Michael Pilevsky: Aesop’s Fables has a role to play in the real estate world
Michael Pilevsky, Co-President of Philips International, has adapted the moral of a certain tale to provide some perspective on his approach to buying, selling, and managing properties.
“There are actually several different versions of the Old Man and Death story,” Pilevsky said. “They all have the same moral – ‘be careful what you wish for’. I’ve had some experiences where this idea has played out and it has taught me to take things in stride, as you never know when what looks like a win turn out to be a loss and vice versa.”
Check out the library
One of his favorite examples involves a building owned by the New York Public Library in midtown Manhattan. Philips International was renting an office, also in Manhattan, but the preference of the principals was to relocate into a space that they would own rather than be a tenant in someone else’s building.
“For much of his career, my father, Philip Pilevsky, had owned his own office space,” Michael Pilevsky explained. “Although we gave that up in connection with selling certain office assets, we ultimately determined that owning our own space was better for the long-term health of our company, Philips International. So, we started looking around; but we had very specific, limiting criteria. Our perfect location would be in midtown, north of 34th, south of 42nd, west of 3rd, and east of 6th.”
“Easy to find, right?”
Eventually, something opened up. The New York Public Library owned an office building that they were willing to sell. The library’s plan was to sell the building and lease back four of the six floors. The library would stay in place, but with a smaller footprint.
“It was on 5th Avenue with an entrance on 39th Street,” Pilevsky said. “It was within our boundary, there was a built-in tenant, and we would have two floors for our own occupancy. It really was a perfect situation for us.”
“Working through a broker, a tentative deal was reached – or so we thought – at a price point we felt comfortable with.”
Location, Location, Location vs. Cost
Following a library board of trustees meeting, the broker contacted Pilevsky. The good news — the building was still available. The bad news — the selling price had leaped by almost 70%.
“In my view, the number was just too high,” Pilevsky said. “We were not prepared to stretch that far. As a result, the library chose not to sell. It was hard because not only did it fit every one of our criteria, but we were also going to get a great tenant in the process. The New York Public Library would have been a stellar addition to Philips International’s tenant roster.
“I was devastated that we lost out on that opportunity. Actually, ‘devastated’ may be too extreme of a description; I was really disappointed that we missed out.”
Be careful what you wish for
A few months later, the COVID pandemic turned the world upside down. Workplaces cleared out as people started working remotely. Philips International was no different. Its 25,000 square feet of leased office space on Madison Avenue was nearly empty.
“We had only a few people coming into the office every day, mostly just to deposit checks and complete critical tasks,” he said. “Otherwise, our team was completely remote.”
The Manhattan real estate market overall took a big hit and the office market wasn’t spared. Philips International decided to move its home office out of Manhattan and into a building they owned in Long Island.
“At first, it looked like a real loss to me,” Pilevsky said. “In retrospect it was a huge victory. If the price had not changed, we would have bought it, made an enormous investment, been stuck with an inordinate amount of unused space, and would not have been able to move our headquarters into Long Island. Instead, we were able to move on with our business in a much more efficient and productive way. For now, we love being in Long Island and so does our team.”
“The moral here is to take things in stride and realize that a loss may really be a disguised victory, or a victory may really be a disguised loss,” Pilevsky said.