Archive for the ‘Office’ Category

Branding Real Estate

Friday, May 23rd, 2014

We’ve all heard the term “branding” but for most of us it’s seemed like just another name for the familiar business of marketing. Some people think it’s the packaging around a product – the logos and colors; others think it’s the sum total of the advertising that promotes a company. Both are wrong. Interbrand defines brands as “a living business asset, brought to life across all touchpoints which, if properly managed creates identification, differentiation and value. The key word there is “living”.   At its fundamental level, branding involves giving an inanimate object –a company, service or product — human properties. It allows you to relate to it at a human level. While marketing pushes a product to market (through the 4 P’s of Product, Price, Promotion and Place), branding is what creates its emotional appeal, its narrative.” A brand is what makes you insist on an Apple iPad as opposed to the well-reviewed Barnes & Noble Nook HD; a brand makes you covet an Audi S4 over the highly-rated Hyundai Genesis. A brand is a mist of memories, associations and aspirations that corporations spend millions of dollars trying to understand.

Modern brand management has its roots in the 1930s at Proctor & Gamble but it’s only in the last 20 years that we’ve seen it become the preeminent creed of effective marketers. For corporations, the implications of branding are enormous for this simple reason: a strong brand commands a premium in the marketplace (consider that the Ipad can command a price of more than $100 more than the Kindle Fire which is lighter, has better resolution, more RAM and a better camera). No wonder then that branding is entering the world of the biggest-ticket items.

Branding is still evolving in the real estate industry. We’ve seen companies like CBRE, JLL, and Hines do a fine job of conveying their scope, financial strength and expertise but rarely has it been applied at the product level. This is changing. One of the early adopters is Forbes, the eponymous business magazine, which will now put its name on commercial real estate. It has chosen the Philippines as the site for the world’s first Forbes-branded office high-rise — a partnership with a local developer. The 646,000-square-foot Forbes Media Tower will be located in the suburb of Manila. The project is expected to be part of a network of Forbes Media Towers around the world. It’s a tantalizing concept. While premium Class A buildings are sometimes branded under their anchor tenant (like the Time Warner Center in New York) or their vanity name (think of the Rookery in Chicago), the vast majority of the nation’s commercial real estate stock isn’t; it’s viewed as a commodity separable only by practical concerns like location, technology, lease rate, incentives and buildout. Clearly, it is an idea worth exploring: the Forbes brand has equity — a hundred year old company that is associated with hard news on “business, investing, technology, entrepreneurship, leadership and affluent lifestyles”. According to Omniture, forbes.com reaches 47 million monthly unique visitors, while Forbes Magazine, Forbes Asia and Forbes Europe attract a global audience of more than 5 million readers. It would appear to be the ideal brand to extend into the realm of premium office space. Plus, the concept of the branded tower has its precedents (albeit mostly in residential real estate) — most famously with the Trump organization which has licensed its brand across a vast portfolio of real estate. One report has the value of the Trump brand alone at $3 billion.

So, how do you brand? We start with a full-scale brand audit of an asset, looking at its perception in the market (including it’s positioning, identity, personality, reputation) by talking to brokers, CREs, investors; then we look at competing buildings to see where we stand in relation to them. Once we have a very detailed snapshot of the asset, we undertake the actual branding process which starts with a SWOT analysis (and maybe a PEST analysis to see where the market as a whole is going) and proceeds to lay out all the aspects of the brand that will make it personal and unique. Think of it as an onion with layers – a vision, mission, positioning statement, personality, promise, values. The deepest layer is the brand idea or unique selling proposition. It is the DNA of a company of a product or company and motivates all of its messaging. To clarify, here are the most famous USPs in history:

Jaguar – styling
Mercedes – Engineering
Volvo — safety
FedEx – overnight
McDonald’s – Kids
Burger King — grownups

This simple idea is the spark that fires the look and feel of the brand, its expression in the market and the target audience. Think of Volvo and how every ad you see in some way references safety.

Case Study
Most recently, The Alter Group wanted to rebrand one of its signature buildings in downtown Chicago, Dearborn Plaza. Built in 1999, the 385,000 SF office building in downtown Chicago’s River North neighborhood was known across the industry as the Chicago headquarters of Google and winner of numerous architecture prizes. With the Google space becoming available in 2015, Alter knew that they needed to brand the asset as the best tech space in the best location in the city. However, when the Alter marketing team did their audit of the asset, they found that the brand didn’t reflect the status of the building.

