Chris Balestra, President and Chief Investment Officer at Taconic Partners, joined the Real Estate Daily Beat for an interview. We discussed the implications of the hybrid work model, the life sciences sector, challenges in the affordable housing market, and other interesting topics.

Daily Beat: Many large companies announced plans to delay their return to the office to October because of the Delta variant. What are your thoughts on the future of the office sector and work from home trends?

Chris Balestra: In the long-term, I think companies will ultimately revert back to something closer to the previous norm. But until people take that first step back, tenants do not know what they’re going to need space wise. We’ve been in this situation for too long now.

Our firm has been in the office for a while now with some flexibility, but you really need those big companies to come back, and see how they’re using space. I don’t think we’re going to really know for another year or two.

Assuming that people do come back in greater quantities in the fall, there will be more clarity at that point as to what the long term really brings. Selfishly, as an office landlord, we’re definitely betting on a more full return to work and that work from home doesn’t work for everyone. It certainly doesn’t work for our industry.

Daily Beat: One thing that frequently gets lost in this conversation is that the hybrid work model doesn’t necessarily mean less office space. Let’s take a firm that allows employees to work remotely one to two days per week. How much less space can those firms really get away with?

Chris Balestra: I think if you’re looking at a 3-4 day per week scenario, I agree with you that it would be hard to operate with less space. People don’t like the touchdown desk scenario. In recent years – even pre-pandemic – we were moving away from those super tight office spaces. So that’s why I think people really have to wait and see, but the collaboration that takes place within the office, even if it’s three or four days a week, you still need the same sorts of spaces that we’ve had in the past.

People forget about the fact that employees are sometimes traveling on vacation and get sick. Even before Covid, everyone didn’t come to the office five days a week necessarily anyway. You have to take that into account in the overall formula.

Daily Beat: Taconic has been active in the life sciences sector for a while now with projects like 125 West End Avenue and Hudson Research Center. The space is certainly heating up post-pandemic. What attracted you to the sector?

Chris Balestra: Life sciences is a sector that we’re highly invested in and have a lot of faith in. Even pre pandemic – three or four years ago – we saw that interest in some early tenancies that we had at the Hudson Research Center and trying to understand the space and the needs of those tenants better.

The sector presents a crazy supply demand imbalance in New York City compared to other major cities with lots of life science space. A lot of it stems from having alternatives to build over the years like high price condos and other office space, which led to lab space not really being built.

New York has the medical research institutions and the funding and unfortunately a lot of the great ideas that happened in those institutions have been forced to leave to grow their businesses. It’s been our experience so far that if you can provide great lab space, tenants will rent it. As soon as we pre-build a space, tenants are leasing it and paying phenomenal rents. New York is currently that type of market and I think they’re really happy with the product that we’re creating.

Daily Beat: I’m always surprised by the lack of supply.

Chris Balestra: The space doesn’t exist and these companies that are rapidly growing can’t sit around and wait for a three-year conversion to get lab space. They have to move and be nimble. The other thing to note is that most NYC
buildings can’t be converted. It’s really hard to build new product given the land basis for most areas in the city.
You have to find vacant assets that have floor loads that can handle it and ceiling heights that work, so that you can do the infrastructure projects that are required to attract the tenants. We’ve been successful in finding some of those opportunities and that’s also why the sector can’t quadruple overnight here because most assets aren’t really capable without massive retrofits.

Daily Beat: Let’s say you’re looking at a new office development. How are you pricing the costs of a life sciences project on a square foot basis versus a traditional new Class A building?

Chris Balestra: The space building premium we apply compared to a new office development is probably 40%. And then the TI’s on top of that, which is probably 2x what traditional office leasing is today – perhaps even more depending on the location. So it’s more expensive, but the rents are higher and they have to be justified. If you have a tenant that wants to stay in New York, you’re getting into some fairly high rent premiums, but our thesis across the board is always about talent. New York attracts and retains talent and those companies want to grow here. That’s what you’ve seen in the tech and banking sectors, and I think it’s the same thing in the healthcare and the life science industry.

Daily Beat: What are some of the discrepancies between different types of lab space and how does that impact development?

Chris Balestra: Because the New York market is still maturing, our approach is to put in robust infrastructure at the base building level that can support a variety of different types of user needs. If they want to build their own space or they come to us early enough and can help design their space, we’ve got the infrastructure to accommodate it.

In a scenario where we pre-build space and aren’t sure what type of tenant exactly might take it, we build the most flexible space possible where we can move the lab benches around. Modular construction is very helpful with that.

Daily Beat: What are you seeing in the affordable housing space? It’s obviously a very challenging political environment.

Chris Balestra: We try not to get too political, but the reason that a lot of the incentive programs were put into place initially was to incentivize developers to invest in properties. When the rent laws changed two years ago, it turned that upside down. You can’t raise rents and there hasn’t been a true acknowledgement that operating expenses are higher. In order to continue to improve properties, it takes rent.

So we hope that in the future – perhaps five to eights years – the pendulum will swing back a little bit. And at that point, the government will put some of those programs back into place to help incentivize the reinvestment into rent stabilized properties.

