NY family reaffirms commitment.
The Durst Organization, now under the day-to-day leadership of the third generation of Dursts, is showing its confidence with a $150 million capital improvement program for the company's eight office properties scattered along Sixth Avenue on the West Side and Third Avenue on the East Side.
"We are of the strong belief that New York has a very positive future," said Vice President Douglas Durst, who with cousins Robert, Josh and Jody, are operating the firm founded by their grandfather in 1915.
The "modernization" program, which will span over the next three or four years, Durst said, includes new elevators, air conditioning system upgrades, lobby improvements and the cleaning of facades.
The improvements are in keeping with what Durst says is the current thrust of the company: Tenant retention achieved through good management.
"If the tenant is unhappy in the building today, they have a choice of so many different locations," he said.
While the company's 4.5 million square feet of commercial space is roughly 95 percent occupied, the company is facing, in May of 1994, a 90 percent lease rollover. Today, one year before that time. Durst said, they already have re-leased 58 percent of that figure and are in discussions for another 250,000 to 300,000 square feet.
"We're not relaxed yet," said Durst, projecting they will be 80 percent released by the time of rollover.
That burden has been eased some by major new lease signings, particularly at 1133 Avenue of the Americas. While Bertelsmann vacated the bottom nine floors of the building after purchasing 1540 Broadway for its new U.S. headquarters, the Internal Revenue Service came in to lease 240,000 square feet in upper floors that will be accessed by a separate entrance. Soon after, the law firm of Patterson Belknap Webb & Tyler signed a 20-year lease for 117,000 square feet.
Like many of New York's real estate families, the Dursts built conservatively in the 80's, adding only 1155 Avenue of the Americas in 1984 and, 114 West 47th Street in 1989. But Durst is not surprised his other buildings, especially 1133 Avenue of the Americas completed in 1968, are competing well with brand-new space.
"We think because we were built in 1968 ... the standards built to then were higher than those that were built to in the 90's," he said. "As construction costs go up, you tend to build much closer to what is required."
And now with the building upgrades, Durst said, his projects are in even better standing.
"The power we have in this building is equal to what we have in the new building," he said in his office at 1133 Avenue of the Americas.
Durst said he sees the commercial market improving with the Sixth Avenue corridor being "much tighter" than the East Side market. Key to that, he said, is that work packages and free rent are returning to more reasonable levels. But before rents can go up, Durst believes concession deals will have to shrink further.
"There's very little in a 10-year deal for a landlord if he isn't getting rent for three years," he said.
Tenants are also finding, he said, that, as they wait, "rents are moving away from them."
But while the market crawls toward recovery, Durst notes, we haven't seen the end of buildings in trouble as many owners face mortgage rollovers.
The Durst Organization is not one of those owners. Their properties are about 95 percent occupied overall and they are relatively debt free.
While the Dursts will not be expanding their portfolio via new development for some time, Durst said, he and his cousins believe this is the right time to buy in New York. But, he finds few opportunities are because of high New York State and New York City taxes, which reduce a seller's return immediately.
"If they would lower them again," he said, "they would increase their revenue."
But, known for its determination to assemble property, the Durst Organization does own a prime under-developed parcel at the corner of 42nd Street and Sixth Avenue. Currently, the space is comprisea of one-story stores with a uniform facade and landscaping.
The Durst Organization was founded in 1915 by Joseph Durst. From the mid-50's through the mid-80's, Joseph's sons, Seymour, Roy and David, held the reigns. Today, a third generation, comprised of Douglas, Robert, Josh and Jody, are leading the way.
"Basically, our generation has taken over the operations," he said.
But, according to Durst, no one cousin is the captain of the ship.
"We work as our fathers and uncles did," he said. "It's done by consensus."
In addition to commercial space, the Durst Organization has also done a number of residential conversions and currently owns some 600 units in Manhattan. Brick Management, a Durst subsidiary, oversees these units.
As a surviving entrepreneur in a sea of institutional owners and managers, Durst said, he can offer tenants more flexibility. Unlike his institutional counterparts, he has a long-term view and he is not bound by short-term projections, he said.
"They have their formulas on how the deal has to pencil out," he said.
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|Title Annotation:||evaluation of Durst Organization|
|Publication:||Real Estate Weekly|
|Article Type:||Company Profile|
|Date:||Jul 21, 1993|
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