Firstly, in our research we found that everybody knew the building as 20 West Kinzie and not Dearborn Plaza. Secondly, the brand expression , including its logo, signage and messaging didn’t convey what was special about the asset – the fact that it had a Michelin-rated restaurant and a boutique hotel in the building and was located in a spot with more nightclubs, restaurants and art galleries than anywhere in the city. After an exhaustive study , we re-engineered the brand under the Unique Selling Proposition of “Primetime Office” to convey the prime space and the notion that the building remained vibrant well into the night when the area became the center of the city’s nightlife. As part of this we introduced a new logo, new brand colors, and monument signage that still gestured at the building’s unique architectural lines. To cap it off, the building’s new web portal is one of the most content-rich sites ever done for an individual building with a look that evokes the most stylish tech companies like instagram, pinterest and tumblr.

Looking ahead, we are now seeing the second major revolution in marketing after branding – namely social media. Make no mistake, it is a sea change. And the biggest part of this is the internet and social media. Consider that 93% of B2B customers now begin the buying process with an online search and 48% participate in industry conversations online. In 2011 there was a study of 600 chief executive officers and 70 percent of them stated that they thought their chief marketing officer was on the wrong track. The reason is because the nature of the sales process has changed entirely. Customers now make 60 percent of their buying decision online before they even engage with your company. The reason for that is because we have moved from the old model of marketing—institutional marketing and the broadcast model, where the company would create a slick campaign and beautiful marketing materials and push that to the audience. This was effectively a one-way conversation. Now, we have moved from that owned content model to earned content which is about engagement.

For 20 West Kinzie, we have to go beyond branding to engaging with tech firms through twitter, LinkedIn and other channels and through very targeted banner and PPC ads. We produce meaningful content through our blog and podcasts and then combine that with presentations at conferences and through the press. You have to be useful and you have to be authentic in this marketing space. The new watchword is interaction not interruption.

In the end, branding real estate , whether it’s the Forbes or the 20 West Kinzie strategy is powerful and a natural extension of the branded environments we’ve become used to in the retail and hospitality industry. Whether it’s the marbleized no-hassle restraint of Nordstrom’s or the design-conscious eccentricity of Target, our energy and attitude is subtly altered by branding. We feel different in these spaces by virtue of the brand. Forbes is a pioneer in trying to do this within office space. It will be a great test case for the influence of the b-word.

Tom Silva is Principal of Silva Brand, a strategic branding agency based in downtown Chicago. Previously Senior Vice President of Marketing & Strategy for The Alter Group, he has branded major corporate campuses and downtown high rises, including 111 West Illinois, a major high-tech office tower in River North (www.111willinois.com) and 625 West Adams (www.625westadams.com), a 490,000 SF, 20-story office building. His writing on branding and business strategy has been featured by Reuters and in his regular column for the Huffington Post.

 

Tom Silva
Principal
Silva Brand

A Quick Story About Irrational Exuberance

Tuesday, January 14th, 2014

There is roughly 55m SF of office spec and construction nationally at a time when the vacancy rate has dipped to 15.2 percent. Seems like a lot until you consider past recessions. Robert Bach, Director of Research – Americas, for Newmark Grubb Knight Frank offers an interesting look at the building boom that caused the recession of the early 1990s to show us that we are in relatively restrained times. Construction levels today are much lower than the industry’s prior two expansion cycles. In the period leading up to the 2001 recession, office construction peaked at 3.6% of inventory while industrial peaked at 2.1%.

Here’s how Bach describes it:

The 1990-91 recession was preceded by a massive cycle of office overbuilding triggered by tax legislation in 1981 and 1986, which loosened and subsequently tightened the tax advantages available to real estate investors, setting off an ill-considered construction and lending boom that spawned the savings and loan crisis. It was the era of opulent, granite-clad towers delivered empty to the market. Texas fared worse than average due to reckless lending by many of its financial institutions compounded by an oil bust in the mid-1980s. Houston, with its lack of zoning, turned into the poster child for the boom-gone-bust and was punished accordingly by a generation of institutional investors who red-lined that market. Fast-forward to 2013 when Houston is near the top of investors’ buy lists.

The overbuilding of the 1980s haunted the commercial real estate industry, tarnishing its reputation as an asset class suitable for conservative investors while leaving a residue of concern that the industry was chronically prone to similar episodes. But lenders and developers have been more restrained since then, which has played a large role in restoring the industry’s credibility among investors. Will that restraint hold? In New York, longtime observers are wondering whether demand will catch up with projects in the pipeline. In Washington, D.C., the market has softened as a moderate construction cycle ran headlong into tenant downsizing related to government cutbacks. But these examples are like ripples from a stiff breeze on a lake compared with the tsunami of overbuilding a quarter century ago.