Daily Beat: The new 421-a program (Affordable Housing New York Program) is set to expire next year and many developers fear what happens next.

Chris Balestra: 421-a is a hot potato. Although it sounds politically great to not give tax incentives to developers, the reality in New York City is that with land, construction costs, and taxes so high – these residential buildings won’t get built without them. The unfortunate outcome is there won’t be the affordable units delivered, in addition to the market rate units that come along with them. And then the only true affordable housing development will be based on more highly subsidized government funding through HPD and the state. But those projects won’t be in the same places that those 421-a buildings would have been. So the policy is detracting from the overall creation of affordable housing and the general housing market.

Daily Beat: I think what many miss is that we aren’t operating on a fully capitalist playing field in the first place. With the high cost of land and taxes, the alternative is developers not building new affordable housing. The deals just don’t pencil out.

Chris Balestra: Exactly. If you look at the rent guidelines board increases, there was a small increase this year, but it’s been basically nothing for years. And I’d love to find a building whose operational costs haven’t gone up, but they don’t exist.

We own 2,000 units in the Bronx where costs to operate the properties have risen. These buildings deserve to be improved, but landlords won’t necessarily do that without the ability to raise rents as well, even on the margin.

Daily Beat: Do you have any WeWork or co-working exposure in the portfolio?

Chris Balestra: We do not. That’s one thing that looking back we intentionally avoided. It wasn’t because we don’t think it’s a trend that will stick around – it’s certainly useful in certain settings, but we were skeptical of the crazy growth the sector went through and shied away from it.

Daily Beat: You guys recently did a deal with Trader Joes for a new grocery store at 121 West 125th Street in Harlem. Interestingly, the sector has remained strong despite secular headwinds in the broader retail sector. What are your thoughts on the future of the space?

Chris Balestra: Personally I like going to the grocery store and there are many people that like to shop for their own groceries. If you look at certain areas of New York City, they’re very underserved by retail, including grocery. The first deal that we did with Trader Joe’s was at Essex Crossing. There are hundreds of thousands of people who live right around that area without a real major grocery store.

If you find pockets of the city that are really underserved by retail, it can be very successful. If you look at 125th Street, there’s a Whole Foods, but Trader Joe’s goes well with it. In that area, there’s enough demand to satisfy the additional need in grocery.

Daily Beat: Are you looking at the e-commerce / industrial sector at all for new acquisitions?

Chris Balestra: We’re looking at deals in the industrial sector. It’s very intriguing and clearly has legs. Our team is looking at deals that would cater to the likes of Amazon and others that are more locally focused.

Daily Beat: Do you think developers are too focused on the larger industrial leases when last-mile delivery will necessitate micro-fulfillment centers?

Chris Balestra: We’re still underserved from the logistics standpoint in the New York Metro area. That’s what you still see those big leases getting signed. That’s why development sites in New Jersey are so expensive, but I totally agree that the sector as a whole has a long way to go in the neighborhood level. It’s probably not as efficient as it could be on the delivery side and I think that’s why you’re seeing even the likes of Amazon taking smaller spaces that they can bike delivery from. I think that as we adapt to the world that has overnight packages, there’s going to have to be adaption in the city.

As an example, if you look at residential buildings, nobody designed package rooms to be warehouses. If you take a 400-unit residential building and everybody’s got Amazon package or two showing up every day, you’ve got major problems. So I think the change in that sector in general is already having a ripple effect throughout other asset classes in the city. If you’re designing a new building today, you’re doing it completely differently and there’s probably room in the space to get your package picked up at somewhere local versus having it delivered right to your home and maybe that’s cheaper.

Daily Beat: Where do you think is a better place to be in the office market right now? Smaller (5,000-10,000 SF tenants) or larger (100,000 SF) ones?

Chris Balestra: I think you’re still going to play in all of it. We’re definitely seeing a much greater increase in tenant traffic and deals on the smaller side. I think that the big tenants will come out of the shadows soon enough. But I think that goes back to one of our earlier discussion points of getting back to the office.

Those big guys who either have a little bit of term left or who maybe did some shorter term extensions, I think they’re just reluctant today to make long-term large space decisions without fully knowing how they’re going to continue to use their space. Maybe they use the space no differently than they do today, but they don’t know yet because their workforce isn’t here. So today, if you have smaller tenant type space available, you’re probably very happy about that. If you have truly unique product for larger tenants, you have seen some of those deals get done, but I think you’re going to see a pickup in the larger tenant space three to twelve months after everybody actually gets back to the office.

Daily Beat: Congrats on your recent promotion!

Chris Balestra: Thanks Joe. I joined Taconic back in 2005. I started my career at M&T bank as a commercial real estate lender. I was an econ major and knew I wanted to try to work for a bank and kind of fell into the real estate side of it and really enjoyed it.

