Blackstone Pitches Old New York Times Home to New Media
The Manhattan office tower that housed the New York Times for nine decades can now be found hosting social-media executives zipping around its empty floors on Razor scooters or trying out a set of ping-pong tables.
The wheeled toys enable prospective tenants to speed through what was once the newspaper’s cafeteria, now stripped bare. Along with the ping-pong tables is a basketball court -- the better to emphasize a 21-foot (6-meter) high, column-free space that owner Blackstone Group LP (BX) is marketing as an amenity to technology companies.
“We’re trying to show that the building is iconic, but also fun,” said Josh Glick, vice president of leasing for the New York market at Blackstone’s Equity Office Properties subsidiary. “A lot of decision-makers are coming through and saying I can not only house my business here, but I can transform my business.”
Blackstone, which bought the top 12 floors of the building at 229 West 43rd St. last year, is seeking to attract fast- growing Internet and communications firms to the former home of the most august name in old media. To do so, the world’s biggest private-equity firm needs to lure tenants that have become accustomed to hip neighborhoods such as Soho, Chelsea and Flatiron to a property located in the heart of Manhattan’s theater district and steps from Times Square, an area more known for tourists than techies.
Blackstone, based in New York, has invested $105 million in renovations and is offering a tenant the opportunity to put its name on the rooftop cupola, once emblazoned with the New York Times’ gothic-type logo. Facebook Inc. and Amazon.com Inc. are among the companies that have toured the building, said brokers with knowledge of the marketing, who asked not to be identified because the information is private.
“This changing physical landscape speaks to the changing economy,” said Ken Doctor, media analyst with Newsonomics.com, and a former vice president overseeing online initiatives at the newspaper company Knight Ridder Inc. “A Foursquare logo, for instance, appearing where the New York Times (NYT) logo once appeared gives you the physical reinforcement of how the basic economy of the United States and the intelligence economy is moving.”
Data, media, information-technology and advertising firms have been gravitating to an area below Times Square known as Midtown South, the market roughly between 30th and Canal streets that has the lowest office-vacancy rate in the country. About 34 percent of the 1.9 million square feet (177,000 square meters) of leasing done this year by creative and tech-focused companies was in Midtown South, which has only 16 percent of Manhattan’s office inventory, according to Cushman & Wakefield Inc.
“There’s a lot of things down there for employees to do before and after work, and those amenities are not necessarily in” Times Square, said Robert Stella, principal of Boston-based brokerage Cresa, which represents office tenants in Manhattan. Midtown South is “more cool and hip,” though tenants probably won’t base their decision on location alone, he said.
There is nothing as large in Midtown South as the 480,000 contiguous square feet available in the 16-story Times building. The office portion of the property has been sitting empty since the newspaper and its parent New York Times Co. moved in 2007 to their new headquarters around the corner on Eighth Avenue.
The 99-year-old former Times building bears the characteristics that so-called creative companies have shown they desire: vast, open floors that allow employees to collaborate; vintage architecture, with the top three floors designed to resemble a chateau in France’s Loire Valley; and vaulted windows that bathe the space in natural light. It also has about 25,000 square feet of outdoor terraces, some of which Blackstone has decorated with plantings and picnic tables.
“If they could move the building 40 blocks south, they would have leased it 40 times over,” said Richard Bernstein, vice chairman at Cassidy Turley, a commercial-property services firm with offices in New York. “Since that’s not an option, I think they will find the right, discriminating, high-profile tenant. It’s just going to take them a little bit more time.”
Blackstone has been marketing the space since November, about seven months after completing the purchase, and is working with brokers from Newmark Grubb Knight Frank. The company is asking for an average of $67 a square foot, according to a broker with knowledge of its campaign.
Asking rents for Midtown averaged $62.29 a square foot in May, according to data from Cassidy Turley, and $68.61 for Times Square. Landlords were seeking $72.96 a foot for so-called Class A space in the neighborhood. In Midtown South, Class A rents were $62.17. Overall rents were to $45.71 a square foot -- a 3.3 percent increase in a single month.
Glick declined to comment on pricing or companies interested in the space, as did Brian Waterman and Lance Korman, Newmark’s brokers working with Blackstone. Glick said that while there’s a “great deal of truth” to the idea that technology and media tenants are reluctant to look outside Midtown South, the Times building may be better able to accommodate them.