According to Bach 2014 will bring another surplus of demand over supply, reducing vacancy rates and pushing rents higher.

Chicago’s Tech Boom

Thursday, September 6th, 2012

Chicago’s high-tech community wants to lure the area’s start-up companies back to 1871 — the year that the Chicago Fire burned the city to the ground.  1871 is the name of a 50,000 SF space on the Merchandise Mart’s 12th floor designed to house entrepreneurs seeking a collaborative and flexible work environment.  The name reflects the spirit of innovation that rebuilt the city after the 1871 fire, said Kevin Willer, president of the Chicagoland Entrepreneurial Center (CEC).

The non-profit CEC operates the space with support from venture capitalist J.B. Pritzker and the State of Illinois, as well corporate sponsorship from companies such as Comcast and Cisco Systems, Inc.  Willer and Matt Moog, founder and chief executive of Viewpoints Network,  led efforts to create a focal point for Chicago digital technology start-ups.

Chicago is a national leader in start-up companies.  Writing in Forbes, Kelly Reid notes that a new start-up is formed in Chicago every 48 hours.  “It takes about 10 years for a first wave of start-ups to succeed or fail, and those that make successful exits begin investing their own money and mentoring the next generation.   According to Built in Chicago, it takes about two of these cycles — or 20 years — to build an entrepreneurship community.”  Chicago is “right at the beginning of the boom.  There were about as many digital start-ups founded in 2009 (72) as there were in the prior two years (73).  In 2010, the trend continued; 107 between 2008 and 2009 and 98 in 2010.   The 193 companies founded in 2011 buck the trend; there were only 170 companies founded in the prior two years, indicating very positive growth. 193 start-ups in a year amounts to a new company founded every two days.”

According to USA Today and the National Capital Venture Association,  San Francisco (not surprisingly) is the nation’s leading home of start-up tech firms, with Boston occupying second place.  These are followed by New York, Los Angeles, Washington, D.C., San Diego, Chicago, Boulder/Denver and Seattle.

Employment growth in the high-tech sector is fueling strong rental rate growth and declining vacancies in tech-oriented office markets of San Francisco, New York and Seattle, among others, according to CB Richard Ellis.   “The strengths of these tech-centric office sub-markets, with the strong rental rate growth and declining vacancies, are major factors supporting the overall office market recovery,” said Colin Yasukochi, CBRE’s director of research and analysis.  According to Yasukochi, “With the high-tech economy growing nearly six times faster than the national average, we expect that these sub-markets will continue to outperform.”

Willer points out that the CEC isn’’t an incubator, but a collaborative workspace where entrepreneurs can bounce ideas off each other.  Venture capital and angel investors also have a presence at the CEC.  “Economic development is about creating new enterprises as well as supporting corporations that are already here,” Willer said, noting that he hopes 1871 will become part of the Chicago’s tech “ecosystem”.  Chicago  start-ups raised $1.45 billion raised in 2010, the majority from Groupon  which is evidence that there is an energetic tech community in the city.

Demand for 1871 space exceeds the supply.   “On the first day we had 50 applications from companies come in,” said Steve Collens, senior vice president with The Pritzker Group. “They continue to pour in,” he said.  “The reality is that there are just very few co-working spaces here.  People are scattered from Ravenswood to River North to the West Loop.”

Chicago’s largest tech company lease in seven years was 572,000 SF, which Google leased for its Motorola Mobile subsidiary, also in the Merchandise Mart.

Large Firms Driving the Downtown Boom

Wednesday, August 1st, 2012

Here’s a little news to buck up the real estate mavens weathered by the daily diet of recessionary news: Google has signed the largest lease in downtown Chicago in 7 years.

It is a familiar story – a marquee firm relocating downtown because of the hip, cosmopolitan appeal and amenities of a CBD — but it does contradict the usual pattern of a recession. Nationally we’re seeing large firms (more than 500 employees) moving downtown to compete for young workers with the effect that the CBD is doing way better than the burbs. According to National RE Investor (NREI) Magazine, since the advent of the labor market recovery in the first quarter of 2010, large companies have created 1.06 million jobs while small companies have created 823,000 jobs. Talk to an economist or your cycle-tested real estate broker and they will tell you that it’s not how things usually work.