The other thing that I figured out pretty quickly into my tenure at the bank was that it seemed like a lot more fun and more interesting to be on the developer and operator side. I left the bank in 2005 and then started at Taconic, which at the time was really just a handful of people – maybe less than 10. We’ve grown tremendously over those years and I think that today we’re closer to 50 people in our office.

I came in as an analyst and worked my way up to CIO a couple of years ago, and then the recent promotion this year. Some of that I’d like to think was skill and some of it’s a little bit lucky because most people in order to move up off have to go somewhere else with people in the way. Being at a smaller, entrepreneurial company to start and that has grown over the years, gave me the opportunity to be able to step up as I was ready, so I’m fortunate in that way.

Daily Beat: And I’m glad the firm enjoys our premium newsletter!

Chris Balestra: It’s one of the first emails I read every day. I’ve been a reader for a few years and when you converted to premium content, we signed up because it’s a great synthesis of the real estate world and very helpful.

*The interview has been edited and condensed for clarity.

Solar Panels will Bring Sustainability to Bronx Community and Environment

Clarion Partners (Clarion), a specialist investment manager and subsidiary of Franklin Resources, Inc., and Taconic Partners (Taconic) celebrated the completion of a noteworthy solar power project at their flagship Quality Communities property, Eastchester Heights, in the Bronx.

Eastchester Heights is a 1,416 unit residential apartment complex which spans five city blocks and 114 individual buildings. Built in 1935 and situated on 14.84 acres, it is among the largest residential communities in the Bronx, and in greater New York City.

By adding solar, Taconic and Clarion are improving an existing property and reducing its emissions. The solar installation will produce over 1.1 million kilowatt hours of clean electricity, equivalent to removing 165 cars from the road for a year or the carbon sequestered by over 12,800 tree seedlings grown over 10 years.

“We’re very proud of this project and the positive impact it will not only have on the environment, but also the Bronx community,” said Taconic’s Andrew Schwartz, Vice President of Residential Asset Management. “We are committed to being a part of a solution to fight climate change and look forward to exploring solar and other sustainable technologies for more of our properties.”

Taconic and Clarion contracted Bright Power, an energy and water management consulting and construction company, to design and install 917 kilowatts of solar photovoltaic panels at their Quality Communities property.

“Bright Power applauds Taconic and Clarion’s commitment to clean, renewable energy. A solar installation of this magnitude sets an example for other real estate owners,” said Jeff Perlman, CEO and founder of Bright Power. “Taconic and Clarion are making the Bronx more sustainable while they preserve high-quality affordable workforce housing. It’s a win for the Bronx, Eastchester Heights residents, and the environment.”

With new legislation in New York City aimed to reduce emissions from existing buildings, Taconic and Clarion will be one step ahead in helping the city meet its goal to reduce greenhouse gas emissions by 80% by 2050. The solar panels at the Quality Communities property will help New York State reach its goal of 100% carbon-free electricity by 2040 and decrease emissions in an area that has the highest asthma rates in the country.

“Clarion Partners is proud of the investment Eastchester Heights is making in clean energy,” said Katie Vaz, Managing Director, Clarion. “We are excited to include Eastchester Heights as a contributor to our ever-growing portfolio of properties which collectively produce over 30 megawatts of solar power annually.”

For more information on Eastchester Heights, please visit https://www.eastchesterheights.com.

The scientists, entrepreneurs and investors driving New York’s biotech boom.

As New York struggled through the worst of the coronavirus pandemic, one of the few sectors of the local economy that not only survived but thrived was the life sciences. But it wasn’t an overnight success story. Years ago, forward-thinking leaders saw other major cities emerging as biotech hot spots and identified the potential – a highly educated workforce, world-class health care institutions, real estate developers and Wall Street types eager to invest – to cultivate a major life sciences hub in New York. Existing academic and research centers created collaborative partnerships. New biotech incubators were launched to support promising startups. Investors and economic development agencies provided millions of dollars for researchers and entrepreneurs to translate scientific discoveries into real-world applications – and high-paying jobs.

City & State’s first Life Sciences Power 50 – researched and written by City & State’s Jon Lentz and Kay Dervishi – recognizes many of the key individuals behind the sector’s remarkable growth in New York, including scientists, venture capitalists, government officials, health care executives, real estate developers, philanthropists and others who have positioned New York as a biotech center on track to rival those in Boston and San Francisco.

Charles Bendit & Paul Pariser

Co-Founders and co-CEOs, Taconic Partners

In October, The New York Times published an in-depth feature on how the life sciences sector is a bright spot in Manhattan’s “battered” office market. The publication cited Taconic Partners’ planned conversion of an old West Side auto showroom into yet another life sciences hub as the latest example of biotech investment buoying the real estate industry. Taconic Partners was founded in 1997 by Charles Bendit and Paul Pariser, who still lead the company today as co-CEOs. In the spring, they completed a $600 million recapitalization for the new hub.

Taconic Partners and Nuveen Real Estate closed on a $260 million fund to pick up real estate around New York City, hoping to create a portfolio valued at more than $1 billion, Commercial Observer has learned.

