The negotiations behind Aegis Media’s renewal and renovation deal at 150 East 42nd Street
Jotham Sederstrom Oct. 18, 2011, 9:39 a.m.
It was a dramatic growth spurt that prompted Aegis Media to reconsider its commercial real estate options in New York 18 months ago. But it was a commitment by the group’s landlord that ultimately convinced the London-based digital media company to renew its lease at 150 East 42nd Street.
To hear it from Aegis Media chief financial officer David Wein, the digital company had been growing significantly over the past two years thanks to a rush of recent hires within its 94,000-square-foot space on the 13th and 14th floors of the Hiro North American Properties asset.
Foreseeing continued growth in the U.S. in the next two years—and with its current sublease expiring at the end of 2013—Aegis was confronted with a conundrum: should it ride out the remainder of its lease while looking for new real estate or stay put and spruce up its three-year-old digs?
“We weren’t necessarily tied to [our current offices], but, obviously because we are here it’s easily accessible to all of our work force,” said Mr. Wein during a phone interview last week. “So that was one of the factors of staying in this area.”
Richard Bernstein, 58, a broker at Cassidy Turley who represented Aegis Media alongside his colleague Adam Ardise, said Hiro North American Properties and its representatives from CB Richard Ellis understood the value of keeping Aegis Media satisfied at its current space.
On Aug. 8, after five months of negotiations, CB Richard Ellis and Cassidy Turley worked out a deal to extend Aegis’s lease for 15 years while also agreeing to an extensive renovation plan for the offices as well as an option to expand if the growth spurt continues as planned.
The asking price was $58 per square foot, said Mr. Bernstein. He declined to provide the final value of the lease. CB Richard Ellis declined The Commercial Observer’s request for an interview.
Mr. Bernstein said Aegis, which in Greek mythology refers to Zeus’s shield, received concessions in the deal that were “similar” to what Wells Fargo received when it signed a 16-year lease for 275,000 square feet of office space at 150 East 42nd Street in April. Wells Fargo received 12 months of free rent and tenant improvements worth $75 a square foot in its deal. Mr. Bernstein would not comment further on Aegis’s concessions.
Mr. Wein said the firm is pleased it is staying in its current space.
“Our plan is to continue to grow, and at the moment we feel we have a competitive advantage in the areas of media and digital,” Mr. Wein, 36, whose company employs 16,500 people worldwide in 80 countries and boasts clients including Pfizer, Adidas and Home Depot. “So we intend to focus on that with more and more clients and grow significantly.”
Aegis—which, through a combination of companies, offers media planning, communications strategies and marketing analytics—has grown by up to 40 percent in the U.S. in the past two years, said Mr. Wein.
The company’s head count in its New York City office had also grown, from 400 employees to 500 in the past year alone.
Before signing the deal, Cassidy Turley and Aegis Media explored other spaces around Grand Central and Hudson Square while negotiating with CBRE and Hiro North American Properties to renovate both floors.
Aegis’s desire to renovate two floors of commercial office space added an interesting twist to lease negotiations, said Mr. Bernstein.
While the renovations themselves would be an expensive undertaking for Aegis, Mr. Bernstein knew the eventual value of the refurbished space would prove greater than the value of a new tenant coming in to replace Aegis in 2013.
“No landlord wants to lose a tenant like Aegis, for its scale, for its credit-worthiness,” said Mr. Bernstein.
Now with its new lease intact, Aegis wants its new office to showcase its three biggest companies in North America: media planning and buying company Carat; global communications firm Isobar; and digital marketing services firm iProspect. This will be the first time the trio of groups will operate under a single roof, said Mr. Wein.
“In the old days you can operate those businesses as silos,” he said. “But now all of them are kind of linked into one joined-up marketing strategy for our clients and therefore we actually bring them all to our clients together.”
The company moved into 150 East 42nd Street from its old offices at 3 Park Avenue in 2008. The space the company inherited was not as open and collaborative as it would have liked, said Mr. Bernstein.
With the theme of hosting all its divisions in one open, collaborative space, the company tabbed HLK Architects to tear down both floors and redesign them from scratch.
“It’s not really about fitting more bodies in,” said Mr. Wein. “It’s about designing a space which is much more functional and helps us deliver our strategy.”
Mr. Wein declined to elaborate on the precise cost of the renovations, saying it was “certainly more than $10 million.”
During negotiations, Mr. Bernstein said that Aegis’s plans to rebuild its office space helped in keeping the company at 150 East 42nd Street.
“From the building’s perspective, they knew that if they couldn’t accommodate us with alternative space they wouldn’t have the option to keep us,” Mr. Bernstein added.
The renovations will be done a floor at a time with “minimal disruption,” said Mr. Wein. Aegis will be working out of a temporary space in the building’s mezzanine floor during year-long renovations.
The company has already started renovations and is expected to finish some time in the middle of 2012. Completing the renovations before its current sublease expires in 2013 guarantees Aegis will enjoy the following 15 years in brand-new space.
Aegis isn’t done. The company may look to move into additional space should its success continue to grow.
“Hopefully within six months we’ll be looking for more space, whether it’s an expansion or something nearby,” said Mr. Wein.
Aegis also plans to give competing advertising giant WPP, whose New York City headquarters are at 100 Park Avenue, a run for its money.
“Part of our advantage is, as the advertising world changes, we’re unencumbered by the legacy of creative agencies,” said Mr. Wein, who later added, “To quote Charlie Sheen, we’re ‘winning’ at this moment.”