So I'm familiar with a project in a major U.S. city where the local government has agreed to give a big name developer more FAR in return for incorporating performing arts space into their development, which is mostly condos, apartments and some retail. The developer would much prefer to install a health club or restaurant into the project rather than some not-for-profit, but the city stands in the way of greater cash flow from more view space up top.
From the city's standpoint -- the mayor wants to expand arts facilities in a neighborhood at the edge of an arts district, promoting a major attraction in the city and creating a more vibrant community. But what a pain for the developer: putting some prominent theatre or dance company into space that could provide better cash flow with chain dining or another "swingles" workout gym. Sure they gain a lot more from the additional FAR, but performing arts space won't help market the building and by itself won't help enhance the NOI numbers when they plan to flip the building in a few years.
So the developer puts the squeeze on prospective arts tenants almost for the sport of it -- nickle and diming artistic directors on lease terms and build out contributions with typical negotiating histrionics. You want our nice space -- well we'll try to take something out of you so we can put some more relative pennies in our pockets and our out-of-town money partners.
And what about the betterment of the city and a cultural contribution that just might improve land values in surrounding blocks for longer-term benefits of everyone in the community?
Well, what about it?
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