The fund, dubbed the New York City Property Fund II, plans to target “value-add” opportunities around the five boroughs and parts of New Jersey, said Chris Balestra, co-president and chief investment officer for Taconic Partners. Nuveen and Taconic are not limiting themselves to any asset classes and are looking at office, life sciences and last-mile distribution properties.

“It’s for any asset class that we can make those returns on,” Balestra said. “If an industrial deal pops up and it makes sense to do it, [we’ll do it].”

Balestra could not say which companies participated in the fundraising, only that it included several European pension funds.

The joint partners started fundraising in 2018 and closed on the fund’s first project the next year, a former auto dealership at 125 West End Avenue the pair picked up for $230 million with plans to turn it into a life sciences hub.

Nuveen and Taconic planned to close on the rest of the fund in 2020, but the coronavirus pandemic hit and made investors wary about jumping into the New York City market.

“That was a tough time to raise,” Nadir Settles, head of Nuveen’s New York regional office, said. “So many investment commitments were still nervous about New York.”

The pair had to lower their target goal for the fund, originally $500 million, but was still able to close on it this month. Settles said the joint venture’s foothold in the city’s growing life sciences market — and the $600 million capitalization for 125 West End they landed in March — helped ease investors’ concerns about the New York market and any amount raised during the pandemic is a good thing.

“There hasn’t been a lot of fundraising in the time of COVID,” Settles said. “But we were still able to raise the lion’s share of the capital. That is a huge win.”

The pair are now actively seeking opportunities around the city to deploy the rest of the fund’s capital and hope to close on its next acquisition by the end of the year.

Despite foreign investors wavering on New York City’s future, both Balestra and Settles said their companies never thought about abandoning the fundraise.

Colleen Wenke once had a career in medicine in her sights.

But, she didn’t anticipate her head would be turned quite so dramatically by a temp job at one of New York City’s leading development and investment firms: Taconic Partners. Twenty years later, she’s not only still there,  she’s holding the reins.

In March, she and Chris Balestra were named co-presidents of Taconic. Wenke describes their dynamic as “exceptionally complementary,” with Balestra focusing on investments and finance, while Wenke leads development and construction for the firm.

As a firm, Taconic has always been especially bullish on New York City, and the two transitioned into their new roles at an exciting time for the industry, and for the recovery of their home base. Taconic’s diverse portfolio — which includes a significant head start and footprint in New York City’s life sciences sector — was well-positioned for a fast-moving crisis. Now, as an “opportunity firm” with an entrepreneurial spirit, it’s ready for all of the action that the rebound will bring.

Wenke — who was recently awarded the Excellence in Field Award for Development & Construction at Commercial Observer’s “Innovations Powered By Women: Celebrating the Women Rebuilding Our National Workforce” forum — discussed her path to Taconic and why there’s never a dull moment in real estate development.

Commercial Observer: You were promoted to co-president three months ago. How have those first few months been, and what are the biggest changes in terms of your day-to-day role?

Colleen Wenke: The promotion was announced a handful of months ago, but I’m in my 20th year here at Taconic and the conversation started many years ago. I’ve worn several different hats here over my tenure, and so this felt like an organic, natural progression because of my legacy, curiosity, personality and the evolution of Taconic’s timeline.

Taconic was started by two partners [Charles Bendit and Paul Pariser]. They recognized that there’s a very strong executive team that has been here for many years, and broadening the breadth of that team and allowing a bit more collaboration and control over what’s happening, positions us well for the future. So, it’s an exciting time and also certainly challenging trying to balance a lot of different responsibilities. I continue to oversee our development business and our development advisory business — which is a third-party business I started a handful of years ago —as well as overseeing corporate operations, and also forward-looking new business. So, it’s diverse, and I’m looking toward the future.

Let’s rewind to the very beginning. Where did you grow up?

I’m a native New Yorker from Queens and I grew up in a town called Floral Park, all the way adjacent to the Long Island border. My father was a firefighter and an ironworker, and at the time he joined [the FDNY], you had to live within the five boroughs of New York City.

Are you the first in your family to go into the real estate business?

Yes. Ironworkers certainly touch real estate through the buildings, but I always had a natural curiosity for creativity and design. And being a native New Yorker, I was always looking around and fascinated by our city. But it wasn’t until I actually landed at a real estate firm that I started peeling back the layers of what it means to be in real estate.

When I was in school, I thought I wanted to be a doctor and I was focused on the medical field. But, I took a little bit of time off, was exposed to the real estate industry, and the rest is history.

What was your first role?

It was right here — I was a temp at Taconic! I was here for a handful of months, and basically said [to management]: “I think something fantastic and really exciting is happening here, and I think I can add value.” We were a small firm at that moment, and I was just persistent. At the time, we had projects not only in New York, but in Atlanta and in Chicago. There were only a handful of people, but they were traveling during the week to those different projects. And so, I’d like to think that I helped to hold down the fort during those times of travel and other things.

I was really curious. I was always reading and listening, so I was learning. And then, I just built and built from there.

How would you describe the evolution of your role since those early days?

