Business Management Executive Q&A
Aug 1, 2007
Editorial assistant Elena Gontar and Bank of America Corp. senior vice president John Saclarides discussed the development of Midtown Manhattan’s new 2.1 million-square-foot Bank of America Tower, built in a physical climate that necessitates green building and a market that demands worthy competitors.
CPN: What was the driving force behind the greening of Bank of America Tower?
Saclarides: First of all, it is the right thing to do for the planet. No. 2 is the corporate responsibility. Bank of America is one of the leading corporations in the world, including profitability. We feel it is our responsibility to set an example for others to follow and show it can be done. This also causes the advancement of technologies used in green engineering. Additionally, it is the right thing to do for our associates. Many of the green features, such as enhanced air purification and under-floor air conditioning, generate a healthier environment, which leads to healthier people.
CPN: What are its key green features?
Saclarides: One of the key features is an on-site co-generation plant (which harnesses the heat created during electricity production for internal heating purposes), which is very innovative. An on-site ice-manufacturing plant and storage is also very innovative. There is also a gray-water system, on-site storm-water-retention tanks, underfloor air conditioning, waterless urinals, use of recycled materials and an enhanced carbon-filtration system, which is 95 percent effective.
CPN: How much of a premium above standard construction costs did you pay for these features, and what short- and long-term savings do you expect to reap from them?
Saclarides: About 4 percent. (The savings) varies by feature. The most expensive feature is the co-generation plant, which is about $15 million to $20 million, but it also has the fastest payback: four years or so. On the other hand, the savings from the enhanced carbon air-filtration system are almost impossible to measure. Although it will contribute to a healthier work environment and enhanced productivity, this one is really about our associates just feeling better. At the end of the day, we expect the payback for our upfront incremental cost of some $30 million or so to be less than 10 years.
CPN: What motivated your company to occupy space in Bank of America Tower?
Saclarides: Enhanced productivity and synergies gained by our various lines of business through locating near each other.
CPN: Did you consider building new space in Downtown Manhattan, where leases are about one-third less expensive than in Midtown?
Saclarides: We briefly considered a Downtown building. Given that our largest space and trading environment is in New York City on 57th Street, a move to Downtown would have meant a significant change in commute patterns for our associates. Our new location is ideally situated, near Grand Central and Penn Station as well as the Port Authority Bus Terminal.
As far as the economics of Downtown versus Midtown rents, remember: We are not simply a tenant in this building; we own 50 percent of it. So we benefit as an owner from the Midtown rents. If we factor our ownership profits into our lease, the economics are very compelling.
CPN: How does the tower fit into the firm’s corporate real estate strategy?
Saclarides: No real surprise here: To be one of the leading financial institutions in the world, you would be remiss not to have a major presence in the leading financial city in the world.
CPN: What are the challenges of developing such an iconic project in the current New York City climate?
Saclarides: This deal was put together four years ago. We broke ground three years ago and will deliver it in late spring of next year. Except for one floor, the remaining 450,000 square feet has been fully leased to other tenants. We seem to have timed this well. I have not experienced developing other buildings in this city, so I can’t compare.
I know we had many hurdles to overcome—such as assembling the site; getting the right size building on the site; incorporating post-9/11 construction techniques and security measures; dealing with and rebuilding a landmark theater on the site; and ensuring the subcontractors and vendors stayed on task, provided sufficient product and held their prices in this heated construction environment. Also, we had to ensure we didn’t disturb the local residents. We had to secure a Liberty Bond allocation and a win-win financial incentive from the city and state based on our growth.
CPN: If you were to start construction today, with the demand for space and rising costs, would this project still be possible?
Saclarides: Yes, but it would be substantially more expensive—about 70 percent more expensive. Land costs and construction costs have soared in the four years since we inked our deal with contractors and purchased the land. But who knows? By the time we are ready to lease the space to other tenants, rents might be well above $200 per square foot.