In every recession we’ve tracked, the small to medium-sized businesses (SMBs) have led hiring during the first stages of a recovery only to be surpassed by large firms ramping up during the latter stages of a comeback.  According to NREI, during the economic recovery in 1992 and 1993, hiring by small companies outpaced hiring by large companies—roughly 1.95 million jobs versus 1.52 million jobs. Over the next seven years before the economy entered another recession, the trends reversed. From 1994 through 2000, large firms created 11.23 million jobs while small firms created 7.36 million jobs.

The same thing happened in the economic recovery of the early 2000s: During 2003 and 2004 as the labor market began to recover, hiring by small firms of 1.44 million jobs outpaced hiring by large firms of 592,000 jobs. During this period suburban vacancy fell by 35 basis points while CBD vacancy rose by 130 basis points. But then it reversed. Once again, large companies generated more jobs than small companies —  3.09 million jobs versus 1.89 million jobs.

So, why is it different this time? The answer is credit. Small firms can’t tap the capital markets the way they used to because banks are still cautious. As a result, they need to keep their real estate costs low which means remaining in suburban space. Concurrently, large firms have gone through a huge cost-cutting period which has warranted the restacking, redesign and relocation of their workspaces to utilize space more productively with fewer but more highly skilled workers. And invariably, it means being downtown. Looking at the 10 largest leases of the last 12 years, we see the types of firms that rely on younger, highly educated workers who want to be downtown  — law firms, large financial consulting firms and tech giants.

Viacom Inks New York’s Largest Lease Ever

Tuesday, May 22nd, 2012

In what may be the largest-ever Manhattan office lease, Viacom, Inc., has committed itself to remaining a tenant in SL Green Realty Corp.’s 56-story, two million SF 1515 Broadway through 2031,  Viacom is the company behind major cable networks such as MTV, Nickelodeon and BET.  The media company will expand into 1.6 million SF, which is expected to comprise the balance of the building’s office space after 2020.

Marc Holliday, SL Green’s CEO, said the decision to remain in Times Square was based on the company’s long-term presence in the market.  “The company has been a corporate anchor in Times Square for over 20 years and the extraordinary building branding opportunity provided in this lease will allow Viacom to increase its corporate visibility to millions of New York City visitors at the ‘Crossroads of the World’ for years to come,” he said.  “The transaction reaffirms the desirability for trophy assets located in the prime areas of Midtown Manhattan.”

It’s a seminal moment for New York City and Times Square,” said Andrew Mathias, SL Green president.  ”  The transaction puts to rest speculation that Viacom might depart Times Square after its leases expire in 2015,” as Manhattan projects such as the World Trade Center and Hudson Yards try to attract anchor tenants.

SL Green bought 1515 Broadway during the market downturn of 2002. Over the last decade, the building had an extensive makeover which included repositioning of all retail space, a complete redevelopment and revenue enhancement with LED advertising signage.  In addition to being anchored by Viacom, the building is home to the Minskoff Theater, one of the city’s largest live performance theaters and Best Buy Theater, which has become New York’s premier rock concert venue.

CompStak Wants to Make Office Comps Transparent

Monday, May 7th, 2012

Two young New York entrepreneurs are looking to cash in on what might be one of the commercial real estate brokerage community’s best-known secrets – that brokers commonly share hush-hush details of office transactions.  But Michael Mandel, a 29-year-old broker who spent more than five years with Grubb & Ellis, and Vadim Belobrovka, a 33-year-old software engineer, have the potential to shake up the brokerage world if their online service gains traction.  Their company — CompStak Inc., — provides the disruptive technology that is used to challenge the conventional order of quite a few other businesses.

Mandel established CompStak because “commercial real estate information should be available and transparent, and because most commercial real estate technology is from the Flinstones era.”

In theory, when leases are signed, tenants, landlords and brokers sign non-disclosure agreements in which they say they will not disclose lease terms, like rents, landlord concessions and escalation clauses.  In reality, brokers regularly share “comps” as a professional courtesy so they have knowledge of market rates for buildings and neighborhoods.

What Mandel and Belobrovka are doing is gathering as many of these “comps” as they can and offering brokers and real-estate professionals access to their data base in exchange for information.  The system currently is being tested and is expected to be launched in the summer.  Mandel and Belobrovka hope that landlords, tenants, private equity firms, hedge funds and others will pay “five to six figures” for access.  “The reality is that everyone has been exchanging this information,” according to Mandel.

The men face several obstacles, as they work on an extremely tight budget and attempt to attract investors.  CompStak also might face strong opposition from brokerage firms who could perceive the service as a competitive challenge to their dominance of market information.  These firms might not allow employees to contribute to CompStak.  CBRE Group Inc said that the firm does not “share comps with any other outside organizations, ever.”