I realized very early on that because I didn’t have a finance background, and because I wasn’t an architect, I didn’t have the education to support some of the dialogue that was happening in these conference rooms and on conference calls. So, I went back and I got my master’s degree early in my career. I think that provided the building blocks to really accelerate the learning curve.

In the early days, I was supporting whatever needed to get done. And then, through the years, there was an evolution from being asked to do something and it being task-focused, to me leading the conversation forward on a project. So, through the years, I’ve done everything from basic project management work through asset management work, marketing, leasing, PR — whatever it took to get something accomplished. I wore all those different hats as the project life cycle demanded them.

I’d imagine experiencing all these different buckets only makes you a stronger leader, because you understand exactly what goes into each part of a project’s process?

Exactly, and I think one of the things that I like most about my new role is building teams and people. I think it’s fascinating to figure out the chemistry of people working together toward a common goal. In development, it’s such a grind. And so, if you can figure out how people are fulfilled and empowered to do what they’re being asked to do toward fulfilling a business plan or project, they start to take ownership over it. I think that’s how people basically rise through the ranks; they start to really have opinions and are more forward facing.

Getting your master’s while working must have been tough.

It was absolute chaos [laughs]. I would get the evening coursework, and often debate what I was being instructed, because I’d say, “Well, actually, it wouldn’t go that way in the real world!” It took me about three years, and I’m happy that I did it. It was a different point in my life. I was doing it simultaneously while working on one of our buildings at 401 West 14th Street. It’s only three blocks from where our offices are. And so, I’d work, grab a bite, go to class, come back, walk past the project, come back to the office, and then go home, wake up and start over again.

Was there a career-defining moment when you knew you were in real estate development for the long term?

Definitely. Despite having to be a generalist in development, you also align with certain parts of the tasks at hand more closely. So, for me, our 401 West 14th Street project — which is now leased by Apple and a few high-profile tenants — was really when the transition occurred. It shifted from me being asked to do certain things to me leading them, and starting to have instincts about how you get ahead of what you need to block and tackle on a daily basis. So, that was pivotal for me.

Then, when we were awarded Essex Crossing and the Seward Park project on the Lower East Side. We’re nine years into that project now, and just getting in a room and working with our partners, figuring out how we were going to execute on the project and bring the images to life, then going through that process and getting our first TCOs, lease-up and the first sales completed.

We’re now completing the second phase of that project, and the fact that seven buildings on the Lower East Side have been developed over the past handful of years is really fulfilling, and I’m really proud. There are so many hands involved in a project; it’s really not a one-person type of work. So, when you can work toward a common purpose, and then sign off on it, it’s an exceptional feeling.

How did the Essex Crossing project first come together?

One of the last big pushes of the Bloomberg administration was to rezone that area of the Lower East Side. They rezoned it and then went out to RFP to the private developer community. In the past, we hadn’t responded to [requests for proposals] — it wasn’t really our wheelhouse. But, it’s such a relationship business, and folks who had previously worked together here with some of our now-partners, called up and said, “Can we work together? Because this is a massive undertaking.” We flipped through and thought, “Yes. This is exceptional.” I mean, when do you ever get the opportunity to touch such a large piece of New York City in your career?

The team’s worked exceptionally hard on it, and one of the amazing attributes of Essex Crossing is the Market Line, this subgrade marketplace that’s connected by three city blocks. And that was really where the value-add aspect of our team came forward, because you could start to assign value to subgrade space, where it’s more traditionally mechanical and back-of-house uses. And so, it’s a market-making project, and it’s really exceptional today — you can walk in the park, we have rentals, we have Trader Joe’s, and we have 350,000 square feet of Class A office space.

Is Essex Crossing top of your priority list today?

So, certainly, Essex Crossing takes up a big chunk of time. The office space is just launching, and we also launched condo sales at One Essex Crossing during the pandemic. We’re also embarking on a large project up in Inwood and just into our planning phase up there. We’re active in that community, and looking for new opportunities up there. I also have a multifamily building on 43rd Street, where we’re demolishing an existing asset and will be in foundations hopefully by year-end. So, we’re busy on the project front.

And, then, we’re thinking about our people and the return to office, and what will be the new driving forces of the company.

And, then, there’s our life sciences initiative, which is a massive undertaking. We have our project at 125 West End Avenue, as well as our Hudson Research Center. There’s very little supply of lab space within New York City. We had been in that market for a handful of years prior to COVID, and, certainly, it’s been a bright light in the real estate market in terms of the response to COVID. So, there’s lots going on and we’re trying to balance the priorities of all of those initiatives so that they can continue on.

Do you think you’re going to be even more active in the life sciences space, post-COVID?

There’s so much capital being injected into the life science market right now. Being early adapters, and having delivered lab space successfully to the marketplace, allows us to execute on a life science plan when the right opportunities come up. But not every asset and not every repositioning is appropriate for a life science undertaking.

One of the things that has resonated with me throughout my years at Taconic is responsible underwriting, responsible investment, and making sure that you can actually execute on what’s being underwritten — not getting caught up in the wave of what the market is doing. So, we’re out looking, and we have just shy of $2 billion underway already invested in the life science sector. When the right opportunities come up that fit with our disciplined investment structure, we’ll be happy to execute on them.

