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of $1.8B AOL Time Warner Center
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing
NEW YORK — Okay, so you're a highly successful hotshot REIT executive. You know real estate, right?
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing
JACKSONVILLE, Fla. — With the two essential final pieces now in place, it's a done deal for Embraer's 200-employee aircraft assembly plant in Jacksonville, Fla.
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing
WAYNE COUNTY, Md. — FedEx Ground, advancing the ambitious $1.8-billion distribution network expansion plan unveiled last year, has picked a site just outside Hagerstown, Md., for a new 335,000-sq.-ft. (30,150-sq.-m.), 400-employee Mid-Atlantic processing center.
So what do you personally decide to pay for a spiffy, 12,600-sq.-ft. (1,134-sq.-m.) apartment on the 76th and 77th floors of a Manhattan high-rise?
How about US$45 million? That's the price that a thus far anonymous REIT exec ponied up this month for some rather spectacular New York digs featuring floor-to-ceiling windows 25 feet (7.6 meters) high. The buy represents a record outlay for Manhattan single-family housing. The previous record: a mere $36 million for corporate raider Saul Steinberg's Park Avenue apartment.
And the high-rise pad's vertigo-spurring price doesn't even include the interior work; that will run another $15 million. The deal's closing costs alone will total an estimated $2.5 million.
Those eye-popping figures underscore the scale, swankiness and appeal of the building housing the $45-million apartment: the $1.8-billion AOL Time Warner Center, a massive 2.8-million-sq.-ft. (252,000-sq.-m.) vertical village that's nearing completion on Columbus Circle.
The project's twin 80-story towers represent New York City's largest commercial development since the 12-million-sq.-ft. (1.08-million-sq.-m.) World Trade Center, which opened in the early 1970s.
The AOL Time Warner Center apartment sale was certainly a humongous win for Cendant Corp.: The company owns both the Corcoran Group, which represented the buyer, and the Sunshine Group, which represented the selling firms, the Related Group and Apollo Real Estate Advisors.
And the record buy signaled a rebound of Manhattan's high-end market, some real estate players asserted.
"This is an affirmation that the super luxury real estate market - that is, properties worth $10 million or more - is back in business in New York," said Corcoran Group Chief Executive Pam Liebman. "This demonstrates a tremendous vote of confidence in the super-luxury market."
HQ Merely Tip of Project's Iceberg
The center's 2.1 million sq. ft. (189,000 sq. m.) of leasable space, for example, will also house six high-end restaurants; the 250-room, five-star Mandarin Oriental Hotel; the prestigious Jazz at Lincoln Center and its three acoustically insulated concert halls; some 200 luxury residential units, and 364,000 sq. ft. (33,816 sq. m.) of upscale retail shops.
Residents will be treated regally. They'll live in the same north tower housing the Mandarin Oriental. Apartment owners will be considered "permanent guests" of the Mandarin, hotel officials said. As such, they'll receive every amenity offered to occupants of the Mandarin's 250 rooms, including 24-hour room service, and maid and turn-down services.
Clearly, the current stock market isn't warming to AOL's technological savvy. But prospective tenants like the array of building amenities reflecting the company's high-tech lineage, real estate agents say.
Each apartment, for example, will also have its own "e-concierge," a touch-control computer system allowing residents to order anything from food to clothing to Broadway show tickets. Each apartment will also be wired for high-speed Ethernet uplink.
Security is also a high priority. The elevators, for example, will work with thumbprint scanners. And cell phones will function properly even inside those elevators.
New York-based The Related Companies bought the 3.5-acre (1.4-hectare) site from the city in 1996 for $345 million. Related got the buy opportunity after the first buyer, Boston Properties, pulled out of the project.
The tract was then occupied by the 26-story New York Coliseum. By 1998, Related began planning the AOL Time Warner Center, forming Columbus Centre (CC) LLC to oversee the project. CC spent a full 30 months planning the development.
In the spring and summer of 2001, New York Coliseum was razed. In November of 2001, first ground was broken on the AOL Time Warner Center, regarded by many real estate insiders as the most complex structure ever built in New York.
The project involved fast tracking the center's $753-million core and shell into a 36-month process. Officials with Bovis Lend Lease, the center's construction company, estimate that more than $30 million of work has been put in place every 30 days. And Bovis came on board only in January 2001, after HRH Construction decided to bow out due to a pending ownership change.
Then there were city restrictions to contend with, including a 750-foot (288-meter) height cap. The city also required building to the property line and aligning the view line with 59th Street. That necessitated leaving an 85-foot (26-meter) gap between the two towers.
In addition, architect Skidmore, Owings & Merrill (SOM) redesigned the project in 2000 after Related Chairman Steve Ross asked that the south tower be moved forward for better views of Central Park. Both towers had to move, SOM reckoned, creating the buildings' unique 30-degree-slant to the podium.
And, of course, there was 9/11. For months after the terrorist assault, security controls on truck traffic disrupted concrete deliveries.
Now, though, AOL Time Warner Center nears completion as a unique property. The company's timing, though, is altogether another question. AOL Time Warner's $850-million investment in its new headquarters comes after a 65-percent plummet in its stock in the five years since the deal was sealed. Formally rolling out what will likely be seen as a trophy building could be risky business.
The luxuriousness of the space is underscored by part of the purchase. The buyer, described as a single, 30-something British native living in the U.S., decided to add 4,200 sq. ft. (378 sq. m.) on the 77th floor to his 8,400 sq. ft. (756 sq. m.) on the 76th.
And he's having that 77th-floor space turned into . . . air. The buyer is gutting it, using the space solely to enhance the apartment's view - which includes Central Park, three states and a sliver of the Atlantic Ocean.