The quality of CompStak’s data is critical.  Mandel and Belobrovka say their data base currently includes 2,900 comps for deals closed in the last two years and a total of 6,000 comps.  Industry estimates are that about 2,500 Manhattan leasing deals are done a year.  If those numbers are correct, CompStak has collected approximately half of all comps for the last several years.  CompStak executives say they haven’t met resistance from the brokerage industry yet and don’t expect any, noting that brokerage firms offer a lot more than quality information.  “If you think that (lease comps are) your only advantage, you’re probably not a very good broker,” according to Mandel.

Writing for the A Student of the Real Estate Game website, Joe Stampone says that “Throughout my brief career in commercial real estate, I’ve seen a lot of innovation. From 3D mapping, mobile, and retail tech, to the data space, tech-related start-ups are proliferating.  I was lucky enough to be part of a test group for CompStak, a new crowd-sourced database of lease comparables launching in New York City.  CompStak is destined to be a game-changer and one of the founders was nice enough to take the time to sit down and answer a few questions.”

Mandel describes CompStak this way: “The germ of the idea for CompStak, and our first product, is a marketplace for the exchange of lease deal information (comps).  Others have certainly identified this need, and a few have acted on it, but many others never tried, because unlike collecting sales data and other property information there are no large sources for this information.  We realized very early on, that if we didn’t tackle this problem the right way, we could not succeed.  We had to create a site that is very easy to use, allow our users to add and search for a lot of data, and properly incentivize brokers and appraisers to share information that is near and dear to them.  Our lease comp marketplace is just the first step in our larger vision.  Our ultimate goal is to increase transparency in commercial real estate information on the whole.  This includes the information that buyers, sellers, tenants, landlords and brokers use in doing transactions, and the information owners use to manage their buildings and maximize their revenue.”

Mandel is bullish on the future of CompStak. “When all the stats get tallied, 2011 may surpass the record number of square feet of office space transacted in NYC.  With the instability in the national economy combined with the turmoil in European countries, I think it will be tough for 2012 to compete.  The segment of NYC real estate that I’m most interested in, is office space for tech startups.  Tech startup real estate has been one of the strongest drivers of NYC office space in the past year, and I think it will continue to make a big impact in 2012.  Availability of office space in Midtown South (where most tech startups are located — roughly between Canal and 34th Street — is lower than Downtown and Midtown, and is the lowest it’s been in three years.  Finding cool creative loft space for startups is really tough right now, and the smaller the space you need, the harder it is to come by.”

Office Buildings Have to Get on the Smart Grid

Monday, April 9th, 2012

Back in the day, hot weather that overtaxed the power grid meant that office buildings had to turn down the air conditioning to save electricity.  Meanwhile, the employees would notice that their surroundings were getting appreciably warmer.  Today – because more buildings are connected to a smarter grid – fewer adjustments need to be made, one of those perhaps switching to a secondary power source that happens to be roof-mounted solar panels.

Writing in National Real Estate Investor magazine, Managing Editor Susan Piperato says that “Smart grids are digital networks connecting utilities, power-delivery systems and buildings.  Traditionally, when local energy grids become overtaxed, what’s referred to as a ‘demand event,’ a utility company must fire up additional power stations to meet increased demand or ask its biggest users to reduce power consumption.  If a building that isn’t connected to the smart grid receives notice of a demand event, the building engineer must manually reduce the building’s power usage in some way.  When the event is over, the engineer manually revs up the building’s energy consumption level again.  But by connecting to smart grids and utilizing demand response (DR) systems, a building can determine automatically through its building management system (BMS) how much electricity it needs at various times of day.

DR systems manage buildings’ consumption of electricity in response to supply conditions and respond to a utility company’s demand event by automatically reducing the amount of power being used or starting on-site power generation through, say, a solar panel array or wind turbine.”

Unfortunately, the majority of commercial owners are not using these highly beneficial advanced technologies.  A surprising finding of a preliminary CoR Advisors survey found that most commercial building owners and managers aren’t even thinking of connecting.

According to the survey, a mere 19 percent of buildings have some type of automated connection to the smart grid, while 32 percent are using DR systems.  CoR Advisors President and CEO Darlene Pope said that 68 percent of building owners are not planning to connect their buildings to automated smart grid systems within the next three to five years.  The survey, commissioned by Continental Automated Buildings Association and conducted by CoR Advisors, asked 25,000 commercial building owners and managers about “their attitude about smart buildings and the smart grid,” according to Pope.  The survey included approximately 12,000 buildings comprising approximately 1.2 billion SF.

