500 Mamaroneck Avenue in Harrison, NY

AT&T was considering relocation to an under-used facility it owned in nearby White Plains. Although the telecom giant did renew at 500 Mamaroneck in late 1999, it was for a downsized 95,000 square feet, with a commitment to remain only through 2004.

"We always viewed the shorter-term nature of AT&T's leasing commitment as a potential upside opportunity, rather than as a problem," recalls Jeffrey H. Newman, W&M Properties executive vice president in charge of the suburban office portfolio. "We had a lot of leasing to do when we bought the property, and renewing AT&T reduced our exposure at that time."

AT&T recently decided to relocate its Harrison staff to White Plains in a consolidation program. But W&M Properties was more than ready, having established a plan that not only anticipated the vacancy but proactively accelerated AT&T's surrender, on an early "buyout" basis, of a portion of its leased space.

"We used a refinancing a few years ago to establish a reserve against costs we would face should AT&T leave the building," says Anthony E. Malkin, president of W&M Properties. "By creating a generous reserve fund, we were ensuring that we could complete all the leasehold improvements and common area upgrades that quality tenants expect of a premiere Class-A office property like 500 Mamaroneck Avenue, and still maintain distributions to our investors."

Once AT&T made known its decision, W&M negotiated for AT&T to buy-out its lease in staggered increments long before the actual lease expiration, while initiating a vigorous marketing program. "Happily, rents at 500 Mamaroneck have risen since 1999," says Mr. Newman." Now we can upgrade these top-floor spaces with multiple, creditworthy tenants on longer lease terms with staggered expirations, and at market rates enabling us to increase the rent roll.

"Demand for top-level office space for smaller and mid-sized tenants is very strong, and we are benefiting from the spillover effect coming from Greenwich and Manhattan as well," he adds. "Interest in our space was intense as soon as we began marketing efforts, and has remained so."

Re-Leasing Well Under Way

The combination of strong market demand and W&M's foresight in preparing for AT&T's departure has resulted in much of the space already being re-leased, and several transactions in late-stage negotiations, six months prior to the official expiration of AT&T's lease. A hedge fund relocating from Manhattan, and a commodities trader and wine importer moving from Fairfield County in Connecticut are preparing to take occupancy shortly (with W&M Construction doing the build-outs), accounting for about 25% of the available space. Additional deals are expected to close shortly.

"Our goal of re-leasing all of AT&T's former space with virtually zero downtime is within our sights," says Mr. Newman.

W&M Properties negotiated the acquisition of 500 Mamaroneck Avenue, which occupies a beautifully landscaped parklike setting, after two higher bidders for the building were unable to close.

"Consequently, Wien & Malkin investors acquired one of the finest office properties in the suburbs of New York for about 55% of replacement cost," says Mr. Malkin. "We paid $3.5 million less than what the original high bidder had offered, and used only modest leverage to complete the acquisition. Then we committed $12 million to a comprehensive upgrading and amenities program to make sure the property was unsurpassed in quality.

"This has been a classic Wien & Malkin investment," says Mr. Malkin, "acquired below market, improved to realize maximum value, and proactively managed for continuing success."