How Do Buyers React to Rising's Built-In Internet?

Marc Gittleman is the CEO of 5×5 Telecom, Rising Realty’s sister telecommunications company.

LOS ANGELES— Rising Realty Partners ‘ sister telecommunications company 5×5 Telecom is making major waves in the office sector. The company launched the telecommunications company at PacMutual as a reliable and affordable Internet and phone service, and it resulted in tremendous occupancy and rent growth. Now, the firm is launching the service at all of its properties and other property owners are signing up, too. But, is there problem when an investor and property owner operates the Internet service at a competitor’s building? We asked Marc Gittleman , the CEO of 5×5 Telecom, about buyers’ response to the Internet service during the incredible sale of PacMutual and how buyers and sellers are responding now. “It was a huge part of the 100 tours that we did when we were selling PacMutual,” Marc Gittleman, the CEO of 5×5 Telecom, tells GlobeSt.com. “It did breed a lot of questions, like who owns that company; what happens when we sell the property; are you going to continue the quality of service? Those were all questions that all of the serious buyers had, and the answers were very simple. The telecom business is a for-profit venture. We would be foolish to turn off that revenue stream, because it is not an insignificant revenue stream and we wouldn’t be perusing it if it were. We want the new owners to understand what we did and be happy that they have a place to send new tenants leasing space. That is a transition that we worked on through training and educating, and taking something that is an unknown and making it a benefit or another asset to the building.” The decision wasn’t necessarily a choice for buyers to take or leave. The completely separate company has the same rights of entry that any other telecommunications company has. “We have rights of entry that extend anywhere from 20 to 30 years, so it doesn’t matter what any other owners wants because our agreements supersede any other transaction, other than condemnation of the building,” adds Gittleman. For that reason, buyers aren’t able to take over the operations of the built-in fiber optic system or service tenants, which helps protect the company. And, if buyers did want to start a similar company, Gittleman, who has a tech background, says that would be challenging for another owner. “We started out knowing that we would want to do this at scale, and you have to have the wherewithal and the desire to do it at scale,” he explains. “It is not something that you can kind-of be in the business of, because you will be in the position that AT&T was when we bought this building, which is that everyone is complaining that it is not working. I make it sound like it is very simple to do, but you have to have the mind frame and skillset to be able to do it.” Now, Rising is having the opposite conversation when acquiring new office projects. “Every new project that we do will have 5×5 in it,” says Gittleman. “When we acquire a project we sit down with our partners, and we explain how the company works and how it drives rent and absorption. After the sale of PacMutual, that was a really easy conversation.”