A Federal Energy Regulatory Commission rule allows smart buildings in DR programs to recoup some of their investment by shedding load during times of non-peak demand and selling that excess capacity at spot pricing, Pope said.  “So if the price of electricity is $200 a kilowatt hour in Dallas in the middle of August because there’s such a demand for capacity…and you have a building in New Jersey that you want to shed load, and you want to sell it in Texas, you can do that.  While you might be paying 17 cents per kilowatt hour in New Jersey, you can sell it to people in Dallas for $200.”

Why don’t more building owners take advantage of these new technologies?  According to John Bredehorst, executive vice president with WSP Flack+Kurtz, his firm’s “more responsible clients” are already participating.  Additionally proactive clients are the exception and not the rule.  The smart grid is still nascent, and “No one wants to be a guinea pig.”  Many existing buildings lack the infrastructure to support the technology, meaning that their owners don’t have the ability to cut electrical consumption by switching to a secondary power source.

California is showing the most interest in smart-grid buildings, according to WSP Flack+Kurtz’s Clark Bisel, senior vice president.  He is managing the construction of 350 Mission Street in downtown San Francisco, which hopes to acquire LEED-Platinum status and will have smart grid connection and DR systems.  It’s a multifaceted project, but Bisel sees 350 Mission as “a very good idea from the building owner’s perspective.  Demand response is becoming more of a discussion topic,” he said, with the big electrical utilities directly approaching customers and offering competitive rates for DR programs.

“California is a hotbed for this,” Bisel said.  “Frankly, the utility crisis of 2000 is still in people’s minds, so that may be more of a reason why (smart grid and DR) is active out here.”  If there was more new construction, according to Bisel, the smart grid and DR would take off even faster.  With new construction, “You have architects, engineers, and developers all very engaged in the whole dialogue so when a utility company approaches, they find a very receptive audience.”  When it comes to existing buildings, operations are decentralized and owners are “more interested in making tenants comfortable.”

WSP Flack+Kurtz’s Bredehorst says it will take 10 years for the smart grid and DR to catch on.  With more smart buildings being constructed, he said, existing buildings will need to make alterations to stay competitive.  Additionally, utility companies need become more proactive: “They make it easy for building owners to be able to upgrade their building’s control system and tie it in with a utility,” he said.  “They need to make it so that it’ll be enough of an incentive for (buildings) to reduce their load, but also easy enough that (building owners) don’t have to tie (DR) in with their entire infrastructure and change out a lot of equipment.”

A New Chapter for Iconic Empire State Building

Wednesday, March 14th, 2012

The landmark 102-story Empire State Building in midtown Manhattan could raise as much as $1 billion in a share sale and become a real estate investment trust (REIT), if the company that controls that iconic structure if its plans pan out.  According to a Securities and Exchange Commission filing, Empire State Realty Trust, Inc., intends to list the shares on the New York Stock Exchange.  The firm, Malkin Holdings, LLC, will consolidate a group of closely held companies to form the REIT as part of the IPO, according to a separate filing.

Malkin, supervisor of the company the holds the title to the tower, said that it had “embarked on a course of action” that could result in the Empire State Building becoming part of a new REIT.  Malkin Holdings supervises property-owning partnerships led by Peter and Anthony Malkin, and owns the 2.9 million-square-foot Empire State Building in conjunction with the estate of Leona Helmsley.  Bank of America, Merrill Lynch and Goldman Sachs Group Inc. will advise on the IPO.  The price and number of shares were not disclosed in the filing.

The proposed IPO would give investors a rare opportunity to own a piece of one of the world’s most famous buildings as New York’s real estate values rebound after the recession.  Midtown Manhattan office property prices have recovered 87 percent of their value since bottoming out in mid-2009, according to Green Street Advisors Inc., a REIT research firm.

The REIT would consolidate Manhattan and New York area properties owned by companies including Empire State Building Associates LLC, 60 East 42nd St. Associates LLC and 250 West 57th St. Associates LLC. Participants can opt to receive cash instead of shares for as much as 15 percent of the value.

Since gaining control of the building 10 years ago, Malkin has invested tens of millions of dollars to improve the office spaces and cut the cost of heating and maintaining the 81-year-old structure.  That helped attract tenants such as social networking site LinkedIn.  According to the SEC filing, Malkin said that upgrading the building still requires additional investment of between $55 million and $65 million over the next four years.

