Real Estate Weekly: Scandal won't deter Times Square Tower

Andersen's dire straits notwithstanding, the chairman of Boston Properties is confident that the Enron debacle won't forestall them from anchoring his $625 million Times Square Tower.

"They're better than a solid anchor tenant. They are a huge worldwide business and this will not diminish their status as such," said Zuckerman, adding that Andersen committed to a 15-year lease on floors 3-27 of the building.

The project remains "well under way," said Zuckerman.

Andersen, which employs 85,000 people in 84 countries, has endured increasing scrutiny for covering up information about Enron's books. Just last week, they dismissed a senior executive, citing his central role in the scandal. How this will affect their status as anchor tenant is uncertain, but a rising tide of negative press suggests that the firm has a challenging future. The skyscraper will not be completed for another two years.

Brokers contacted for this story refused to comment, citing their working relationship with Boston Properties. Other sources also declined to speak on the record.

The site for the 47-story tower is located on a block bound by Broadway, Seventh Avenue and 41st and 42nd Streets. Andersen agreed to pay Boston Properties $67.50 a SF for the space. The tower--a Skidmore, Owings & Merrill design--will support approximately 1.2 million SF of office space.

Insignia's leasing deal with Andersen was one of 2000's largest, signing the firm to over 620,000 SF. The deal was prominent enough to earn the Robert Lawrence Award at last week's Real Estate Board of New York's annual awards dinner.

This isn't the only Times Square project for Boston Properties. Directly across from the new tower is the nearly completed 5 Times Square. This 37-story building is pre-leased to one of Andersen's competitors, Ernst & Young.

A spokesperson from Andersen said that the firm had no comment on their plans to occupy the building.

One source speculated that the full court press of negative publicity could hasten Andersen's demise.

"Perception is reality. If people perceive that Andersen will go under, they'll go under," said Lawrence Fiedler, a real estate professor at New York University's Real Estate Institute.

One possible outcome is a merger, said Fiedler, since reports have indicated that Andersen is looking to be bought. If that happened, their space needs could be reconsidered.

"Boston Properties could ride out this storm even if Andersen filed for Chapter 11," said Fiedler.

Boston Properties, a publicly-traded real estate investment trust, boasts over 40 million SF of office space reportedly worth $4.7 billion. The firm concentrates on the development of Class A office space in four major U.S markets: Boston; Washington, D.C.; Midtown Manhattan and San Francisco.

"The intrinsic value of a property is in the location. That's what future tenants will find attractive," said Professor Lynne Sagalyn, a real estate professor at Columbia Business School. Last year, Sagalyn wrote a book called "Times Square Roulette" which explores the redevelopment of this corridor.

"Times Square will survive the loss of any one tenant. Still, the more flexible the space is, the more likely it will be to attract new tenants," she said.

If SOM had designed the building for a financial services firm--who typically require custom-built trading floors, among other specifications--the space would be harder to market to the average office tenant, she said.