Studley (now Savills Studley) represented Time Inc. in negotiations to provide a long-term home for the company’s magazine groups and administrative offices located at the Time & Life Building, 1271 Avenue of the Americas. Options evaluated during a strategic planning review included the early renewal, a lease restructure or relocation to a leased or purchased facility. Studley also evaluated the viability and costs associated with splitting the requirement into two or more decentralized facilities.
Studley began its initial review of Time Inc.’s 1.5 million-square-foot lease more than 10 years prior to its lease expiration. A major concern for Time Inc. was that they were facing a 44% bump in base rent on the entire premises. Additionally, while Time Inc. was being directed by its then real estate adviser to pursue an additional 300,000 square feet, Studley realized the space’s inefficiencies and concluded Time Inc. could instead give back approximately 200,000 square feet – a net savings of a half million square feet.
The landlord initially declared that it would not give Time Inc. any money or concession if it were to extend its lease early, as they believed Time Inc. to be a captive tenant. Studley was able to shift the leverage of negotiations by using the Columbus Circle site (which Time Warner was in the process of acquiring) and several other locations as viable relocation alternatives. The move of the Sports Illustrated division across the street allowed for the phased construction of Time Inc.’s existing facilities without the requirement of “swing space” in the interim.
In reviewing the lease documents, Studley took advantage of ambiguous language in the renewal-option clause of Time Inc.’s lease that enabled the base years to automatically reset upon the renewal being exercised.
Through the lease restructure at 1271 Avenue of the Americas, Time Inc. will save more than $600 million over the next 20 years through a reduction in rental obligations, lower annual renovation expense, disposition of significant excess space, and the cost avoidance of future expansion space. Additionally, Time Inc. received $27 million in incentives from the city and $130 million in concessions from the landlord.
Time Inc. also gained the right of first offer on the remainder of the space in the building (approximately 250,000 square feet).
1271 Avenue of the Americas,
New York, NY
1.5 million SF