As with many recent tech and internet IPOs, the company plans to have two classes of stock — class A shares that are sold to the public and worth one vote, as well as class B shares with 50 votes each.  The structure leaves the Malkin family with significant control.  The proceeds will pay existing stakeholders in the buildings who chose to take cash in exchange for their interests, and to repay debt.  The REIT will list itself on the New York Stock Exchange under the symbol “ESB.”

The Malkins realize that leasing in New York is “highly competitive,” and faces new rivals in the skyline, primarily the One World Trade Center, which will have a broadcast antenna and observation deck that could attract tenants away from the Empire State Building.

At 1,250 feet and 102 floors, the art deco-style building is one of New York City’s most recognizable tourist destinations, enjoying its second stint as the city’s tallest building.  It was the world’s tallest building from its 1931 opening until 1974, when the 442-meter Sears Tower (now Willis Tower) was completed in Chicago.

The building played a starring role in several movies, most notably “King Kong,” “An Affair to Remember” and “Sleepless in Seattle.”

LED Lightbulbs More Affordable, Easy on the Electric Bill

Wednesday, February 15th, 2012

If you’d like to slash your electric bill, switch to the LED light bulb, the “light-emitting diode” that General Electric invented 50 years ago.  Now, LED bulbs are the focus of intense competition among all of the major lighting manufacturers.  “There are two races going on,” said Todd Manegold, LED product manager for Philips Electric.  “One is the race to equivalency.  It’s about delivering light bulbs that replicate or imitate what people are used to.  Once you reach equivalency, the game is how to make it more affordable.  We think we have gotten it more affordable.”

According to industry experts, within 10 years LEDs will surpass conventional lighting such as halogen and compact fluorescent bulbs (CFLs).  This will not occur because of government regulations, but rather because it makes economic sense.  The changeover is already underway for commercial customers, particularly in new construction, where newly designed fixtures incorporated LEDs.  But there are an estimated 2.6 billion light sockets in American homes, making them a major market for the industry.  Philips for some time has offered LED bulbs to replace conventional 40-watt, 60-watt and 75-watt lamps.

LED prices are falling rapidly.  Replacing an old 60-watt bulb with a Philips 12.5-watt LED bulb cost approximately $40 one year ago.  The price now averages $25.  Introduced in 2010, the first household LED able to direct light in all directions — the 8.5-watt bulb — was $50.  Now it retails for $30 to $35.  Philips considers CFL bulbs and especially its halogen bulbs as “bridge technology” to LEDs — products that people will use until LEDs become more affordable.  GE Lighting has had virtually the same experience.  “Think of it as a lighting revolution,” said Linda Pastor, GE’s LED product manager.  The switch will take less than 10 years, industry experts say.  “I absolutely believe that the incumbent lighting technology will be replaced by solid state alternatives — all of them with very rare exceptions, within 10 years,” said Tom Griffiths, president and publisher of Austin-based Solid State Lighting Design.

Writing for MSNBC Real Estate, Brian Clark Howard says that “If you want to consider an LED bulb for your fixture, you’ll get even better efficiency and longer life.  For a 60-watt replacement, one popular choice right now is the Philips 12-watt Ambient LED, which produces remarkably soft, yellow light.  It’s also fully dimmable, and is rated to last 25,000 hours.  It costs $40, which we know is more than you’re used to spending on a bulb.  But let’s calculate potential savings.  For a lamp that’s on six hours a day, that would give us 12 watts x 6 hours x 365 = 26.3 kWh.  At 12 cents per kWh, that’s $3.12 a year to operate.  Subtract that from $16, and that’s a savings of more than $12.80 a year.  With a lifespan of 25,000 hours, it should theoretically last for about 12 years in this application.  Over 12 years, we would otherwise have to buy 24 incandescents, for a cost of $18, or about $1.50 each year.  With the annual savings of $12.80 in energy and $1.50 in bulbs, the LED will pay for itself in just under three years.´

Another advantage that LED has over CFL bulbs is that they don’t emit a mercury hazard into the atmosphere.  Many states have been instrumental in passing laws to reduce toxic pollution in their workplaces, communities and our environment.  Additionally, the majority strongly support replacing harmful products with safer alternatives when available.  In the case of light bulbs, the switch to CFLs cuts mercury and other pollutants such as carbon dioxide and sulfur dioxide.  CFLs use less mercury because they require less electricity to produce the same amount of light as an incandescent bulb.