“If you peel back the layers a little bit, Midtown South is a super-tight market,” Glick said. “It doesn’t service the tenants who want large blocks of space.”
The largest comparable block of space available in Midtown South is 414,000 square feet in Soho at 101 Avenue of the Americas, a glass tower completed in 1991 that is “not at all the same style” as the Times building, Robert Sammons, vice president for research at Cassidy Turley, said in an e-mail.
Times Square isn’t void of the types of companies Blackstone is seeking to attract. Viacom Inc. (VIA) and Thomson Reuters have offices in the area. LinkedIn Corp. (LNKD), owner of the world’s biggest professional-networking site, leases space in the Empire State Building. Yahoo! Inc., the largest U.S. Web portal, has offices in Midtown.
“These tenants have migrated away from the thinking of being in Chelsea,” Waterman said. “You’re going to be surprised where some of these tenants sign leases. The ones who have traditionally been located in those districts are going to start migrating north.”
Besides Facebook and Amazon, companies that have looked at the Times building include London-based WPP Plc (WPP), the world’s largest advertising firm, which considered it for one of its subsidiaries, one of the brokers familiar with the matter said.
Slater Tow, a spokesman for Menlo Park, California-based Facebook, declined to comment, as did Ty Rogers, a spokesman for Seattle-based Amazon. Kevin McCormack, a WPP spokesman, didn’t return phone and e-mail messages.
The building was one of “dozens of properties” looked at by Deutsch Inc., the advertising agency whose chairman is television personality Donny Deutsch, said Vonda LePage, a spokeswoman. The company is seeking 140,000 square feet and hasn’t made a decision yet, LePage said. Deutsch is currently at Google Inc.’s building at 111 Eighth Ave. in Chelsea, and has a renewal option there.
The building at 229 West 43rd St. was the fifth to house the Times since its founding in 1851, according to the company’s website. It was originally commissioned as an annex to the tower the company built at Broadway and 42nd Street in 1905, whose construction led to the renaming of Long Acre Square to Times Square. That building is now known as One Times Square, the advertising-festooned tower whose roof hosts the ball that drops on New Year’s Eve.
The property has passed through two owners since 2004, with vastly different outcomes for each.
Tishman Speyer Properties LP bought the tower from the Times in 2005 for $175 million. Two years later, as real estate prices were peaking, Speyer sold it to Yehud, Israel-based Africa-Israel Investments Ltd. (AFIL) for $525 million.
A plunge in property values left the building worth far less than the $711 million of debt Africa-Israel had placed on it, and in late 2009, it brought in Five Mile Capital Partners LLC as a partner in a settlement with creditors.
The building was split into separate office and retail condominiums when Blackstone acquired the upper floors for $160 million. Africa-Israel and Five Mile remain in control of the four lowest floors and the basement, where the Times’ presses used to rumble. Today the basement houses Discovery TSX, an exhibition hall co-founded by the Discovery Channel that has displayed artifacts from the Titanic and King Tut’s chariot.
Based on the 480,000 square feet it is marketing, Blackstone paid about $333 a square foot for the office space, a deep discount for Times Square. The nearby skyscraper at 1515 Broadway is worth about $1.6 billion, or $900 a square foot, landlord SL Green Realty Corp. Chief Executive Officer Marc Holliday said in April after Viacom, the anchor tenant, extended its lease. The valuation includes the retail portion of that building.
Blackstone is willing to offer space as small as 22,000 square feet on lower floors, and 16,000 square feet on the smaller top four floors. In its offering book, the company suggests dividing the building into contiguous 200,000- and 230,000-square-foot units, topped by a 43,000-square-foot space for the three highest floors, which once housed the Times’ executive suites.
Blackstone’s track record and the quality of the building should eventually entice companies to lease space there, said Jeffrey Peck, a senior managing director at Studley Inc., a brokerage firm that only represents tenants.
“Right now, tech and media tenants are focusing on the submarkets where tech companies are,” he said. “Ultimately, these types of tenants grow up and need a building with a great location and tremendous infrastructure, both of which this has.”
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