Latest News - Crain's New York Business News Feed

1. Top Cushman vet jumps ship
   Commercial brokerage veteran Joseph Harbert has joined Colliers International as president of the Eastern region. His hire is part of the company's effort to raise its profile in the area, especially in New York City.
   "We hired Joe because he is a proven leader in the New York market," said Dylan Taylor, CEO of the U.S. division of Colliers. "He has a tremendous track record of taking brokerages to leading positions in the New York market."
   Most recently, Mr. Harbert was the chief operating officer for Cushman & Wakefield Inc.'s New York metro region. He has also held senior leadership positions in other firms, including CBRE Group Inc.
   Part of Mr. Harbert's responsibilities will include luring other seasoned real estate professionals to the firm, which aims to become one of the Top 3 in the New York market. He will also expand the firm into new business segments such as retail and capital markets.
   "For us this is a quality, not quantity," said Mr. Taylor.
   Mr. Harbert said he was drawn to the firm because of its strong international brand, solid balance sheet and skilled leadership.
   "The company has great people and they want to grow the business," said Mr. Harbert. "We are going to investment in New York."
   Mr. Harbert joins Colliers during a time of major musical chairs in the New York commercial brokerage industry, with other companies all taking aim at market leaders such as CBRE and Jones Lang LaSalle. Earlier this month, Arthur Mirante, a former Cushman & Wakefield CEO, left for Avison Young. Meanwhile, Newmark Knight Frank sold itself to a financial firm and then bought Grubb & Ellis out of bankruptcy to become Newmark Grubb Knight Frank.
   But even with all the companies aiming to raise their profiles, Mr. Taylor believes Colliers can attract new talent.
   "A lot of the large firms are difficult to navigate for the large producers because there are a lot of constraints, policies and rules," said Mr. Taylor. "We have the size and scope of those firms [but] an easier platform on which to conduct business."
   Mr. Harbert agrees. "It is a good time for firms with developed leadership and an organized plan to gain momentum," he said. "We can differentiate our selves through personalized service and real focus on the customers."
   In a statement, Jim Underhill, Cushman & Wakefield's CEO of the Americas, said, "We wish Joe well and are happy for him. At the same time, we have ambitious plans to grow our New York operation aggressively, as we have elsewhere around the country."
   

   

   
2. New York books find foreign audience
   TV shows and Hollywood blockbusters aren't America's only cultural exports. The book industry is also expanding overseas, according to a report released Friday by the Association of American Publishers that looks at book exports for the first time.
   Exports by U.S. publishers, which are dominated by the big six New York houses, rose 7% in 2011 over the prior year to $357 million. That included $22 million in e-books purchased overseas—a 333% spike—and $336 million in print books, a bump of 2%.
   Continental Europe made up the biggest market, with sales of $83 million, up 15%. The United Kingdom was second, with $64 million in sales, up 23%, followed by Latin America, which was up 15% to $17 million.
   The report attributed the growth to the spread of online booksellers and the international emergence of e-books in 2009. Historically, foreign distributors, particularly in non-English language countries, offered only 5% to 10% of U.S. publishers' English-language titles.
   "It's both a greater number of iPads and smart phones, and Amazon moving into a greater number of countries," said Lorraine Shanley, president of Market Partners International, a publishing consulting firm.
   Foreign audiences are often attracted to the original U.S. edition, the report's authors found. Particularly popular were pop culture and business books, as well as children's and young adult books in countries where readers are keen to learn English.
   "English language education has reached into increasingly younger demographics," Ms. Shanley noted. "The expectation is we'll see the trajectory for English language book and e-book sales continue to go up."
   

   

   
3. Economists skeptical of city's record job gains
   While the city economy is certainly gathering momentum, economists are skeptical that it's growing faster than at any time since the 1950s, as data released Thursday showed.
   
   An analysis of state Department of Labor data revealed that the city added 60,000 private-sector jobs this year through April, the largest four-month gain in about 60 years, according to real estate services firm Eastern Consolidated. The strength was widespread: professional and business services added 19,400 jobs; education and health services netted 10,600 jobs; retail posted a 9,000 job-gain; the leisure and hospitality sector grew by 6,600 jobs; and information expanded by 4,000 jobs.
   
