Right now, the naming rights to so many high-profile buildings are up for grabs that the clique of elite companies branding the city’s skyline could be due for a shakeup. That is, if the new names actually stick.
Several Midtown mainstays, such as the former New York Times Building, the General Motors Building and Citigroup Center, are now vacant or will soon see their namesake companies depart. The GM building’s previous owner, Harry Macklowe, even used the possibility of generating significant revenue from the sale of the iconic tower’s naming rights, up for grabs in 2010, as enticement for potential buyers.
Whether new owner Boston Properties will be able to do so remains to be seen. In a summer conference call to investors, Doug Linde, company president, said, “The name ‘GM’ may no longer be the moniker of the building depending on what our perspective of the value of that is.” He added, “In our economic models, we haven’t assumed or attributed any cash value to it. It doesn’t mean we don’t think it’s worth anything.”
Unlike sports arenas and stadiums where naming rights, now commanding up to $25 million a year, are a direct advertising maneuver that promises a company considerable media exposure during events, the monetary value of such rights to an office tower, often more about prestige, is harder to quantify.
Luigi Rosabianca, principal attorney and founder of Rosabianca & Associates, has been involved in structuring several such deals and said the monetary value “is a lot less obvious [than with stadiums], but it’s also a lot less expensive.”
He said there are hardly any examples of direct cash transactions involving the naming rights to an office tower in New York City because it is generally structured within the lease agreement and gets used as a bargaining tool rather than as a separate commodity.
“At the height of the market,” when naming rights for large towers are more commonly part of lease agreements because tenants are willing to shell out more money and rent more space, “they are the ultimate luxury; they are an ego trip for these companies,” he said.
One straight-cash transaction, Citigroup Center at 153 East 53rd Street, offers a means of comparing the monetary value of naming rights to an office tower versus a stadium.
With Citigroup preparing to empty out 18 floors of that building, landlord Boston Properties reportedly paid $1.5 million to rename it, at least temporarily, 601 Lexington Avenue. The company now essentially has the right to offer a new tenant the ability to plaster its name on that building, although it declined to comment on whether it would do so.
In terms of stadiums, Citigroup will shell out $20 million annually to name the new Mets baseball stadium “Citi Field,” a sum equivalent to Barclays Bank’s purchase of naming rights to the Nets basketball arena planned in Brooklyn, part of the United Kingdom banking giant’s efforts to establish itself in the American market.
The new Giants and Jets stadium being built in the Meadowlands could have topped those record deals. German-based insurance company Allianz was widely reported to have agreed to pay $25 million a year for the stadium’s naming rights, but the company was dropped after its involvement in the Holocaust came to light, stirring public disapproval.
“If you look at how expensive advertising is in this country, $1.5 million becomes a bargain,” said Rosabianca, referring to the Citigroup Center deal.
According to Scott Alessandro, an account executive for Van Wagner Communications, a prominent outdoor advertising firm in the city, outdoor advertising space in Times Square brings in $650,000 to $3.9 million a year. Billboards elsewhere in Midtown are less common due to zoning regulations, but generate up to $1 million annually.
The former New York Times building at 223 West 43rd Street has been renamed “The Times Square Building,” a place holder according to Brian Gell, vice chairman of CB Richard Ellis, which is handling the commercial leasing for the building.
Joshua Strauss, a managing director at Robert K. Futterman & Associates, which is handling the retail leasing for the building, said 100,000 people pass by the corner every day.
Strauss said the foot traffic presents a tremendous opportunity for a major retail or commercial tenant to erect flashy signage on the building’s exterior, part of the reason retail space commands $350 per square foot. But he said the signage alone isn’t given an independent value.
Unlike stadiums, where the main tenant is the sports team, there are several delicate considerations to make when it comes to naming an office tower. For example, Lisa Kiell, managing director at brokerage Jones Lang LaSalle, said tenants frequently pass on moving into buildings named by competitors, and specify in their leases that a building not be renamed after a competitor. That makes these deals unattractive to a landlord who expects high turnover inside the building.
Therefore, naming rights are only offered to tenants willing to take a sizable amount of space, she said.
Rosabianca noted that the emotional connection many people feel toward the Freedom Tower would prevent it from being named after a single company.
In addition, in the case of office towers, well-known names die hard and history often persists. The Woolworth and Chrysler buildings have long been vacated by their namesake companies, yet those companies are so connected with those buildings that the new owners haven’t attempted to rename them.
This could be the case with the GM building, also more commonly known to the general public for the giant glass cube Apple erected in its plaza. Both factors could decrease the cash value of a naming rights deal.
In the case of New York’s record-breaking stadium and arena deals, the corporate names are designated before or during construction, are nearly always used by media in reference to the venue, and are found throughout the building and on goodies handed out to fans.
Some planned projects with office components, like Hudson Yards and Atlantic Yards, offer companies the opportunity to slap their names on a new building. A fresh start like that could be a powerful lure for a developer seeking an anchor tenant to secure financing.
Forest City Ratner Companies, struggling to find an anchor tenant for the office tower masthead of its Nets arena and residential high-rise project in Brooklyn, recently changed the tower’s name from “Miss Brooklyn” to “B1.”
Ratner spokesperson Joe DePlasco said the name change wasn’t an effort to lure an anchor tenant, despite the obvious advantages.
“Miss Brooklyn was a specific design concept developed by Frank Gehry. When he redesigned the building, it was so different that the name Miss Brooklyn no longer worked because the inspiration for the building had changed,” he said. “And as for a tenant, we are continuing to market the building and there has been interest.”
And then there’s scores of smaller buildings that may not put a dent in the skyline, but do offer prestigious signage opportunities on well-traversed streets. Derrick Ades, a senior vice president with CB Richard Ellis, said landlords of smaller buildings more commonly offer naming rights in a flooded market as a way to compete for tenants, although “if the building is mid-block, the naming rights would really be irrelevant.”
Ades is handling leasing for 90,000 square feet at 960 Avenue of the Americas, a 16-story building with direct views of Herald Square, formerly known as the Atlantic Bank Building. Naming rights would be available to a tenant willing to lease most of that space, he said.
Across the board, the parties involved in such deals were reluctant to offer specifics. But Rosabianca said in one such deal he helped draft, the landlord “didn’t get any money for [the rights], but he was able to rent his commercial space at the height of the market for a ridiculous amount per square foot, and part of the component was getting the naming rights.” However, he couldn’t attribute the difference in price per square foot that the naming rights commanded.