"From the outset, tenant consolidation was a major component of our proactive management strategy," says Anthony E. Malkin, President of Wien & Malkin Supervisory Services. "There can be an issue of having too many tenants in an office building. Property management becomes inefficient and implementing building-wide upgrades becomes more problematic. We are happy we have been able to make such progress on occupancy and building upgrades in less than three years."

    Mr. Malkin explains that having too many tenants today not only can make building operations less efficient, but also can lead to low tenant credit quality and high turnover.

    "We still have a portfolio full of small to mid-size tenants and are working to attract and renew tenants of higher credit-worthiness that fit our upgraded building profiles," he says. "By reducing the number of tenants under 1,000 or 1,500 square feet, we are also enhancing our buildings' prestige and value and helping the properties become more desirable environments in which to conduct business."

    Says Mr. Malkin: "We feel we owe that to ourselves and our investors. It's something that prior operation of these buildings was simply ignoring."

The W&H portfolio-wide occupancy rate improved as the number of tenants declined.

    In 2003, having too many tenants was especially a problem at 250 West 57th Street and at The Lincoln Building, but less of a problem at 501 Seventh Avenue and 1359 Broadway, which were less than 40% occupied at the time. Yet even in those two properties, which are now almost full, the actual number of tenants has declined.

Dramatic Change

    "At 501 Seventh there were 48 tenants occupying little more than a third of the building," recalls Fred C. Posniak, Senior Vice President of Supervisory Services. "Today, we have 43 tenants there filling up about 98% of the property. By bringing our strategy into play, we quickly attracted a great collection of high-quality companies. It was a dramatic Manhattan turn-around achievement."

    Along with tenant consolidation, Wien & Malkin's sweeping asset management strategy on behalf of the W&H portfolio has included a $230 million capital upgrade program, a highly successful branding campaign aimed at the brokerage community as well as tenants, and the installation of three of the nation's leading real estate services firms as property management and leasing agents.

    "Each of these buildings now has an entirely new image," says Mr. Posniak. "Instead of lagging the competition, they are leaders, providing cutting edge technology as a result of the massive capital improvement program, with responsive onsite management, unsurpassed proximity to mass transportation, and ownership that is eager to please and ready to deal. That's why occupancy is way up, even as the number of tenants is significantly down."