   Mayor Michael Bloomberg trumpeted the gains, saying, "Industries like tech, tourism and entertainment are helping to diversify our economy, and that means all New Yorkers will have better opportunities in the long term."
   
   If the data are accurate, it is a stunning development for the city and a sign that the local economy has diversified sufficiently to enable it to grow without much assistance from the all-important securities industry. Despite continued layoff announcements, Wall Street has posted gains this year, adding 1,000 jobs, but the bulk of the city's growth has occurred outside its main economic engine.
   
   But economists said that quirks in the seasonal adjustment, which is an objective and formulaic analysis, might be producing overly rosy results.
   
   "Certainly, the New York City economy is doing relatively better than most places in the U.S., but I am not convinced that we have just seen a record four-month run," said James Parrott, chief economist at the Fiscal Policy Institute.
   
   Mr. Parrott said that the seasonal adjustment process is skewed by changes wrought by the recession. A sharp decline in a particular month because of the recession might lead to exaggerated gains in subsequent years. Professional and business services, for example, took a big hit during the recession.
   
   "Since the financial crisis, all bets are off about how businesses behave seasonally," said Frank Braconi, chief economist in the office of New York City Comptroller John Liu. "Whether it's interns, shopping season or hiring part-timers, all of that has been thrown off."
   
   A warm winter could also be playing a role in throwing the adjustment out of whack, said Marisa Di Natale, a director at Moody's Analytics. "A lot of the hiring that would have happened in the spring was pulled forward into winter months," she said. "I'm skeptical of all the employment data from November through March, just because of this weather phenomenon. It's been our expectation that things would start to return to normal, but for New York there was this big gain in April. I'd at least want to see what happens in May, when the data should be free from the weather influence."
   
   Other indicators point to more measured growth. If the city were really creating so many jobs, economists said, the commercial real estate market—which just recorded its worst quarter in years—should have picked up. And city income tax withholdings were down by about 2% in March and April from the prior year.
   
   Also, a separate survey that examines employment of New York City residents has indicated much more modest growth. Since the bottom of the recession, there has been a small increase of only 3,100 in resident employment, according to an analysis by Mr. Parrott. There has been no reduction in the number of people discouraged from looking for work or working part-time involuntarily, he said. And the employment-to-population ratio has remained flat at 54%. The unemployment rate has dropped to 9.5% from 10.5% but remains high.
   
   "You have statistical noise, and you have truth and you don't know the exact proportions," Mr. Braconi said.
   
   While it may be tough to pin down the pace of growth, it is clear that the city's economy is improving. From April 2011 to April 2012, the city gained 65,000 jobs, and that number is unambiguous.
   
   "Regardless of whether these numbers get revised down, the city's economy is doing very well," Ms. Di Natale said. "This may be overstating the strength a bit, but I don't think there's anything to worry about."
   

   

   
4. Citigroup's bike deal is big bargain
   
   Citigroup Inc.'s five-year, $41 million sponsorship of New York City's bike-share program will turn 10,000 bicycles into a fleet of advertisements, giving the bank a virtual monopoly on mobile marketing that has until now been highly restricted.
   The deal announced last week was lauded as a coup by the city and its bike-share manager, Alta Bicycle Share, because it will pay for the bikes and 600 racks that will be placed throughout Manhattan and parts of Brooklyn and Queens. New York will be unique among the growing number of bike-share systems popping up in cities around the world because it will not be funded with taxpayer dollars.
   But it's also a boon for the bank's brand. The agreement amounts to $2.20 in advertising per day for each bicycle, which will be painted blue and labeled "Citi Bike" with the bank's familiar red umbrella-shaped logo.
   "Wow, that's a pretty good deal," said Bill Wise, the owner of Akron, Ohio-based American Mobile Ads, which operates the kind of truck billboards that cost $500 to $1,500 a day but are prohibited in New York City.
   Only "advertising notices relating to the business for which a vehicle is used" are permitted by the city, and they are not allowed to be "reflectorized, illuminated or animated," according to city's legal code. And the vehicle can only be used for "normal delivery or business purposes, and not merely or mainly for the purpose commercial advertising."
   So, FreshDirect legally covers all of its trucks with its own advertising, which are seen throughout the city's neighborhoods, but Bowlmor Lanes, for example, couldn't just paint a fleet of trucks with ads and drive around empty all day.
   Otherwise, only rooftop taxi ads and bus advertising are allowed. The Taxi and Limousine Commission tightly regulates that industry and charges $50 for each cab with a rooftop ad. Only five companies are authorized to sell ads on taxi roofs.
   The advertising ban, however, does not apply to "devices moved by human power." And a few of the rickshaws operating in the city have been known to mount small billboards.
   Alta President Alison Cohen said the sponsorship was well-suited to a consumer-oriented brand with the resources to make the investment. The conditions that are likely to make the bike-share a success will also prove beneficial to Citibank.
   Ms. Cohen told Crain's that the bike-share program, branded as Citi Bike and expected to launch in July, "is just perfect for New York. There's unique density, flatness, there are millions of tourists, and the apartments are small. That will make this system successful."
   

