Equity Office

New lease on life┬áLinda Seid Frembes learns how an aging New York City skyscraper is getting a total transformation into a modern high-rise office tower, thanks to a hefty investment from private equity firm Equity Office. While most New Yorkers may know it as the old Verizon Building, the property now known as 1095 Avenue of the Americas in midtown Manhattan is a testament to how capital management and construction technology can transform an antiquated high-rise into a modern office building.   Adjacent to Bryant Park, the buildingÔÇÖs renovation is one of the many successful projects for Equity Office, one of the nationÔÇÖs largest commercial real estate landlords.Equity Office, a private equity firm owned by Blackstone Partners, has holdings in major metropolitan areas such as New York City, Boston, Houston, San Francisco, Los Angeles and its headquarters city of Chicago. The firm employs 700 people nationwide, with a portfolio that has over 300 properties and more than 50 million square feet of space.ÔÇ£Equity Office purchases real estate during downturns in the market. For example, our portfolio bulked up in the early 1990s during the last major slump,ÔÇØ explains Frank Frankini, senior vice president of development investments, who manages specific development projects. The renovation of 1095 was his project from conception and execution through to completion. ÔÇ£Over the last 30 years IÔÇÖve managed over 20 development and major redevelopment projects. The decision to renovate 1095 was easy; it had a good structure, good floor plates and floor-to-ceiling heights, and the electrical and mechanical infrastructure was more than sufficient.ÔÇØThe building offers over 1 million square feet and has 41 floors. It was built between 1972 and 1974, with its primary function serving as the headquarters for New York Telephone (then AT&T, NYNEX, and now Verizon). ÔÇ£It was an antiquated building. A complete renovation was required, so we stripped it down to the core, steel frame and floor slabs. We saw that it had a good structure, but it needed improvement in order to serve the needs of the modern office tenant,ÔÇØ says Frankini.Under the agreement with Verizon, Equity Office purchased approximately 80 percent of the building for $505 million in 2005. Verizon retained six floors in the building to continue its operations, offices, and switching equipment. ÔÇ£Reportedly, every phone in Manhattan is connected to this switch and related network,ÔÇØ says Frankini.He also notes that, while he saw a building that was not architecturally acceptable with its outdated black and white fa├ºade, there were several good aspects of the building that were hidden gems. ÔÇ£The building wasnÔÇÖt built as a fungible asset but rather as a functional building, designed to house a giant phone switch and the related operations,ÔÇØ says Frankini, who has been in the construction industry since 1977 and is a licensed professional engineer. ÔÇ£Originally, it wasnÔÇÖt designed to be a Class A office building with highly efficient office space. But it did have a desirable location on Bryant Park, a developing area at the end of Times Square with burgeoning retail and easy access to Grand Central Station.ÔÇØWhen asked why the building was rehabilitated rather than razed, Frankini responds, ÔÇ£In many urban areas like this sub-market in New York, there are no available land sites or severely constrained land sites, so the ability to rehab buildings will become more important. We have developed the in-house financial and technical expertise to ensure that the development process meets the needs of our investors and the building tenants.ÔÇØFrankini notes that the inherent benefits of the 1095 Avenue of the Americas building included floor plate that was large enough to accommodate an open and flexible floor plan and an abundance of mechanical and electrical capacity. Equity Office coordinated with a team of professionals to execute the renovation while Verizon carried on its daily operations within the building. Key players on the project included Tishman Interiors of New York as the construction manager; Gensler and Moed de Armas & Shannon as the lead architects; Hoffman Architects as the interior architectural consultant; Sillman as the structural engineer; Cosentini Associates as the mechanical/electrical consultant; Israel Berger as the curtainwall consultant; and Hillman Environmental as the environmental consultant.ÔÇ£The design program is a function of the desired end use,ÔÇØ says Frankini, who notes that his firm has handled over 100 million square feet of leased office space and has seen the evolution of office space, office layouts and technology over the last two decades. ÔÇ£We took the curtainwall off┬áand extended the window lines. The views from the building are incredible, with park and/or water views almost 360 degrees.ÔÇØHe also adds, ÔÇ£ItÔÇÖs a very efficient curtainwall, with a shading coefficient of 0.32. This curtainwall design, coupled with the sophisticated HVAC design, takes advantage of solar loads in the summer and in the winter months. In fact, the utility costs are projected to be $1 lower per square foot than the old building due to improved efficiency.ÔÇØFrankini has spent the vast majority of his career addressing energy consumption and other green issues. ÔÇ£Good stewardship of investor capital is the goal, as well as improving the environmental impact of a space and being a good neighbor,ÔÇØ he says. ÔÇ£You must look at specific potential energy efficiency options as individual investments and calculate a return on investment. If the return is there, sophisticated companies will make the investment, and everyone benefits. When considering the long list of green initiatives, we invested in the ones that made sense for this building, in this climate, in this market, for the desired end user. For example, there is no bike rack in the building because it is highly unlikely that anyone will ride their bike to work on Sixth Avenue in New York. Every building is different, so you must address the details and incorporate that process into your design program.ÔÇØToday, 1095 is marketed as providing prominence, proximity and productivity. To date, each floor has been integrated into a fiber optic network. The buildingÔÇÖs new fa├ºade of green-tinted windows has brought a towering elegance to Bryant Park. Among other prominent tenants, MetLife has announced that it signed a 21-year lease at 1095 Avenue of the Americas. The insurance giant will occupy 12 floors in the building, or approximately 410,000 square feet. Other occupants include law firm Dechert LLC and the Bank of Scotland.Currently, Equity Office has reached substantial completion of the building, with several key tenants occupying their spaces. Frankini credits the in-house sophistication in all areasÔÇödevelopment, investment, operations, marketing and leasingÔÇöwith making Equity Office one of the best in the business.┬á ┬á