Has the pandemic made you view any asset classes differently?

We’re an opportunity firm. Despite being larger than we were when I first started, we’re entrepreneurial in spirit. So, we’re studying the markets and certainly always looking for new opportunities. Our platform was well-diversified prior to the pandemic, in terms of the balance between residential and commercial and life science.

I — and we — still very strongly believe in New York City, and, despite some of the negative headlines during the COVID era, we remain focused on it. We’ve expanded our geographic area a little bit, but what comes of that is to be determined. We’ve certainly looked at more industrial-type properties and other things as we pivot some of our focus. But, again, I think it just boils down to our culture and that entrepreneurial, opportunistic lens that we bring to the table.

How was your personal experience of working remotely?

I have to say, I’m really proud of our team. We weren’t the most forward-facing technology-focused company in terms of Zoom and virtual meetings, but we proceeded almost without interruption. Some of the early doom-and-gloom thoughts and downside scenarios that we were running both on our investments and our Taconic platform didn’t come to fruition, and I think it’s because people adapted and they did what was necessary.

I personally prefer to work in the office. I have two young children at home and it just complicates matters. Additionally, I have never claimed to be a teacher. And so, virtual schooling was very challenging. So, for some of the things that have returned, both from a school perspective and a return to office, I’m very thankful.

Any surprises within Taconic’s portfolio through the pandemic?

At the beginning of the pandemic, the world was so uncertain and it felt like the rug had been pulled out from everything. So, we certainly spent a responsible amount of time on a weekly basis going through each and every investment, and analyzing the downside and upside potential. We certainly had to adjust for the market, on the multifamily side with increased concessions, but we got ahead of it. There was a lot of dialogue, there were a lot of conversations, and some of them are still ongoing. But, we fared well in the storm.

And, I think, again, that’s why I’m feeling so optimistic about what the future holds. Because, if you look back a year ago, from where we stand today, it’s night and day.

Any key takeaways from this crisis?

This is a people business. It’s also an investment business, a building business, a marketing business, and lots of other things. But, when you boil it down, it’s about people. And so, we focused heavily on our internal teams, we focused heavily on making sure our partners were well, making sure investments were sound, and making sure that we almost over-communicated to make sure that nothing was brewing in the background that may come out and catch us.

And so, we just made sure that we had an open dialogue on a consistent basis, as we analyzed and figured things out. It’s something that we’ve done here for many, many years — with lenders, partners and tenants. And it’s something that we did successfully during COVID — probably at a heightened level —and something that we will continue to do. It’s really one of the key ingredients of our industry.

Another key aspect of the crisis was an overdue, increased focus on diversity, equity and inclusion in our industry. What are your thoughts on how far we’ve come, and how far we’ve still to go?

I’m happy to see that the conversation is happening. And, we’re at a point where progressive change can be made for more inclusion. I think diversity is not only about recruiting new talent, but it’s also developing talent internally and providing similar opportunities to others who are here, whether it’s a female or whether it’s somebody in the Black and brown communities. So, I’m excited by the dialogue that is happening. I think it’s incredibly important, but I also think that it shouldn’t [supplant] some of the hard work and effort that it takes to accomplish what needs to get done. I’m glad it’s a topic that is being discussed, but I think there is still a fair amount of work to do.

Have you had any key mentors throughout your career?

Paul and Charlie here at Taconic were absolutely inspirational throughout my career here. I started my early days at Taconic under the mentorship of a woman named Caroline Vary, who just was a fantastic leader and teacher, and who helped to provide opportunities and answer all of the questions that I had in the early days.

What’s your favorite part of the job today?

The diversity of tasks. It’s something that I think turned me on to real estate development in the early days. You can go from being in a meeting with a group of subcontractors, to sitting with a partner in a creative meeting, to talking about a new underwriting, and so many other things.

And that dynamic is a daily occurrence. I can say with certainty that every day that I try to plan out never happens as intended. There’s always something that comes up, that causes a blip. And so, being able to have a clear head, respond to the challenges, and persevere comes fairly naturally to me. And I enjoy that challenge.

Charles Bendit, Paul Pariser, Chris Balestra and Colleen Wenke

Co-CEO; Co-CEO; Co-President; and Co-President at Taconic Partners

Post-COVID, it seems like everyone and their mother is trying to convert offices to life sciences. But firms like Taconic had established a firm and enviable footing in the space pre-COVID, and that’s only a small part of their repertoire.

“It was certainly a challenging year out of the gate, but I think we adapted pretty quickly,” Chris Balestra said. “We’re definitely looking to expand our [life sciences] platform as we go forward, and we’re evaluating several opportunities right now. The supply/demand imbalance in the city is extreme and we think that there’s a lot of run room, but not every asset can become life sciences. We have a keen eye as to what can be transformed.”

While Balestra describes Taconic as being “a little less active than in a normal year” during COVID, the deal headlines beg to differ.