   

   
5. Andrew Rigie bolts NY Restaurant Association
   The New York Restaurant Association has a full plate of legislative issues to address in the city including letter grades and paid sick leave. Now it needs to find a new executive to lead its New York City chapter as well.
   The association is conducting a search to replace Andrew Rigie, the executive vice president who left two weeks ago to join a hospitality venture, said Rick Sampson, CEO of the New York Restaurant Association.
   "We are restructuring the organization," said Mr. Sampson. "We want to hire a trade executive who will take it to the next level."
   The association wants to expand its membership here. It currently counts 1,100 members who represent some 4,000 restaurants. There are 24,000 food service establishments in the city.
   Mr. Rigie, 29, who could not immediately be reached for comment, had been with the city chapter for eight years. He assumed the helm in 2009 after veteran Chuck Hunt retired.
   Mr. Sampson is handling his duties for now, traveling from his Albany office to Manhattan where he spends two days a week.
   NYRSA has been a strong voice of opposition to a number of initiatives launched by the city's health department, including menu labeling, which resulted in calories being posted on restaurant menus of large chains and the smoking ban, which started in bars in restaurants.
   The association will rely more heavily on Andrew Moesel of lobbying firm Sheinkopf Ltd. for legislative and public relations issues.
   

   

   
6. Local ad network creates spinoff shop
   Nearly a year after Interpublic Group of Cos.' Mediabrands began hinting at its desire to create a spinoff shop, plans for the official launch of a third agency network are finally being firmed up.
   Ad Age has learned details about the new entity—which is intended to serve as an alternative shop to handle business that conflicts with other Mediabrands clients—such as its name: it will be called BPN, or Brand Programming Network. BPN will sit within Mediabrand's Orion trading unit, and will be overseen by Orion CEO Brian McMahon.
   For Mediabrands, the hope is that the new network, which will handle media buying and planning, will help solve the problem of having to turn down participating in domestic and global pitches because of client conflicts. Mediabrands CEO Matt Seiler said last year the company turned down opportunities worth a combined sum of nearly $11 billion in billings.
   Mr. Seiler expects the firm to grow to be at least as large as Initiative and UM. Additionally, the new brand will create an umbrella organization for a group of regional media agencies, dubbed Brand Connections, that don't exist as part of UM or Initiative.
   "We knew we could build on the base of those existing [global] agencies and create a network around them. Putting that under Brian [McMahon] allowed us to think about how it could be something other than just a conflict shop," Mr. Seiler told Ad Age. "We want it to have a strong point of view like UM and Initiative, so we looked at what a network would feel like [if it had] an investment banking perspective."
   Mr. Seiler noted Mr. McMahon's investment banking background was one reason he was chosen for oversight of the new agency. The association with Mr. McMahon and Orion will enable the new shop to leverage the firm's bartering assets and unique relationships with media owners, Mr. Seiler said.
   In the coming weeks, the firm plans on announcing a global CEO for BPN, as well as a portfolio of clients. The CEO will report to Mr. McMahon, who reports to Mr. Seiler.
   

   

   
7. In the Markets: Facebook winners and losers
   A clear list of victors emerged just hours after Facebook Inc. went public.

