Weekend Interview: L&L Holding COO Jamil Lacourt On Stark Office Realities, Mixing 'Church And State' In CRE

This series goes deep with some of the most compelling figures in commercial real estate: the dealmakers, the game-changers, the city-shapers and the larger-than-life personalities who keep CRE interesting.

Over the last few years, NYC’s office market has been a source of pessimism, worry and nightmarish headlines for commercial real estate professionals as the pandemic hacked away at office revenues.

But L&L Holding Co., one of the city's most prolific builders of workspaces, had big plans when Jamil Lacourt joined in early 2020 — and the firm wasn’t planning on letting the coronavirus get in the way.

At that moment, L&L was in the midst of completing 425 Park Ave., the 670K SF, 47-story building anchored by Ken Griffin’s hedge fund Citadel that recently refinanced to the tune of almost $1B. It was also preparing to kick off plans to transform Terminal Warehouse, a historic full-block storage facility in West Chelsea that L&L has since converted to office space, and expand in South Florida.

Now, it seems L&L’s bets have paid off: Its operating portfolio in NYC is 93% leased, according to a company spokesperson. Monday through Friday, those same buildings average 72% occupied.

However, those figures don't include the still-under-construction Terminal Warehouse or L&L's West Chelsea Ironworks development, which are seeking their first tenant — although Lacourt said the firm expects to announce a major deal by the end of the year.

Lacourt, who is now L&L's chief operating officer, sat down with Bisnow at 425 Park to talk about how L&L is evaluating the city’s office market now as well as how the company is thinking about its future in a fiercely competitive landscape awash with maturing loans, high borrowing costs and a less-than-predictable supply of future tenants.

This interview has been edited for length and clarity.

Bisnow: We’ve seen an uptick in leasing over the past few months, but that’s followed a difficult few years for the office market and there’s no signs that it’s definitely out of the woods yet. What’s your assessment of NYC’s office market right now?

Lacourt: I think it's forever changed. I don't think it's ever going to be what it was in 2015 or in 2013. History repeats itself, but it comes back in a different form. It looks different, it feels a little different.

Unfortunately, we have to use that word Covid. That happened, and a lot of organizations asked, ‘Do I have too much space? Do I have the right amount of space?’ But a company still has to make money, and I think people have to be together for a certain amount of time in order to achieve that.

So I don't think the office market will ever be what it was before, because I think these major institutions are going to look at their real estate portfolio very differently. It's just not going to be the same. We're not going to see these towers just going up left and right like you did a decade ago. 

Bisnow: So you see the near- to mid-term future in the New York City office market sustaining some demand, but that demand being more limited than it had been in the past, meaning less new construction?

Lacourt: Correct. You're always trying to find the right equilibrium: How much do I need to build? How much can I fill this space? What is it going to cost me to build it? Can I actually build it to the price point I need to make the returns work? It's a whole machination of things that go into underwriting. We've seen the tech firms go through it. They went out like gangbusters and leased millions of square feet. You've seen them retract on that. So it's very hard to tell. The market is very cyclical, as we've seen for the past 100 years.

Bisnow: Does the way that tech companies have behaved make you hesitate?

Lacourt: I think it would make anybody hesitate, even outside the real estate market. If you look at the Nasdaq and the stock exchange, who are the big players that dominate these markets? It's a lot of technology. Right now it's a lot of AI. Do I think that technology firms move the needle a lot? They do. And they are going through their whole cycle right now as to what the world looks like for them. How they compete with each other? How do they continue to dominate market share? So, do I think we follow some of their decisions and trends? I think we do.

Bisnow: Even outside of the tech sector, if you're looking at the ways that certain industries have behaved as tenants, does that add to your uncertainty — and perhaps hesitation — around building or acquiring new properties?

Lacourt: Yeah, it absolutely does. Because the first thing that a lender is going to ask you is, “Okay, you're going to build XYZ building, you're forecasting XYZ rent, we haven't seen that rent in the market, who do you think is going to pay the rent? Where are they coming from?” Things are sitting on the market for a year, they haven't been leased. The capital markets, the people that are actually going to give you some of the equity to build these things, are asking all those questions. Back in 2014, everybody was riding these tailwinds of the economic environment. Now, interest did what it did, things cost a lot more, Covid happened and you’ve seen a significant drop in tenancy. So absolutely, it gives you pause.

Bisnow: Do you think or have you found that lenders are being more hesitant as well?

Lacourt: 100%.

Bisnow: How have you navigated that?

Lacourt: We're not coming to the lender and saying, “We forecast $200 a foot on the rent, and now in the market I'm only getting $125.” We've had demand at our price point. If you have a good track record, you have good partners, you've executed on the business plan, you have a good vision, you'll be able to do it. If you're going in there and you don't have a good vision, you don't know how you're going to bring the people to the building, it's going to be a lot harder.

We’ve done some crazy stuff at L&L. If we came to lenders and tried to raise money around that today, I think a lender would be like, “Why am I going to go so high-risk right now when the cost of capital is so high for you?” At 425 Park, we took it down to 25% and then rebuilt on top of it. If we went to market today to do an intervention like this, we would probably get laughed out of the room.

Bisnow: What’s your advice to office owners who are facing maturities?

Lacourt: You have to figure out what the art of the possible is. You have to find a common interest. The loan servicer wants you to pay the debt, that's what they are in business for — they loan you money and you pay it back with interest. The [limited partner] is giving you equity because they believe in you and that you're going to actually give them a return. And then you have us. We also put equity in the deal, and we want to make fees, and we also want the profit to be accretive and make money. It’s going to become very complicated in buildings that are just not the greatest product to lease.