In March, the firm celebrated a groundbreaking for National Urban League’s $242 million Harlem headquarters, plus a $600 million capitalization for its state-of-the-art, life sciences development at 125 West End Avenue. In December, it sealed a $205 million refinance for Hudson Research Center, its 322,000-square-foot, mixed-use property at 619 West 54th Street; and, in April, it bagged the Bill Gates-backed biotech startup C16 Biosciences as a tenant for that same property. Not too shabby.

Colleen Wenke describes the biggest challenge of the past year as the uncertainty: “First and foremost, keeping our people safe, making sure that we were responding to what was happening in the world at large, and making sure that our investments were sound,” she said. “I think when you’re being inundated with uncertainty, you have to figure out how to calm the waters and figure out what the appropriate, strategic best move is.”

Balestra and Wenke were named co-presidents of the firm this past March, and oversee more of the day-to-day operations, freeing up Charles Bendit and Paul Pariser to focus on strategy, deals and opportunities.

“Chris and I — and many of the other executives here — have had a very long tenure,” Wenke said. “Our co-founders created an exceptional platform, and were excited to diversify in order to figure out where new opportunities can be uncovered.”

The new headquarters will house researchers developing an alternative to palm oil — an ingredient in more than half of consumer products and a cause of greenhouse gas emissions, according to Bloomberg. 

C16 Biosciences will move into 20,000 square feet of pre-built lab and office space on the seventh floor of the building at the end of this summer or early fall. Asking rents were in the mid- to high-$90s on a triple-net basis.

C16 Biosciences’ move into the seven-year lease from an NYU Langone-run biotech co-working space in Hudson Square comes after the company closed on a $20 million, Series A investment round led by Gates’ Breakthrough Energy Ventures last year. Its expansion is another marker of the booming life sciences sector in New York.

“The West Side of Manhattan, where this building is located, is one of the hottest clusters for life science in New York City,” Taconic Partners Executive Vice President Matthew Weir told Commercial Observer. “We have the flexibility to accommodate a variety of users and I think that this proves it. … The building is creating best-in-class spaces that are flexible in their design engineering, as well as lease terms and things of that nature, to draw tenants that have different operations.”

Weir said Taconic was working to lease the remaining 80,000 square feet in Hudson Research Center and had received a lot of interest, as New York begins to gain a foothold as a life sciences hub. Silverstein Properties and Taconic were represented by Jonathan Schifrin and Alessio Tropeano of CBRE and Weir in the deal. C16 Biosciences was represented by John Isaacs of CBRE.

“We were thrilled to be able to represent C16 in relocating to 619 West 54th street, which is building a thriving life science ecosystem,” Isaacs said.

The New York City Economic Development Corporation was also excited by the move, with the acting chief linking a post-pandemic recovery to a strong life sciences sector.

“Building a successful recovery means ensuring the life science sector is equipped with the greatest potential for cutting-edge technologies and treatments for New Yorkers,” Rachel Loeb, acting president of the city’s EDC, said in a press release. “Companies like c16 Bioscience Inc. establishing its headquarters here is an example of the strength of the life sciences ecosystem and the city’s potential as a biomanufacturing hub. With a diverse talent pool, and advancements in technology, New York City is uniquely positioned to grow as a global leader in life sciences research and innovation.”

Landlords and designers are adding more outdoor space to office buildings, so employees can actually work outside.

Office life is about to move outdoors.

In buildings across the country, new and renovated offices are being designed to include more options for workers to get away from their desks and go outside. According to designers, developers, and landlords, it’s an emerging trend that could shake up the way workplaces look and feel for years to come.

“Access to daylight, good fresh air—those kinds of things are really tangible to the tenants,” says Marc Fairbrother, vice president of the architecture firm CallisonRTKL. “We are headed in those directions where it’s more about the user experience than efficiency and the cost of the product.”

CallisonRTKL has several projects in the works that are putting a premium on outdoor space. Common building amenities such as fitness centers and ground-floor cafés are being augmented with new spaces for outdoor breaks and even outdoor working. One project currently in the works, a new office building in Arlington, Virginia, for the global construction company Skanska, includes a variety of outdoor spaces throughout the building. At street level, there’s a quarter-acre parklike space with seating and shaded areas that can be used by the public or by office workers. On the roof, there’s a large patio space, with various seating options that can function as lunchtime getaways, informal working areas, or spots for open-air presentations. The roof also includes an enclosed central conference room that can host both formal board meetings and after-hours cocktail receptions.

They even added outdoor spaces on a part of the office that has traditionally been unpopular. “The second floor, which is always the hardest to lease in office space, is where we put the terraces,” says Fairbrother.

Another of the firm’s projects, an office building in Tulsa that’s slated to open in 2023, was designed to include terraces on every floor. CallisonRTKL principal Dallas Branch says it’s a new approach, and one that the designers had to tinker with before it felt right. “We’re not used to seeing that in offices. When we first laid it out, it seemed like a residential building because it looked like we had balconies everywhere,” says Branch. “We had to tweak the design a bit to keep that office building look.” As a result, every floor will have about 1,500 square feet of terrace space for the tenants.

