Marx Realty’s Craig Deitelzweig on buying office buildings, amenities to attract office workers, more

May 6, 2022

10 Grand Central

By Adam Pincus

Craig Deitelzweig joined Marx Realty in 2017 as president and CEO, and is responsible for repositioning the existing portfolio of 67 properties as well as expanding it, with a focus on value-add office investments in three core markets: New York City, Washington D.C. and Atlanta.

Marx Realty owns commercial properties nationally, including 19 office and retail properties in New York City including 10 Grand Central, 545 Madison Avenue, 430 Park Avenue, 201 East 57th Street and others in Tribeca, the Bowery, Williamsburg, Soho, and elsewhere.

The interview has been condensed and edited. The questions have been edited to provide more clarity. This 30-minute interview is available on our YouTube channel in its entirety.

Q: What kinds of properties are you looking to buy?
It’s going to be a really wide range our range, [it] would be from like $100 million to $2 billion. So it’s a broad broad range and if it’s $100 million it would have to be a special boutique type building that just really speaks to us.

Q: Are you looking at only office buildings to purchase?
We also are looking at hotel properties to convert those to office. So we came very close to one of those deals with a lender and then the lender decided to give their borrowers some more time.

Q: What building characteristics are you looking for?
If it has all the ceiling heights and the column spans and views and location, then you’re able to [rehab it in the Marx Realty style], but there are some buildings that you just look at and it doesn’t have a prayer.

Q: What’s a property you bid on and lost?
Some of the properties we looked at and bid on were 360 Park Avenue South. That was really the last one that we liked a lot. [Boston Properties entered a joint venture with the existing owner, Empire Asset Management, in December 2021, valued at $300 million.]

Q: What kind of criticism have you heard from brokers?
Brokers were telling us [that] we’re not going to attract a good portion of the market, those conservatives — the law firms, the accounting firms, the insurance companies — and what we found was actually the complete opposite.

Q: Do the amenity investments lead to higher rents?
At 10 Grand Central on our lower floors we just got two floors back, the rents were in the $30s which is insane and we just did a deal there for $67 and we think the next one will be in the $70s. So if we hadn’t done this type of hospitality-infused experience maybe we would have gotten rents in the $50s.

Q: How much more per foot on average?
You will get at least ten dollars a square foot more by doing [hospitality-infused design]. It’s very real, it’s very worthwhile to do.

Q: Can you compete with the Plaza District towers?
We’re competing with buildings that historically were the ones that were the “club buildings,” whether it’s 667 Madison, the GM Building… we have tenants from those buildings that have come to us recently, and those are “view” buildings so they’re giving up a view of central park to be in a building that has more of an experience to offer.

Q: How much are you investing in the 10 Grand Central penthouse, and what are rents?
At 10 Grand Central we have a penthouse collection which is five floors. We leased one of them, we have a lease out on the second one and then the others will be together as a group. One of the floors is our mechanical floor which has 24-foot ceiling heights. It’s really remarkable and we’re putting all the mechanical above that and then that floor will have two terraces, one of the terraces will be made into a solarium.

So the investment is about $8 million dollars and then the rent, we’re marketing it for for $140 but we’ll probably get something closer to $120.