Too Small? Too Big? Just Right.
Jotham Sederstrom Dec. 13, 2011, 10:04 a.m.
It may have been the kind of problem every tenant wishes it had, but for Wasserman Media Group it was a problem nonetheless.
Only a few months had elapsed since the firm had signed on at the start of the year to take roughly 7,000 square feet on the fourth floor of the midtown office tower 444 Madison Avenue, and already it was clear to Wasserman’s executives that they had significantly miscalculated the company’s needs.
Founded and headquartered in Los Angeles, the sports marketing and talent management firm had broken into the Manhattan market about as well as any company in its business could have hoped. And for Wasserman, success meant quick growth.
In recent years it was hired to help sell the naming rights to the new stadium in the Meadowlands built in partnership by New York’s two professional football teams, the Giants and Jets, what John Brody, a principal at Wasserman and head of its New York office said was one of the largest naming rights assignments ever in sports. That deal finally came to fruition over the summer when the insurance company MetLife reached an agreement to have its brand as the stadium moniker in a reputedly $400-plus million transaction that Wasserman helped arrange.
Meanwhile, relationships with two key New York clients of the firm, Pepsi Co. and American Express, were blossoming.
“It just worked out that there was a confluence of wins for us,” Mr. Brody said. “We had been working on the Jets and Giants stadium project since the shovels were in the ground but we redoubled our efforts in the months leading up to the deal to get it closed with MetLife.”
Even though Mr. Brody, a veteran of the New York market who worked for Major League Baseball as a marketing executive before joining Wasserman last year, may have had an inkling that the company’s business might thrive in the city, the rapidity of it seemed to take both him and the firm off guard.
Needing to add personnel, Wasserman found itself almost immediately bumping against the limits of its footprint. It couldn’t simply push out into more space on the fourth floor to resolve the problem either. Another tenant already occupied the floor’s remaining 12,000 square feet.
Wasserman sought to use its offices at 444 Madison Avenue as efficiently as it could. Stephanie Rudnick, a spokeswoman for the firm, said that it had even reduced the amount of space it dedicated to backroom server operations by using cloud computing services that allowed it to store its data offsite and keep more of the space for employees.
“Casey Wasserman is a huge advocate and early adopter of new technology,” Ms. Rudnick said, referring to the company’s founder and chief executive, who operates primarily out of the firm’s L.A. office.
Taking too much or too little space can cause a tricky situation for tenants. Most firms that anticipate growth commit to more than they need to accommodate expansion. But overestimating comes with its own risks. A tenant can be left with awkward scraps that are difficult to sublease if its strategy doesn’t go according to plan. On the flipside, as Wasserman was finding, too little space can threaten to stifle a firm’s business and force it into the often challenging task of tacking on additional room.
Because Wasserman’s deal was so freshly minted, the company couldn’t just wait for its lease to expire to allow it to troll the market for bigger options. Of course, the company could have subleased the space in its entirety and rented somewhere else, but that would likely have been a costly and inconvenient process. More than anything else, Mr. Brody said the firm wanted to stay put.
The asset at 444 Madison Avenue, situated on the corner of 49th Street, is ideally located for Wasserman’s business. Mr. Brody said that his old office at Major League Baseball and a number of other big league professional sports headquarters, like the NFL’s and the NHL’s, are just a stone’s throw from the property. Major television networks such as News Corporation, NBC and CBS are also close by in Rockefeller Center and on Sixth Avenue.
“We really loved the building because it was right in the midst of the hub of our business,” Mr. Brody said.
At first glance, however, the prospects for staying at 444 Madison Avenue seemed dim. Paul Amrich, a leasing executive with the firm CBRE who handles deals at 444 Madison Avenue for the property’s owners, had been busy since the beginning of the year marketing one of the only vacancies at the 42-story property, a block of floors on nine, 10 and 11.
Initially Mr. Amrich had hoped to lease the spaces in a contiguous deal to a single tenant. When Sinclair Li, a colleague of Mr. Amrich’s at CBRE and Wasserman’s broker, reached out to Mr. Amrich and the building’s landlord, Westbrook Partners, Wasserman was excited to learn that ownership would be receptive to the idea of its expansion.
“Originally we wanted to lease the floors together but we were open to changing that strategy,” said Mr. Amrich, who has overseen a number of successful leasing campaigns at other Madison Avenue buildings, such as 510 Madison and 660 Madison.
Mr. Amrich and his agency team at the property, comprising CBRE executives Patrice Meagher, Kerry Powers and Elie Gross, quickly drew up a deal with Wasserman to scrap its lease on four and have it take all of 10, a roughly 20,000-square-foot space. And just like that, Wasserman rejiggered its space in the building to nearly triple in size.
“We told ourselves carpe diem,” Mr. Brody said, seeming to hint that even though Wasserman clearly needed the extra room to grow, it nonetheless took a degree of confidence to trade up in size at a time when many firms are being cautious to see how the economy will pan out in 2012.
For Mr. Amrich, the lease with Wasserman didn’t deal any setbacks to his plans for filling 444 Madison Avenue’s other empty floors. As he negotiated with Wasserman in the months leading up to its recent closing on the 10th floor, he leased the ninth floor to FTN Financial.
Seeing the wisdom of keeping in close contact with other tenants already in the property to see if, like Wasserman, they too would be interested in growing, Mr. Amrich found another existing occupant in need of space. TD Bank, which had a retail location on 444 Madison Avenue’s ground floor, needed to relocate offices it had from another building in Midtown. Mr. Amrich struck a deal to place the bank on the entire 11th floor. The bank ended up wanting to import even more units into the building and in recent months Mr. Amrich leased TD the second floor as well in another 20,000-square-foot deal.
Now, Mr. Amrich says he has a deal on for the space that Wasserman is leaving behind. He said that it was too early to reveal who that tenant is because the lease is not yet signed, but he says it will be with a Fortune 500 company.
“The caliber of tenants at 444 Madison is something that we’ve worked to maintain at a high level and this deal, just like Wasserman, FTN and other tenants, is in keeping with that,” Mr. Amrich said.
Dan Geiger, Staff Writer, is reachable at email@example.com