The move toward the outdoors has been underway for years, but unlike in the past, this new generation of outdoor spaces is less about escape than about adding new types of spaces for people to work and interact in.

“In the early days, these were meant more for social gatherings, but you’re starting to see even the idea of outdoor conference rooms,” says Matt Weir, of the New York-based developer and landlord Taconic Partners. “You’re laying out furniture, you’re creating privacy with greenery, you’re creating alcoves where you can put a table and folks could have a board meeting or a presentation.”

“You’re seeing the office layout function migrate to these outdoor spaces,” says Weir.

Taconic is now finishing up several projects in New York that embrace this. One is the renovation of 440 9th Avenue, a building from 1927 with distinctive wedding cake-style setbacks on its upper floors. To create more of a connection to these preexisting outdoor spaces, Taconic has added NanaWalls, sliding and folding walls that can be opened.

Adding these kinds of spaces can be expensive, Weir says. For new rooftop spaces, elevator shafts have to be extended, as do emergency stairwells to meet fire and safety codes. New shading and planters may also require structural renovations to support the additional weight. But in many instances, the costs of adding these spaces can be offset with higher rents. “The buildings that provide these spaces certainly carry a premium versus buildings that don’t,” says Weir. “And I think it’s becoming one of those standard, check-the-box things that tenants are looking for. If you’re not able to provide this, you’re at a competitive disadvantage.”

In expensive markets such as New York, landlords understand that these kinds of spaces are appealing to workers and also to the companies that are trying to attract and retain them. With office vacancy rates higher than normal during the pandemic, landlords and building owners know they need to try harder to lure in tenants.

Though COVID-19 has changed the way a lot of people think about office environments, Weir says this trend isn’t necessarily a pandemic reaction; it sometimes reflects a new way of working. “We are doing outdoor spaces in almost every single one of our projects. That’s how important we believe they are,” he says.

Others say providing these spaces is just a new part of doing business. “Some of this stuff may be table stakes,” says Nadir Settles, managing director for the real estate investment manager Nuveen Real Estate. “What would you rather have, an empty building or a building that you’re putting some costs into but you’re filling?”

One of the company’s New York buildings is in the process of adding this kind of outdoor amenity. On its 22nd floor, the building at 730 Third Avenue will soon have a 7,000-square-foot landscaped terrace. Designed by the global architecture firm Gensler, it’s intended to provide space for events and cocktail hours, but also what Settles notes can be a third place.

Settles expects new buildings to have these kinds of spaces incorporated into their designs going forward. For existing buildings, those with outdoor spaces are likely to be more popular with both tenants and landlords. “Of course, if we’re out doing an acquisition right now, and we can buy a building with no terraces or a building with terraces, and we have to pay a little more, we would do that because that’s what tenants are going to want, and you can fill that building,” says Settles. “I think the bar has been raised.”

As for CallisonRTKL, Fairbrother says he’s hoping to do some post-occupancy analysis of new buildings with outdoor spaces to see exactly how they’re being used, and whether they have any impact on worker productivity.

“That would be the real meaningful thing, is to prove it economically. Yes, you spent some money to do this, you created a better environment, and see here the payoff is better productivity,” he says. “I think we have a little more work to do on this and it’s going to evolve, but I think we’re going to be using science to help us decide what’s valuable and what’s not.”

Developer Taconic Partners named longtime staffers Chris Balestra and Colleen Wenke as presidents, the first time the firm has had the role since it was founded 24 years ago, Commercial Observer has learned.

“We’re thinking about not necessarily succession, but how do we provide for the future of this firm and for the future of all of them who have invested their careers in Taconic?” Charles Bendit said. “It was a natural evolution to come to this point.”

“Charlie and I have no plans of giving up our roles,” Paul Pariser added. “But this is a way of really strengthening the organization.”

Along with Balestra and Wenke being named co-presidents, Taconic also promoted senior vice president Matt Weir as executive vice president.

Wenke joined Taconic fresh out of college 20 years ago, and led the firm’s development and construction practice, overseeing both ground-up and restoration projects, according to Taconic.

Balestra joined Taconic in 2005, previously served as a bank officer for M&T Bank, and has been involved in nearly $4 billion of real estate acquisitions in New York City while at Taconic.

As part of their new roles, Wenke and Balestra will continue to oversee more of the day-to-day operations of Taconic, freeing up Bendit and Pariser to focus on strategy, deals and new opportunities.

“I think they do a better job at what they do than I do,” Bendit said. “We take great pride in their accomplishment and how they’ve grown into the position they’re stepping into.”

The promotions at Taconic came the same week that the developer was able to land a $600 million capitalization with its partner, Nuveen Real Estate, for a life sciences development at 125 West End Avenue.

Bendit and Pariser said the firm is also focused on finishing up the second phase of the Lower East Side’s Essex Crossing development this year, along with potentially starting a new multifamily project in Inwood, looking to expand its development advisory business, and actively invest in new projects.