That perspective is rivaled only by the Empire State Building's observation deck. Not to be outdone, the AOL Time Warner Center's $45-million apartment will also have its own observation deck: a 2,000- sq.-ft. (180-sq.-m.) wrap-around terrace.
200-Worker Plant in Jacksonville
The world's fourth-largest aviation manufacturer last month initially announced that it planned to open the new assembly facility in the northeast Florida city to serve the U.S. defense and homeland security markets. That commitment, however, was contingent on two additional things happening: getting a piece of a contract for U.S. Defense Dept. work and finalizing its incentive package for the Jacksonville site.
The Defense contract came first. Lockheed Martin tapped Embraer as one of its subcontractors in developing the U.S. Army's Aerial Common Sensor (ACS) system. The Brazilian company's subcontracting work calls for it to build 40 surveillance jets, based on Embraer's EMB 145 platform.
"Our Jacksonville facility will play a significant role in our active pursuit of U.S. defense and homeland security market opportunities," Gary Spulak, president of Embraer Aircraft Holding Inc., said in announcing the finalization of the deal.
The Jacksonville operation is a major cog in Embraer's plan to considerably grow its U.S. presence for Defense Dept. work, explained President and Chief Executive Officer Mauricio Botelho.
"We believe this initiative . . . will lead to a multi-year expansion of Embraer capabilities in the United States on defense-related operations," Botelho said. The company will pursue that expansion through work as a military subcontractor, rather than as a primary contractor, he added.
Embraer has had a U.S. presence since 1979. Its U.S. headquarters is in Ft. Lauderdale, Fla., where it has also stationed its national sales and product support operations. The U.S. is Embraer's largest market, providing two-thirds of its commercial and business aircraft sales.
The deal marks a major win for the 17,200-acre (6,880-hectare) business park, which served as the Cecil Field Naval Air Station until the Navy closed the operation in 1999.
"Embraer is a great addition in its own right and will boost our efforts to identify and attract additional aviation-related companies to Cecil Commerce Center," said Kirk Wendland, executive director of the Jacksonville Economic Development Commission, the community redevelopment agency and industrial development authority for Duval County. "It's not often that a city has the opportunity to attract one of the four top aviation manufacturing companies."
Development authorities augmented the area's attraction for Embraer by finalizing an $8-million incentive package. A key part of that package is Embraer's free 10-year lease for its site in Cecil Commerce Center. The incentives offer also includes two subsequent opportunities for 10-year lease renewals, as well as an option to obtain another 30 acres (12 hectares) in the development.
Jacksonville best met the company's site-selection check list, Embraer officials said. Facilities and logistics were the "primary focus" on that list, with skilled labor and living costs also significant factors, they explained. A number of other undisclosed areas were considered for the plant, company officials added.
The project's Defense Dept. connections provide another plus for Jacksonville: That military focus makes the plant less susceptible to the commercial aviation market's boom-or-bust fortunes.
The plant could open as soon as next July, Embraer officials said.
Editor's Note: For further coverage of Jacksonville's economy and other aerospace projects in Florida, check out the Florida Spotlight, coming in the September 2003 issue of Site Selection.
Mid-Atlantic Hub
The project is part of FedEx Ground's major bottom-line role for parent FedEx. The Pittsburgh-based subsidiary has recorded a growth rate of more than 20 percent over the last six quarters. In contrast, the current economic downturn has triggered a sharp decline in the volume of overnight shipping, the niche in which FedEx first made its name.
FedEx Ground's new Maryland facility will be located on a 114-acre (46-hectare) site in the Hunter's Green Business Center II near I-81.
Clustering near FedEx Ground's customers, particularly production-focused operations, was key strategic consideration in selecting that site, explained President and Chief Executive Officer Daniel Sullivan.
"The Mid-Atlantic region is home to a large concentration of manufacturing industries and is critical to our continued success," he said.
Distributional network efficiencies were another factor in choosing the Maryland site, Sullivan added. The Wayne County site sits 77 miles (123 kilometers) southwest of FedEx Ground's existing hub in Harrisburg, Pa.
"The new facility will work in concert with our existing Harrisburg hub to serve a strong and growing customer base in the area, as well as act as a gateway where shipments destined to and from other parts of the country are consolidated," he said.
The Wayne County center will process 45,000 packages an hour when it reaches full capacity, Sullivan explained. The operation's 400 workers will include both full- and part-time employees, as well as independent contractors, he said.
Hagerstown was one of four locations for future new hubs (along with Cincinnati, Dallas and Memphis, Tenn.) that FedEx Ground specified in the billion-dollar distribution expansion plan that it announced last year. Until now, though, the company hadn't picked a specific site or announced the facility's size and work force.
FedEx Ground's Wayne County center will break ground in September and will open in 2006, Sullivan said. The company purchased the site from Plymouth Meeting, Pa.-based Tiger Development.
Work-force quality was also significant factor in FedEx Ground's decision, said officials who worked on the project.
"Washington County is a natural location for this new facility, given its strategic location, excellent transportation infrastructure and solid employee base," said Aris Melissaratos, secretary of the Maryland Department of Business and Economic Development.
The state Department of Business and Economic Development is contributing $1.2 million through a Community Development Block Grant to help in offsetting FedEx Ground's costs in opening the new operation. The Washington County Board of Commissioners is providing another $200,000 through a similar grant. FedEx Ground also will receive $370,000 in state work-force training grants, provided that it meets its specified job creation targets.
FedEx Ground, though, will continue pounding the expansion drumbeat for quite some time. The company's expansion agenda calls for 10 new and 23 expanded central distribution hubs by 2009, as well as expanding or relocating more than 300 other existing facilities.
Editor's Note: For further insights into the FedEx Ground expansion strategy ... including how it's even buying land from UPS ... read the Logistics Industry Spotlight in the September 2003 issue of Site Selection.
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©2003 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.