|
|
Variety Magazine
|
March 09, 2003
|
|
| Real Estate Woes for AOL |
| $800 mil new digs belie cost-cutting agenda |
|
| Nicole LaPorte |
|
NEW YORK -- While AOL Time Warner has been facing billion-dollar debt and shrinking stock for some time, the media empire's latest problem is real estate.
Conglom is slated to begin settling into its colossal new digs -- alternately dubbed the Taj Mahal and the Rockefeller Center of the 21st century -- on Columbus Circle one year from now.
Yet while there is talk of selling up to $4 billion in assets to help cut its $27 billion debt load -- as well as spinning off its cable unit in an IPO and possibly deep-sixing noncore assets such as sports teams and cable networks -- not a peep has been made about letting go of its $800 million interest in the palatial two-towered spread overlooking Central Park.
Leasing in a soft market is another thorn in the media giant's big toe. Bound by a lease that expires in 2014, corporate offices at the current Rockefeller Plaza headquarters will soon be put on the market for sublet. In addition, a portion of AOL TW's commercial space in the new building is also in need of tenants.
Given the slumpish real estate market, the biggest property tax increase in Gotham history (recently approved by Mayor Michael Bloomberg) and an increase in commercial vacancies due to the belt-tightening economy, the situation could stand to be rosier.
Down market
"The commercial real estate market has been in a steady decline over the past year," said John Cicero, of appraisal firm Miller Cicero. "Rents are down about 10% in Manhattan, and with all the job losses, there's a flood of sublet space coming on the market."
On the other hand, AOL TW's cross-town move is less risky than it sounds. Despite the new headquarters' eponymous name, the AOL Time Warner Center is only partially devoted to its most troubled tenant. The $1.7 billion building, the most expensive single-building project in U.S. history, is divided among several principal owners, namely the Related Companies and Apollo Real Estate. The Mandarin Oriental Hotel has a stake in its property in the north tower, and McFarland Partners has a future equity interest.
Just over half of the building's 200 luxury apartments have been sold by Related. A $35 million penthouse with views of the Hudson -- and just about all of Gotham -- is still available. Full occupancy is expected in the fall.
Ninety percent of the commercial space has been shored up by the likes of J Crew, Pink, Hugo Boss and Williams-Sonoma.
AOL TW's $800 million piece of the pie represents less than a third of the 2.1 million square-foot complex. Indeed, a scant 2% of its 90,000-plus workforce will be setting up house. Most of America Online's operations will remain in Dulles, Va., and besides corporate honchos and CNN, only Lou Dobbs' "Moneyline" and "NewsNight With Aaron Brown" are relocating to the space.
Gotham coverage
The bulk of AOL TW's New York operations, including HBO, Time Inc. publishing and Warner Music Group, will remain in offices scattered throughout the city. CNN's "American Morning With Paula Zahn" and "Connie Chung Tonight" are not budging from their venues on the Avenue of the Americas.
|
|
|
� 2002 Reed Business Information��� 2002 Variety, Inc.
|
|
