Studley negotiated the site acquisition and managed the development of Time Warner’s one million-square-foot office condominium inside a 2.7 million gross-square-foot multi-use structure. The project included both Time Warner’s world headquarters and studio space for its CNN division. This high-profile Columbus Circle site had seen a number of unsuccessful redevelopment proposals over a 15-year period, with the ultimate developer (Related) having lost on the first round of bidding. By bringing Time Warner to the project and arranging for a corporate guarantee of the land purchase, Studley helped the developer to win to project against stiff competition (with a bid that was the third highest).
Consideration and Analysis
Studley negotiated on behalf of Time Warner to secure a one-third interest in the property to provide approximately 1 million gross square feet of space for its operations. Once the site was secured, Studley acted as development advisor to provide strategic planning, programming and project management expertise on behalf of Time Warner.
Result
Substantially completed in 2003, Time Warner Center includes retail space, advanced television studios and production space, a jazz auditorium, executive offices, a five-star Mandarin Oriental hotel and several hundred condominium apartments within its twin-tower design.
A key aspect of the transaction was that it was done at developer’s cost (plus fixed fee) with no markup. Studley helped Time Warner finance the condominium with a low-cost, short-term debt, which was hedged internally. The LIBOR-based construction loan saved tens of millions of dollars and helped deliver the project under budget.
Studley assisted Time Warner with:
Negotiations with the MTA on the terms of the purchase and sale agreement, which was repeatedly modified and amended during the transaction. These changes (which were highly favorable to the job) were negotiated directly with the chairman of the MTA.
Negotiations with City Planning, including a three-person architectural review board appointed by the mayor to evaluate the design. These negotiations included the head of the City Planning Commission.
The evolution of the design, acting as Time Warner’s forceful advocate with the architect and base- building engineers in order to create:
extremely usable floor plates with ideal core-to-wall dimensions office use;
27-foot slab-to-slab heights and 60-foot column spacing for studio floors;
a “building within a building” that completely uncoupled Time Warner’s systems with those of the balance of the complex.
Negotiations with the developer on the development agreement, including a final negotiation through which Time Warner acquired significant price protection against cost overruns associated with the developer’s fast-track bidding and purchasing process. The development agreement included extensive intellectual property rights that allowed Time Warner to take advantage of the complex as a venue for television broadcasting and special events for minimal cost.
Hiring, contract negotiations, and direction of Time Warner’s construction project managers. This included analyzing and verifying budgets and schedules, designing change impact reports and systems, and working to create a cost allocation methodology that was fair to Time Warner. At Studley’s recommendation, Time Warner retained Bovis Lend Lease as its project management advisor. Studley judged correctly (two years in advance) that the developer’s chosen contractor might not be able to bond a job of this magnitude. By retaining Bovis and having them estimate the job in parallel with the developer’s contractor it became possible for Bovis to change roles (both Time Warner and Related concurring) to become the contractor for the job. This prevented a significant, extremely costly, project delay and is one of the central reasons the project was delivered on time. When Bovis changed roles, Studley assisted Time Warner in the process of hiring a replacement project manager.
All financial modeling on the project. This included an integrated cost model that began with the project budget and the project finance models (both construction loan and “takeout”) and developed a fully-loaded occupancy cost budget for Time Warner operation groups. This model was used to present the project for approval to Time Warner’s board, and for value engineering and scope refinement throughout the project.
It is worth noting that the original strategic plan for Time Warner (completed in 1998) illustrated a “portfolio sweet spot” in first quarter of 2004. Time Warner’s actual move-in was in the first quarter of 2004.
