David Arena is leading Grubb & Ellis NY to new heights through preparation, focus and creativity

David Arena, president of Grubb & Ellis New York, a leading Tri-State area real estate services and investment firm, is sure of one thing: the impact of the global economic crisis on the city's commercial real estate industry is not unprecedented-just a different variation of prior downturns. In fact, his firm anticipated a slowdown back in October 2007 by analyzing market activity in prior cycles going back to the 1960s. That forecast allowed Arena, 48, and his team to ready themselves-and, more importantly, their clients-for today's turbulence. This focus on preparation and a longer-term outlook is serving the firm well-in Arena's three years at the helm, Grubb & Ellis New York has experienced over a 120% increase in property-under-management and a threefold overall annual revenue increase. The firm is now widely regarded as a serious player in the Manhattan market, climbing five notches in three years to sixth place on Crain's New York Business real estate rankings. Never content with the notion of "summer recess," Arena and his team are focusing on the key drivers of the current market. One priority is understanding the magnitude of and identifying successful marketing approaches for the growing inventory of corporate sublease space. The current market inventory is 16.1 million s/f, which is projected to increase by approximately 20% in the next 12 months. In the past 12 months, Grubb & Ellis was retained to market over 30 corporate subleases in both Midtown and Downtown. Broker teams are currently concluding a combined 175,000 s/f of assignments at 7 World Trade Center and 101 Park Ave. for Royal Bank of Scotland (RBS)-space that RBS inherited and needed to dispose of as a result of the ABN AMRO merger. The firm's recent success, combined with Grubb & Ellis's recent email campaign to its clients and prospects-The Wisdom of Optimism-reflects Arena's confidence that, with the right advice, there is opportunity in this market for tenants, investors and owners alike. We spoke to him to get his take on the market and hear what lies ahead for Grubb & Ellis for the remainder of 2009: Q: First off, how did Grubb & Ellis pull off these major sublease transactions? A: This is a market that rewards research, experience and sound preparation. A good sublease strategy begins with good market research, understanding clients' financial goals and the impact of write-downs on corporate balance sheets, properly and creatively targeting demand as well as effectively negotiating with prospects and the affected landlords. We could complete these transactions because we have the best team in the city-research, brokerage and marketing-as well as our own technology and property management experts, who lend us their expertise regarding the value and re-use of existing infrastructure. We also owe a lot of our success to our partners-our clients. They are grounded in reality, but open-minded and trustworthy when it comes to taking our advice, and they base their actions on a sound and sober assessment of the market. Q: How is this any different from the work of your competitors? A: Our competitors were saying back in March and April that the majority of the city's sublease office space was "unleaseable" (one report from CBRE even said 70% of sublease space would not be able to be moved). We found that with accurate pricing, the right case-by-case negotiating approach, and carefully targeted marketing strategies, we are able to sublease space successfully for our clients. Unlike many of our competitors, we're a smaller and more nimble company, which is intentional. We take advantage of our ability to quickly make and implement a decision-and revise it when called for. We collaborate across business lines to get our clients the best advice-so brokers rely on property management experts for accurate infrastructure and operating cost data, management professionals rely on brokers to get their landlord and investor clients accurate pricing and demand information, and capital markets folks track investment demand, risk tolerance and the cost of capital to inform a wide range of customers. A market like this requires this kind of comprehensive view. In addition, on average, our brokers and experts have more experience than our competitors-most have succeeded through at least one downturn if not two or three. They have valuable personal experience to contribute to every client situation. Q: Why are you bullish on real estate in this time, which is quite possibly the worst market in decades? A: I'm bullish, but grounded. This is still a market of supply-and-demand; it's just more supply and less demand and at lower prices than we're used to. The market didn't disappear-it shifted. For example, investor interest and capital hasn't disappeared, it's building on the sidelines. The investment side of our business-which invests institutional and private funds in real estate assets and structured real estate products-is successfully raising significant funds every quarter in anticipation of terrific buying opportunities. Clients-investors, tenants, owners-need sound advice so they know how and when to respond best to this market. Transaction activity will follow. Q: You've been at Grubb & Ellis New York for three years now. What are your goals for the firm? A: I enjoy my job more and more each day, because things are always changing in New York City, and with change comes challenges. My goals are to meet these challenges, and, over the long-term, to continue to build a great team and maintain our firm's momentum. In the short term, one challenge we're meeting and goal we're exceeding at Grubb & Ellis is building relationships with international investors who view this market as their time to invest in New York City office properties. We are not only spotting investment opportunities on their behalf, but they see us as a resource to raise capital and as a safe pair of hands to manage their investments. We are seeing interest from London, South Korea and China-in fact, our China practice is experiencing significant activity. I also recently met with executives from a sovereign wealth fund, who are breaking into New York City for the first time, and we've heard from investors in other countries throughout the Middle East and Asia. I expect a good portion of our future business to come from international investors. Another major goal is to be part of the solution for the distressed property market. We have assembled a strong team across the country to help owners and investors dispose of troubled assets. We recombined our services and the talent of our existing professionals to address every aspect of the business-from initial valuation and operating due diligence, to positioning, marketing, financing and sales. Our approach was just validated by a major financial services firm who chose us as one of three providers to dispose of portfolio assets. We look forward to building our client list and doing our part to restore some liquidity to this market.