W&M Properties portfolio: Built to withstand downturn - Brief Article

As we move into the final months of 2001, the commercial real estate market in Fairfield and Westchester Counties has clearly experienced an adjustment from the frenzied scramble for space in 1999 and 2000 to a more stable and sustainable level of activity. Compared to 2000, there has been a downshift in leasing velocity and a rise in sublet space, a result of the economic slowdown caused by the technology sector's meltdown and falling corporate earnings.

W&M Properties' 2.5 million-SF Class "A" New York/Connecticut suburban portfolio was built to survive and prosper through all cycles. There are several considerations that went into assembling our properties with an eye toward successfully weathering just such a cycle and serving tenants and brokers well during uncertain times.

What factors keep owner/operators of office buildings on solid footing through the up and down cycles of the economy? In our case, most important is the solid financial footing of the Malkin family and our stated direction from the Malkins to maintain an absolutely Class "A" portfolio and to negotiate leases as market conditions dictate. We are there to do whatever quality tenants and brokers require to conclude leases.

We have a strategy of multi-tenanting our buildings, staggering our lease rollovers, and selecting high-credit tenants with strong business histories. We take the initiative to negotiate the release and reletting of underutilized space for tenants with more than they need. We benefit by leasing such space to a new or existing credit-worthy tenant and helping our tenants avoid the trials, tribulations, and costs of subletting. The tenant relinquishing space to the landlord can cut down on occupancy and "lease exit" costs, while avoiding the continuing liabilities and billing and collection headaches associated with maintaining a sublandlord/subtenant relationship. Such an arrangement also permits the user of space to negotiate for and secure a longer lease term with full new-lease benefits, thereby better enabling a prudent occupant to invest in and grow its business in the same location.

It is also important for the user of space to have a direct contractual relationship with a building's landlord, which is not the case when tenants sublease space. Having such "privity of contract" with the property owner assures the space user that building services will be available directly from the landlord without the involvement of an intermediary, whereas a subtenant is at risk of losing its space as a result of its sublandlord's default under the primary lease.

No matter the condition of the economy, Class "A" amenities and improvements are always a draw for tenants. W&M consistently upgrades and improves all of its buildings' common areas, systems and amenities to ensure that its tenants receive absolute first-class quality space and services. At 500 Mamaroneck Ave. in Westchester, for instance, ownership is just completing an extensive capital improvement and expanded amenities program, while a similar, comprehensive $8 million program is now well under way at our recently acquired First Stamford Place.

Two of our properties, First Stamford Place and Metro Center, also benefit from being located within Stamford's Enterprise Zone, which offers special economic development incentives to relocating and expanding businesses. Tenants of these properties benefit from an 80 % abatement of real and personal property taxes on all leased space for five years, for a minimum annual savings of $2.50 to $3.00 per SF, as well as a 25 % credit against Connecticut corporate income taxes for 10 years.

With practically no new suburban office product built in these markets during the past 12 years, and no new suburban office construction to be delivered for at least the next few years, the present market slowdown should be less severe and worrisome than the last one. With our comprehensive strategy, our goal is to maintain the largest privately owned, Class "A," multi-tenanted suburban office portfolio in Westchester and Fairfield -- nearly 2.5 million SF -- at an occupancy rate of more than 95%.

COPYRIGHT 2001 Hagedorn Publication
COPYRIGHT 2001 Gale Group