Editorial assistant Elena Gontar and Bank of America Corp. senior vice president John Saclarides discussed the development of Midtown Manhattan’s new 2.1 million-square-foot Bank of America Tower, built in a physical climate that necessitates green building and a market that demands worthy competitors.
CPN: What was the driving force behind the greening of Bank of America Tower?
Saclarides: First of all, it is the right thing to do for the planet. No. 2 is the corporate responsibility. Bank of America is one of the leading corporations in the world, including profitability. We feel it is our responsibility to set an example for others to follow and show it can be done. This also causes the advancement of technologies used in green engineering. Additionally, it is the right thing to do for our associates. Many of the green features, such as enhanced air purification and under-floor air conditioning, generate a healthier environment, which leads to healthier people.
CPN: What are its key green features?
Saclarides: One of the key features is an on-site co-generation plant (which harnesses the heat created during electricity production for internal heating purposes), which is very innovative. An on-site ice-manufacturing plant and storage is also very innovative. There is also a gray-water system, on-site storm-water-retention tanks, underfloor air conditioning, waterless urinals, use of recycled materials and an enhanced carbon-filtration system, which is 95 percent effective.
CPN: How much of a premium above standard construction costs did you pay for these features, and what short- and long-term savings do you expect to reap from them?
Saclarides: About 4 percent. (The savings) varies by feature. The most expensive feature is the co-generation plant, which is about $15 million to $20 million, but it also has the fastest payback: four years or so. On the other hand, the savings from the enhanced carbon air-filtration system are almost impossible to measure. Although it will contribute to a healthier work environment and enhanced productivity, this one is really about our associates just feeling better. At the end of the day, we expect the payback for our upfront incremental cost of some $30 million or so to be less than 10 years.
CPN: What motivated your company to occupy space in Bank of America Tower?
Saclarides: Enhanced productivity and synergies gained by our various lines of business through locating near each other.
CPN: Did you consider building new space in Downtown Manhattan, where leases are about one-third less expensive than in Midtown?
Saclarides: We briefly considered a Downtown building. Given that our largest space and trading environment is in New York City on 57th Street, a move to Downtown would have meant a significant change in commute patterns for our associates. Our new location is ideally situated, near Grand Central and Penn Station as well as the Port Authority Bus Terminal.
As far as the economics of Downtown versus Midtown rents, remember: We are not simply a tenant in this building; we own 50 percent of it. So we benefit as an owner from the Midtown rents. If we factor our ownership profits into our lease, the economics are very compelling.
CPN: How does the tower fit into the firm’s corporate real estate strategy?
Saclarides: No real surprise here: To be one of the leading financial institutions in the world, you would be remiss not to have a major presence in the leading financial city in the world.
CPN: What are the challenges of developing such an iconic project in the current New York City climate?
Saclarides: This deal was put together four years ago. We broke ground three years ago and will deliver it in late spring of next year. Except for one floor, the remaining 450,000 square feet has been fully leased to other tenants. We seem to have timed this well. I have not experienced developing other buildings in this city, so I can’t compare.
I know we had many hurdles to overcome—such as assembling the site; getting the right size building on the site; incorporating post-9/11 construction techniques and security measures; dealing with and rebuilding a landmark theater on the site; and ensuring the subcontractors and vendors stayed on task, provided sufficient product and held their prices in this heated construction environment. Also, we had to ensure we didn’t disturb the local residents. We had to secure a Liberty Bond allocation and a win-win financial incentive from the city and state based on our growth.
CPN: If you were to start construction today, with the demand for space and rising costs, would this project still be possible?
Saclarides: Yes, but it would be substantially more expensive—about 70 percent more expensive. Land costs and construction costs have soared in the four years since we inked our deal with contractors and purchased the land. But who knows? By the time we are ready to lease the space to other tenants, rents might be well above $200 per square foot.
Recent Executive Q&A Headlines
Subscribe to this blog's feed
