place as once. We are chasing large-scale leases but we have the luxury of not needing them, as we have locked floor plates.
The height will be 1,401 feet, the second tallest behind the Freedom tower. Because of ceiling heights our building will be comparable to a 77-floor building. We have super high slabs - ranging from 14.5 to 16.5 to 18 feet, even as high as 20 feet on three to four executive floors.
KPF envisioned a design that respects Grand Central, with views on the 42nd Street side capturing Grand Central and the Chrysler building. The building will feature an observation deck. Daniel Boulud has a restaurant on the second floor. Tenant amenities include a terrace overlooking Vanderbilt Plaza. The designer from the Trade Center Plaza is doing our plaza, which links the building to Grand Central.
As the year unfolds, what are you keeping an eye on in terms of NYC office market trends?
» It should be a great year for our sector. Firms repatriating foreign dollars under the new tax law could amount to trillions coming into the country. The stock market is doing great. All of this basically translates to strong leasing velocity this year.
We are confident and excited - I don’t think people are going to be moving away from New York. Building by building, we are well-positioned. But it is all a case-by-case basis - there are tenants that want to pay $70 per square foot, $90 per square foot or $120 per square foot. Rent roll is one part of determining capital investment you make.
Financial services, legal, media tenants that are looking for large blocks of space - we know who they are and we know who is looking. We will compete, but we have the most diversified allocation of office space and premier locations. Our portfolio has a 96-percent occupancy rate. We have so much to offer in terms of our buildings and we have a very diverse tenant profile.
SL Green is the largest office landlord in New York City, with a portfolio of interests spanning 47.8 million square feet across 118 Manhattan buildings as of September 30, 2017. In light of that dominance, what is the company doing to stay competitive?
» We measure everything. We survey our tenants. We send 30 questions to the 800 or so tenants we have and get them to score us and our buildings. We want to know how they feel. Having an open channel of communication and being aware of what they want is important. When you walk into an SL Green building, everything has been taken into consideration of what the tenant wants. Tenants gravitate to us because they know what type of operation we run.
We are passionate about green energy buildings. When the Mayor called for an 80-percent reduction in greenhouse gas emissions, we were already prepared to meet the targets. The City is going to start posting Energy Efficiency grades at building entrances and we are proud of how we rank.
This is our story - about corporate responsibility. Some just ignore it as a penalty and turn a blind eye, but we are cognizant about the effects on emissions, on climate change. We want to be a leader in sustainability. Our long-term partnerships with the Mayor’s office and Energy Star keep us competitive.
Expenses stem from how well your building is running. We’ve invested $50 million in energy efficiency programs. We are the most sustainable REIT in New York City. That differentiates us.
1185 Sixth Ave. is one of three lobby repositionings we are doing to make our mark. It is scheduled to complete in July 2018. There we are doing an elevator cab renovation, storefront and lobby entrance with new glass and stone. The finishes are based on tenant profile and future profiles - and then you always think, what kind of retailers do you bring in to appeal to tenants?
If you continue to create value, be a market leader and deliver returns to shareholders, and if you are aligning your company to certain standards, then you don’t have to worry about the noise others get distracted by.