Today was, my friends, what we in the news biz call a “crazy day.” Everything seemed to hit the fan at once. Here’s a full transcript of my interview with First National owner Aaron Yashouafar. He was not willing to discuss matters currently in litigation – including the foreclosure action on First National.
Q: A lot of locals were shocked at the $21 million paid for First National in 2006. Looking back, do you still think the price was a good deal?
A: First National Center consists of 1 million square feet of prime, landmark, office space in Downtown Oklahoma City. The price paid is well beyond a good deal. The building was purchased at approximately $21 per square foot. To rebuild such a project would cost hundreds of millions of dollars, not to mention the fact that this landmark is irreplaceable.
Q: How much have you spent improving the property? Approximately $8.5 million, and continuing.
A: One of the biggest complaints I’m hearing about the current ownership is how there were sharp increases in rent even though improvements were halted.
A: Notwithstanding the improvements the ownership has made to the property, the rents are still in line with (and sometimes below) what others in the neighborhood are charging. We are all aware of substantial increases in the cost of operating a building such as First National Center (such as utilities, insurance and labor). Prior rents from old leases dating back to previous owners (who neglected the building, and would take anything from anyone without contributing to the building), should not be considered when talking about the rent increases. There has been 4 years of work and progress towards substantial improvements in building infrastructure as well as cosmetics. The pace of making improvements has only recently slowed down, not by no means, “halted”.
Q: You’ve seen properties in L.A. and New York go into foreclosure and the newspaper accounts paint a pretty bleak picture of your company – how do you respond to that?
A: Although Oklahoma has been, to a great extent immune, the rest of the nation is undergoing one of the most significant recessions, with the real estate industry taking a substantial hit and undergoing tremendous devaluations. Many properties, many owners, and many banks have gone out of business. Milbank, however, on behalf of the various owners it represents, is continuing to deal with the economic slowdown by repositioning the properties it manages. Many other owners faced with the same facts, have simply abandoned the properties.
Q: What’s your reaction to The Village Voice describing you as one of New York City’s “worst slumlords”?
A: I am not sure you have all the right facts. Milbank has not been managing the properties in question for nearly a year and a half. The lender hired its own management company to manage the properties, and that management company is the one being blamed. Unfortunately, when that management company was engaged, Milbank was prevented from carrying out its plan to improve and stabilize that property. In fact, the tenants are suing the lender now because of its lack of care for the properties. During the time that Milbank was managing those properties, many violations from prior owners were removed, the buildings improved substantially, and the tenants were being tended to. We do not believe that Milbank is a “bad manager” – especially here in Oklahoma City, where occupancy at the FNC has increased threefold in four years.
Q: With the debt level being so high and the mid-2000s real estate boom history, how do you make a property like First National successful again?
A: The property is already successful. Through the financial resources made available by the owners, the management team has been able to raise the occupancy from low 20% range to almost 65%, in just four years. In a building as large as First National Center, this translates to over 400,000 square feet of new leases. I am not aware of any other building in Downtown Oklahoma City experiencing such a transformation. In fact, the owners have always been, and continue to be, in compliance with the loan.
Q: Do you have any regrets when it comes to First National?
A: Not at all. At a time when almost everyone in Oklahoma City had simply written off First National Center, the current ownership made a commitment to give the property a new life. The dedication of the owners encouraged the City officials to support such renovation and together we created a dedicated and compassionate team whose results we are witnessing today.