We wouldn't throw good dollars after bad. If a building is 50% leased and our cash flow is just enough to pay our real estate taxes and operating expenses, but it’s a good building and we know we have tenants that could fill the floors, we negotiate with them. That, to me, is good news dollars. We'd pump money into that building all day long.

On the flip side, if the building's 80% vacant, I have two tenants that can only take a third of the building and we have got to put in millions of dollars of equity just to do [tenant improvement] commissions to get the tenant in, that's when you have to analyze what you do. Do you look at a conversion? Do you look at a sale? Do you look at restructuring the capital stack? 

There is no script. This has never occurred. There's no playbook. Even in the Great Recession, we weren’t dealing with what we're dealing with now.

Bisnow: Are there any properties that you currently own that you’re interested in converting? Or properties that you’re interested in acquiring for conversions?

Lacourt: No, not currently. We are looking to acquire, not specifically for conversion, but because we are still believers in the office market. 

Bisnow: Is right now the moment to strike, if you’re looking to make office purchases?

Lacourt: Yeah, if you’re sitting on powder. You have to be a believer in New York, which a lot of us in the New York City real estate industry are. The city has kind of always rebounded. You have buildings that are performing well, even in this environment, because it's all cash flow. If it's leased, I'm getting revenue, it's in a good location, it's a good product … You have to find that moment in time where the existing ownership wants to exit, for whatever reason, who knows what it is. We are very interested in buying those types of assets.

Bisnow: You started out as a project manager, first in hotels and landmarked properties then in hospitals and banks. How did your past jobs in construction management prepare you for your current role as chief operating officer?

Lacourt: I came out of school and worked for a contractor just as a builder, I was a project manager. I didn’t know what I was doing, everything I learned really was through experience. I went to school for architectural engineering. I worked in the industry during school, and somebody told me, “Hey, you should get into construction management, it pays a little bit more.” And my school created that program, so I worked for a construction company and I was just very observant. I was like, “OK, I'm working for the owner. Who manages the owner?” And that’s how I got into owner’s rep.

Then, in 2016, I met David [Levinson] and Rob [Lapidus] through previous colleagues and friends. We were given the opportunity to create a new business venture, OC Development, which was project management and construction. That's like the antichrist in New York because you don't mix church and state, but we did it successfully. That was my first step into how you create, develop and run a business. I never went to school for an MBA, that was my MBA.

Personally, throughout my career, I was always like, “What can I do or what am I going to do to get out of my comfort zone?” A mentor of mine a long time ago said the worst time to leave a job is when you're miserable at that place. I never left a company when I was unhappy at a place, but when I was really happy at a place because I was like, “I need something to get me out of my comfort zone because I want to continue to grow.” For me, I never really chased dollars in my career. I always chased the experience, I wanted to drink and swallow and eat and just inhale that experience as fast as I possibly could and as broad as I possibly could while interacting with as many people as I could.

Bisnow: We’ve previously chatted about NYC CRE’s heightened need for public and private sector collaboration, given the health of the office market and the city’s reliance on property taxes as a source of revenue. If you were in charge for a day, what changes would you introduce?

Lacourt: Developers could do more, even given the economic climate in the capital markets, if there were better incentives given to developers in tax abatements and things like that. That does move the needle significantly.

I think the city is doing this. The mayor created City of Yes. They've been very thoughtful in how they've done this. They looked at what processes are taking too long and what hurdles are preventing developers from actually moving off the start line.

Where I think rubber meets the road right now — you have all these loans maturing, you have developers that need to continue to grow a pipeline. But when we're prevented from doing that because of the capital markets environment, where the city was making positive steps to a better future, we don't have the runway of time to wait. Something else needs to happen now, immediately.

They tried with this new 485-x to bring more affordable housing. That's out there, it could work for some developers. I think it may not work for others. And then we have these zoning changes that need to happen.

Bisnow: You’re on Mayor Eric Adams’ Get Stuff Built Advisory Board. What are your responsibilities there? What insights can you offer to the public about how that board works and what its aims are?

Lacourt: A big one was giving us transparency as to all the initiatives they're working on to really move the needle a little bit. We're allowed to opine on that. That's public information. Everybody can see that information, but they really use industry experts to inform their decisions.

Bisnow: Zooming out, what do you think are the biggest challenges facing NYC’s CRE sector this year?

Lacourt: The biggest challenges are stabilizing the portfolio. Whatever has happened has happened. Time has given us more data, and we've kind of resolved those issues. But I think probably some of our other competitors still have a bigger portfolio than us. The biggest challenge is going to be the workouts that they're able to do.

The other problem we're probably going to see is that lenders are not in the business of taking back possession of real estate. So you're probably going to see lenders that have taken back an asset and now need to figure out what to do with this asset. But I think there's going to be emerging opportunities for people to come in and manage those buildings. 

Bisnow: What’s your boldest prediction for commercial real estate?

Lacourt: We're going to be in very good shape at Terminal Warehouse. We're probably going to announce a very big deal in the third or fourth quarter. 

Bisnow: Finally, this is the Weekend Interview. How do you like to spend your weekend? 

Lacourt: My wife and I have been married 19 years. We don't have children. We have two dogs. We're members of Lifetime Fitness that just opened up in Stamford. I go almost every day, but Saturday and Sunday I treat it like a country club. I'm there for four hours. So I get there in the morning and I do a stretch class, then at 10 o'clock I'll do a workout class. Then I'll swim for half an hour, get some sun, then I'll do yoga.

Then I get home and we'll walk the dogs, then we boat. We get out on the water a lot. I'm an avid hiker, we like to hike. My weekends are really for restoration and recharge and really spending time with people that really matter to me. As you get older, you can't have 30 friends. You have four really solid, tight friends.