According to the Environmental Protection Agency, a power plant emits four times more mercury pollution to produce the electricity that lights an incandescent bulb than a CFL for the same amount of time.  CFLs do contain a very small amount of mercury sealed within the glass tubing – though  no mercury is released when the bulbs are intact or in use.  That is why it is important to recycle these bulbs.  Many states provide convenient venues to recycle old CFLs, which prevents spent bulbs from breaking in the trash and releasing mercury into the environment.

New World Trade Center Is Rising From the Ashes

Monday, September 12th, 2011

In the nearly 10 years since the 9/11 tragedy, the site that once seemed impossible to redevelop is very much alive.  The World Trade Center redevelopment and the electrifying changes going on in Downtown New York City — 56,000 new residents (doubled that of before the attacks) and 300 new tenants (since 2005) must be onto something good. The site’s transformation has been “a piece of cake,” quipped Silverstein Properties CEO Larry Silverstein. We’re seeing a quick metamorphosis Downtown, and the impact on values is just beginning, according to Silverstein. “It’s nothing short of extraordinary.” The site will have as much impact (if not more) as Rockefeller Center was to New York City in the 1930s. 

Construction on 1 WTC and 7 WTC is progressing, the latter to be the last of the towers to collapse on 9/11 and the first to be rebuilt.  At 1,776 feet in terms of structural height, with the spire, 1 WTC will be the tallest building in the Western Hemisphere, taller than the Willis Tower in Chicago. The structural steel for the 72-floor 4 WTC is currently at 40 stories with completion planned for 2013 and will have 2.3M RSF.  The expected completion dates for all of the WTC properties are: the National September 11 Memorial & Museum this year; 1 WTC, the vehicle security center, and 4 WTC in 2013; the transportation hub in 2014; 3 WTC in 2015; and 2 WTC beyond that.

According to the Lower Manhattan Development Corporation, “LMDC is charged with assisting New York City in recovering from the terrorist attacks on the World Trade Center and ensuring the emergence of Lower Manhattan as a strong and vibrant community. The centerpiece of these efforts is the creation of a permanent Memorial remembering and honoring the thousands of innocent men, women and children lost in the terrorist attacks. The Lower Manhattan Development Corporation was created in the aftermath of September 11, 2001 by then-Governor George Pataki and then-Mayor Rudolph Giuliani to help plan and coordinate the rebuilding and revitalization of Lower Manhattan, defined as everything south of Houston Street.  . LMDC is charged with ensuring Lower Manhattan recovers from the attacks and emerges even better than it was before. The centerpiece of LMDC’s efforts is the creation of a permanent memorial honoring those lost, while affirming the democratic values that came under attack on September 11.”

 Writing on the Plots and Plans website, Carter B. Horsley says that “In the best of all cities, if not worlds, the design for a redeveloped World Trade Center site would include a memorial for the almost three thousand people lost in the September 11, 2001, terrorist attacks that demolished the center’s twin towers, a decked-over West Street to reunite Battery Park City with the rest of Lower Manhattan, an expanded transportation terminal that would better unite Downtown with Midtown and the rest of the Metropolitan region, and a stunning new architectural project that would reassert Manhattan’s international architectural prominence. The redevelopment should also afford the city the opportunity to significantly bolster the downtown community’s cultural assets with the inclusion of some important institutions such as new homes for the Museum of the City of New York and the New York City Opera. Fortunately, the site is large enough to accommodate all of these components as well as meeting the contractual needs of the Port Authority of New York & New Jersey to replace the 11 million square feet of commercial and retail space that had existed on the site.”

“After 9/11, we found ourselves with a clear mission to rebuild 7 World Trade Center quickly,” said Robin Panovka, a partner at Wachtell, Lipton, Rosen and Katz, who provides legal counsel to Silverstein Properties. “But there were tremendous obstacles in the way, and it’s really how those obstacles were overcome, through cooperation with the Port Authority and the other players, that led to rebuilding of 7 World Trade Center and is now leading to the rebuilding of the larger site where the Twin Towers once stood,” Panovka said. “The result is this beautiful building, 7 World Trade Center, built partly on land the builder didn’t yet own or lease, without customary agreements among the major stakeholders.  It’s that kind of cooperation, vision and guts that led to the success of this building and is fueling the rebuilding of the whole World Trade Center site.” 

As the world’s largest and most complex construction site, the new World Trade Center will be home to a national memorial and museum of emotional and engineering complexity, the nation’s tallest skyscraper, a transportation hub that will serve 250,000 commuters every day, and upscale retail. It will also be home to thousands of workers moving into 10 million SF of new office space.