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MANHATTAN REACHES UP AGAIN

AOL Time Warner’s center raises Columbus Circle’s prospects

By Don Jeffrey

The mixed-used project will liven up a long-barren spot.

Despite the financial troubles of its namesake company, the AOL Time Warner Center, New York City, is shaping up to be the city’s most important mixed-use development. On schedule to open in fall 2003, it’s an inspiration in a sluggish economy and a psychological boost at a time when the skyscraper has become a symbol of tragedy.

Development executives say the 2.1 million-square-foot project, located in Manhattan’s Columbus Circle, is also expected to create a new retail destination in a neighborhood that’s not known for it. The center will sit near the southwest corner of Central Park at the edge of the midtown commercial district.

“Most of these developments have enormous impact on surrounding areas,” said Kenneth Himmel, president and CEO of the mixed-use division of The Related Cos., a partner in the development. Related Cos. has several prominent retail, residential and office projects around the United States. The developers estimate that more than 20 million people a year will visit this site.

In retail-rich Manhattan, Columbus Circle has been something of a wasteland, despite its location at the intersection of a number of respectable and vibrant neighborhoods. It sits on a site once occupied by an underused convention center called The Coliseum, and the circle itself has never attained any architectural cohesion. People only cross it to get to somewhere else. But this development, offering 338,000 square feet of leasable retail space, will give them a reason to linger.

The development contains enough elements to constitute a city in itself. Besides the retail, it will serve as the headquarters for the world’s largest media and entertainment conglomerate, AOL Time Warner, with its more than 2,000 employees, as well as house its CNN and CNNfn studios.

As 1 Central Park, it will be the address of 191 luxury condominiums ranging in price from $1.8 million to more than $30 million. In addition, there will be a four-star, 249-room Mandarin Oriental Hotel and six upscale restaurants. And last, it will be the home of the not-for-profit music organization Jazz at Lincoln Center. This rich combination of retail, offices, residential, restaurants, hotel and cultural center represents a trend in large mixed-use developments.

“There’s nothing like it anywhere — six uses in one building,” said Stephen M. Ross, chairman and CEO of the Related Cos. “It’s like a Swiss clock with all these moving parts.”

The Shops at AOL Time Warner Center will include such upscale shopping brands as Armani Exchange, Cachet, Cole Hahn, Crabtree & Evelyn, Eileen Fisher, Godiva, Hugo Boss, J. Crew, Joseph Abboud, Morgenthal Frederics, Sisley Benetton 012, Solstice, Stuart Weitzman, Tourneau, Williams-Sonoma and others still to be announced. It will also house a 40,000-square-foot Equinox health club and a 60,000-square-foot gourmet supermarket.

Negotiations with Time Warner began more than four years ago, before the company made what many consider a disastrous merger with America Online. The combined company is reeling from a depressed stock price, executive turmoil, the bursting of the high-tech bubble, a severe advertising recession and a federal investigation of its methods of booking revenue.

But development officials say that AOL’s problems will not impede the project, nor cause financial risk to the developers.

The $1.7 billion development is financed mostly by a $1.3 billion loan from GMAC Commercial Mortgage Corp., said to be the largest ever for a private project. The developers, along with AOL Time Warner, have put up the other $400 million.

AOL will own its space, while the developers will own the retail and other office space and, in a joint venture with Mandarin, the hotel.

The development entity is Columbus Center, a partnership of The Related Cos. and Apollo Real Estate Advisors (The Palladium Co. was originally named as one of the developers, but today is a division of Related). The Related Cos. was founded in 1972 with a portfolio valued at over $8 billion. It has developed headquarters for such companies as American Brands and Revlon and such mixed-use projects as Pacific Place, Seattle, and Copley Place, Boston.

Ross and Himmel are co-managing the development for Related Cos. Apollo is a real estate investment firm created in 1993 that has invested more than $3.5 billion in more than 200 transactions.

In addition to the space taken up by AOL Time Warner’s headquarters and the offices that Related Cos. and Apollo will occupy, there will be 211,000 square feet of leasable office space.

The project’s principal architect is Chicago-based Skidmore, Owings & Merrill, which designed the Sears Tower, Chicago; and Lever House, New York City. The complex’s lower stories will contain the shops and the jazz center. Atop that will be two office towers, and set back from these will be another two towers housing the hotel and the condominiums. Using the residential ceiling height as a standard of measurement, the complex will rise 80 stories. The towers will be crowned with metal and glass lanterns, serving as an icon for the center.

