Originally published in the Fall 2001 Issue of The Counselor
On November 7, the City of New York held a special event for displaced tenants of the World Trade Center Plaza to introduce a variety of relief efforts designed to assist them. Among these was the Real Estate Advisory Coalition (REAC), a newly formed not-forprofit organization spearheaded by members of The Counselors of Real Estate and The Royal Institution of Chartered Surveyors, as well as NACORE, the New York City Bar Association, the Real Estate Lenders’ Association, and the Appraisal Institute. The attacks on the World Trade Center buildings displaced hundreds of businesses, many of which require expertise and counsel to secure replacement office space. Filling this need is at the heart of REAC.
“Our REAC charter provides that we offer advisory services to tenants displaced or impacted by the events of September 11, 2001,” according to REAC board member Steven Leader, CRE, president of Leader Realty Advisors, Ltd. ‘”Impacted’ refers to tenants who have sustained losses and/ or substantial inconvenience as a result of occupancy, lease obligation and/ or relocation issues. REAC’ s charge is to provide due diligence and advisory overlays to tenants, oversee independent brokers, and provide closure to tenants under extremely challenging circumstances. REAC enters the process upon identification of prospective tenants in need by the New York City Partnership (Chamber of Commerce).”
Subsequent to September 11, 2001, organizations scrambled to find the best way to contribute to the relief effort in lower Manhattan. CRE Duncan Macaulay, managing director of the Highland Group, who also is a Fellow of the Royal Institution of Chartered Surveyors, contacted CRE headquarters and asked if The Counselors would be interested in joining the Chartered Surveyors in an effort to provide relief for the City of New York.
“A small group of us at the Chartered Surveyors tried to find out what was the appropriate response,” said Macaulay, who also is a REAC board member. “The larger tenants were already well represented, but the smaller tenants, defined as being up to 10,000 sq. ft., had a real need for real estate specialists to focus on their specific problems that they might not be able to address on their own.”
Once the framework for REAC was established, the next important step was to establish credibility for the organization. Several Counselors serve on the REAC Board of Directors including CRE Thomas Justin, principal of The Weitzman Group, Inc., who was elected president to the REAC board. The organization quickly aligned itself with the New York City Partnership and the Economic Development Corporation (EDC) to the City of New York. By doing so, REAC gained the endorsement of the City of New York as an official relief organization.
“We decided that we would get incorporated as a not-for-profit organization with the chief objective of advising small tenants,” Justin said. “We made efforts to call the Economic Development Corporation and New York City Partnership because right now, all of the calls asking for help are being funneled to them. We felt it would be best if REAC could be put under the umbrella of the City. Subsequently, we had a meeting with the EDC and New York City Partnership who were very pleased we were coming forward as a not-for-profit group. They suggested we work in tandem with the Real Estate Board of New York (REBNY), which is charged with helping tenants find alternative locations through a space bank. Calls will come in to the New York City Partnership, which will assess the tenant as qualifying for assistance and once an initial evaluation of needs has been completed, refer those needing real estate advice to REAC.”
In addition to aligning itself with the City of New York, REAC also built its board with people from important outside companies that would add credibility and support as well.
“The intent on building a credible board,” Leader said, “was to make sure the board members were backed by reputable companies such as GE Capital, Grubb & Ellis, Cushman & Wakefield and Teachers. These companies can also provide pro bono support or financial backing in areas such as public relations and marketing. For instance, PricewaterhouseCoopers has offered office space for REAC.”
While the main goal of REAC is to provide counseling advice to qualified tenants in need, the EDC requested the additional task of providing strategic planning advice and evaluating the City of New York’s performance during this crisis situation in case another crisis should arise.
“In essence,” Justin said, “the EDC would like to have candid advice as to how the city government performed, how effective was the response to all the tenants, and what recommendations we would have so that they could be better equipped to serve the tenant base in future crises.”
“From our RICS resources in London and Northern Ireland,” Macaulay added, “we experienced members who have created programs and contingency plans in response to terrorist attacks which will be useful in our recommendations here.”
Identifying the Challenges Ahead
Because this is a new effort, it is difficult to determine the type of problems the tenants of the World Trade Center area will have, but there are some tenant needs REAC is anticipating, such as analyzing space needs, running financial analyses on alternative options or re-negotiating leases with existing landlords. Some of the toughest challenges REAC will face will be developing solutions for the known and unknown circumstances.
“A lot of the challenges have been met putting this coalition together,” Macaulay said. “The major challenges from here on will be coming from the tenants themselves. Some have had historic rents and will be faced with coming back into the markets at a potentially much higher rent roll. Some, because of the economy, were already facing downsizing issues and now would be facing more expensive space. Tenants will need help forming business plans for the future, and real estate is only one part of their problems. There are a lot of issues to wrestle with, but we’ll have enormous volunteer resources to call upon, whether it’s advice or market studies.”
The challenges REAC faces as an organization range from public relations to new city leadership. Besides the event held on November 7 by the City of New York, it has been difficult informing the tenants of the services the City is providing. Relatively few tenants have stepped forward. Much of this hesitation is due to conflicting views on the timing and level of direct financial support for affected tenants. Adding to the uncertainty, REAC will also be working under the transitioning leadership of recently elected New York Mayor Michael Bloomberg.
“As a result of the change of administration,” Leader said, “there can be anywhere from a moderate to extreme change in terms of the decision-making infrastructure of the city including real estate and planning. So the challenge is dealing with that administration shift. There are a lot of organizations that want to provide services to the city, which is trying to return to a state of normalcy.
“It really is too premature to provide any long-range planning services, though the need for short-term services like tenant relocation advice is critical,” he said. “We’re in the trenches in terms of the immediate needs, but the biggest challenge is to find the pulse of the new administration and make sure we’re co-opted into a meaningful effort going forward. The important thing is that REAC and The Counselors are positioned with the right team, which is comprised of the New York City Partnership and the EDC.”
Spreading the Word
On November 15, Justin visited the CRE New York Metropolitan chapter meeting and gave a presentation explaining the purpose of REAC to the local CREs. He also solicited volunteers to field incoming problems. With volunteers corning from a variety of professional real estate organizations, including The Counselors, REAC is poised to provide the City of New York with a rich blend of resources and services.
“REAC is being set up by trial and error because we’ve never done this before,” Justin said. “Basically what we need are Counselors in New York who are willing to give their time and be a case manager for these tenants. That will be our immediate need, although we might have further needs going forward. REAC may be an organization we want to keep intact that can address different issues in the City of New York as we go forward. For example, I think there’s going to be a great need to do long-term strategic planning for the redevelopment of lower Manhattan, and I think REAC would be in a great position to address those issues, because we already have a coalition of professional organizations in place.”