Creating new revenue streams on mixed-use developments

Real Estate Weekly, Feb 12, 2003 by Charles Jr. Buscarino

In large mixed-use facilities, economies of scale and synergies provide opportunities for revenue streams derived from IT businesses. Traditionally, a significant portion of the assets that enable these revenue opportunities are parceled out to local carriers for their use in a particular project. Recently, however, Cosentini Information Technologies, working with the Related Companies, identified significant revenue opportunities in the form of four new IT businesses at its AOL Time Warner Center (AOLTWC) project in midtown Manhattan. Each business individually stands alone as a compelling revenue stream. But, when combined, these businesses provide opportunities that would not otherwise be available in the marketplace and add to the uniqueness of this compelling project.

The nature of this value added proposition is that it partners the developer with an operator of the facility's IT businesses. At AOLTWC these IT business specifically include:

* Traditional voice, data, high speed internet services

* In-building wireless services

* Roof-top wireless services

* In-building broadcast and content origination services

In addition to providing revenue opportunities to the developer and the technology operators, these offerings provide unique value to the tenants. IT services such as IP Voice and Data services are no longer restricted to just the tenant's space. Bandwidth costs are reduced due to the purchasing power of the entire site. Interaction between hotel services and residents and/ or retailers is facilitated and readily available if desired. The plug and play platform and technology assets built into the facility help reinforce the value of the rents sought by the developer.

A robust IT infrastructure and services are the cornerstone for any cutting edge facility hoping to attract premier commercial tenants, high-end residents and retailers. Eventually, all high-end commercial, mixed-use and residential construction will be developed as some form of "smart" buildings. Since the mid-1990's, older commercial Voice and Data Services are no longer restricted to just the tenants' space. Bandwidth costs are reduced due to the purchasing power of the entire site. Interaction between hotel services and residents and/or retailers is facilitated and readily available, if desired. The plug and play platform and technology assets built into the facility help reinforce the value of the rents sought by the developer.

A robust IT infrastructure and services are the cornerstone for any cutting-edge facility hoping to attract premier commercial tenants, high-end residents and retailers. Eventually, all high-end commercial, mixed-use and residential construction will be developed as some form of "smart" buildings. Since the 1990's, older commercial buildings may be deemed Class A only if they have the ability to support IT renovations.

Nowhere is this concept more evident than with the integrated IT system Cosentini Information Technologies has created and designed for AOL-Time Warner Center. it is a system befitting the quality and scope of this remarkable project, providing the most cutting edge programs to serve the five mixed-use occupancies.

Early in the design process Cosentini Information Technologies recognized the huge IT business potential for the project. Cosentini developed for Related a fully integrated information technologies system in which the infrastructure is shared by all five vertical markets, but still addresses the diverse usage from each type of tenant. An IT-derived revenue stream stems from the unified and carefully conceived infrastructure that provides opportunity for interactivity and reduced cost due to economies of scale. In turn, service providers pay for the use of the infrastructure and/or services. The aggregation of these revenue streams is a new concept that will undoubtedly be executed in most high-end mixed-use developments of the future. Moreover, the scope of this technology inherently increases the value of the property to the developer's benefit.

Not only is Related's Columbus Circle development a massive project with 2.8 million SF, it is also the first mixed-use facility to take a holistic approach to integrated technology solutions. The entire complex, which includes five vertical markets, i.e., Office, Entertainment, Retail, Residential and Hotel, can use a single robust infrastructure for all site voice, data and video needs.

There are four IT components to the AOL-Time Warner Center project that define the unique nature of the integrated IT systems, making it a paradigm for future development.

AOL-Time Warner is the first building of its type and size to offer a combined approach to voice and data services through one building operator. As developed, the unified infrastructure will offer tenants, cutting-edge technology, value-added technology services, economies of scale and 24/7 support, making this complex the most comprehensive technology approach for mixed-use tenants anywhere in the world. Services such as IP telephony, unified messaging five-digit dialing within the site (at a time when the city is moving to 11-digit dialing) and connectivity throughout the entire site are some of the enhanced services available beyond those of traditional telephony and high-speed Internet access.