Construction work on the $1.7 billion, 80-story development is scheduled to end in the fall of next year. It will contain seven levels of retail.

The shops will take up seven stories, two of them underground. (Executives were expecting to have 85 percent to 90 percent of the space leased by the end of October.) Rents will range from $75 per square foot for deep space to $450 to $500 per square foot for street space. The designer of the retail space is Elkus/Manfredi Architects, Boston.

One major retail tenant is men’s clothing manufacturer Joseph Abboud, and this will be its first store ever. The 6,500-square-foot boutique, on two levels, will be its flagship store and serve as a prototype for future U.S. units.

“When this was presented to us, we liked the demographics,” said Robert J. Wichser, president and COO of New York City-based Joseph Abboud. “Our target customer is in that building.”

Upscale kitchen supplier Williams-Sonoma, which already has several stores in Manhattan, will open its largest store at the AOL center, covering more than 20,000 square feet. (The average size of new and expanded Williams-Sonoma stores in fiscal 2002 is 5,800 square feet.) This facility will also have a performance kitchen and a broadcast studio.

Another flagship store will be that of clothing manufacturer Hugo Boss, occupying 14,300 square feet on three levels. Boss was the first major retail lease the developers signed.

Executives say the center’s biggest retail challenge has been New York’s overabundance of retail. But their intention was not to try to compete with the city’s other major upscale shopping districts (which are mostly centered around Fifth and Madison avenues in the east 50sÐ70s), but to create a whole new shopping venue.

The Columbus Circle area and the residential Upper West Side neighborhood that begins there have been all over the place in terms of retail, the executives said; there was never the kind of commercial planning that went into making Madison Avenue an upscale retail district.

“Currently, the West Side is fragmented, scattered, not cohesive,” said Mitch Friedel, a senior vice president of the mixed-use division of Related Cos. “What we’re building has critical mass; it brings everything to a central point.”

Because of the nature and location of this complex, it will be a different retail experience from midtown’s. For one thing, the stores are expected to draw more New Yorkers than tourists. Also, their hours of operation will be unusual, with stores closing between 10 p.m. and 11 p.m., rather than the typical 7 p.m. In part this is because of the condos and the hotel, but also, perhaps more significant, because of the center, being a cultural and culinary destination.

Three top restaurateurs had signed up by early October. Jean-Georges Vongerichten, a major chef and innovator during the 1980s’ renaissance in American cuisine (with such restaurants as JoJo, Vong and Jean-Georges), will open a steak house. Thomas Keller, who operates the acclaimed French Laundry in California’s Napa Valley, will open a restaurant. And Los Angeles sushi master Masa Takayama will also have a place. Three more restaurants are expected.

The jazz center is destined to become a major addition to the city’s cultural landscape. Lincoln Center is just a few blocks away, but the jazz division of that cultural colossus has always been something of an afterthought amid that center’s prestigious classical institutions, which include the Metropolitan Opera, the New York Philharmonic and the New York City Ballet. Many jazz listeners have viewed Lincoln Center as a little too “uptown” and formal for their liking, but that will probably change when they have their own center, consisting of a 1,100-seat concert theater, a 600-seat performance atrium, a 140-seat café, as well as studios and classrooms.

The AOL center will also become the home address of some of the city’s wealthiest citizens — $1.8 million will buy a two-bedroom, 1,283-square-foot apartment; $30 million, an 8,400-square-foot, full-floor penthouse. Susan de Franca, a senior vice president of Related Cos., said sales as of mid-September had totaled $30 million. She added that some of these buyers should begin moving into their properties in July.

This development arrives at a challenging time for New York City. The terrorist attacks of Sept. 11, 2001, have made many people and businesses nervous about skyscrapers. And the city’s economy, so dependent on such industries as finance and the media, is in a recession, with many jobs lost. The city itself faces a budget deficit, jogging bleak memories of the 1970s when New York City begged for federal assistance — and was rebuffed. These circumstances are in stark contrast to the city’s heady 1990s renaissance. But the center, which will create jobs, could be seen as a symbol of the its resilience.

“This project, hopefully, will be symbolic of the vibrancy and strength of the New York and U.S. economy,” said Bill Mack, managing partner at Apollo. “When it comes on, I trust we’ll be seeing more light at the end of the tunnel. The success of this building and the impact — not even economic, but as a psychological benefit — will stand out as a symbol of the greatness and diversity of New York.”

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