   

   
8. Big Fifth Avenue store space hits market
   
   One of the few retail vacancies on the most expensive retail strip in the nation is being gussied up in anticipation of a new tenant. Landlord Thor Equities is spending $5 million to renovate the former Takashimaya Building at 693 Fifth Ave., between 54th and 55th streets.
   Up until March, California-based fast-fashion retailer Forever 21 had been housed in the six-floor retail space at the base of the 20-floor building via a series of short-term leases, but Thor is now searching for a long-term occupant.
   "Now that test tenant Forever 21 has left, we're really positioning this building to showcase it in a very exciting manner," said Melissa Gliatta, an executive vice president at Thor. It purchased the building for $140 million two years ago, following the bankruptcy of former owner Japanese retailer Takashimaya. At the time, Thor poured millions of dollars into an extensive facelift of the property before Forever 21 arrived in late 2010.
   The latest upgrade includes adding 2,000 square feet, primarily borrowed from the lobby of the building's office tenants, bringing the total ground-floor space to 5,500 square feet. The entire six floors comprise 44,500 square feet of retail space. Thor is also in the final stages of a three-story glass façade for the building, which is not landmarked. Renovations should be completed by September, at which point Thor is prepared to spend many millions more after signing on a retailer to build out its space.
   Already, several European stores, as well as apparel and accessory businesses, are looking at the space, according to Thor. A long-term agreement with Forever 21 has not been ruled out, either. Potential tenants should be prepared to shell out, though. Average ground floor asking rents on Fifth Avenue between 49th and 59th streets have skyrocketed 22% since last spring to $2,750 a square foot, according to the Real Estate Board of New York's spring retail report, released Friday.
   In fact, REBNY asserts that the lack of availability on upper Fifth Avenue has affected rents along the corridor's seven-block strip stretching down from 49th Street to 42nd Street. Average asking rents on that lower slice of the corridor stand at $900 a square foot today, 75% more than last spring.
   "The advisory group attributed this surge in asking rents to the lack of space on Upper Fifth Avenue, which caused a spillover effect for the available space on Lower Fifth Avenue, and also the result of the high degree of pedestrian traffic on the avenue," said REBNY President Steven Spinola in a statement.
   Yet more space may yet arrive. Earlier this week, the Chera family and its company, Crown Acquisitions, announced its purchase of a stake in four Fifth Avenue buildings, including the Olympic Tower at 51st Street, valued at $1 billion. The portfolio included 105,000 square feet of retail space, which currently boasts luxury tenants H. Stern, Versace, Armani and Cartier. Those retailers all have leases coming due in a few years.
   

   

   
9. Fledgling property firm inks 10th buy
   Seven-month-old Trevi Retail has scooped up its tenth Manhattan property since launching. The latest purchase is a mixed-use property at 155 Bleecker St. in Greenwich Village for which the company paid $6.97 million.
   The four-story, 7,200-square-foot building at the corner of Thompson Street is home to The Back Fence, a 67-year-old neighborhood bar that draws a lot of New York University students. The all-cash deal took about six weeks to close, according to Rockie Gajwani, CEO of Trevi Retail. The floors above the bar house three market-rate rental apartments. According to public records, the seller, Avj Aurora LLC, bought the building four years ago for $2.7 million and the property was last listed for sale for an asking price of $8.4 million.
   "It's a highly foot trafficked corner and a great space," said Mr. Gajwani. "Our focus is buying jewel boxes, buildings with great street-level retail."
   Manhattan-based Trevi Retail has been on a tear since its launch. Most recently it bought 304 Bleecker St. for $5.8 million. And last month it snapped up 22 W. 13th St., between Fifth Avenue and University Place, a five-story building, where The City Tavern, a two-level restaurant, is located, for close to $4.83 million. Trevi Retail has an undisclosed financial partner that is advised by Principal Enterprise Capital, an investment manager and subsidiary of Des Moines, Iowa-based Principal Financial Group.
   Trevi Retail currently has a staff of nine and expects to hire three more, said Mr. Gajwani, who started his own firm after eight years as an executive at Vornado Realty Trust. "We are on the prowl for properties like 155 Bleecker," he said, adding that he is in the process of negotiating four deals worth $46 million.
   

   

   
10. Facebook makes its public debut
    
    Facebook is updating its status to "public company" as its stock makes its debut on the Nasdaq Stock Market.
    The stock opened at $42.05 on Friday morning. It later touched its offering price of $38 before rising again. Toward the end of the day, the stock bounced on its offering price repeatedly.
    CEO Mark Zuckerberg smiled as rang the opening bell from Facebook's headquarters in Menlo Park, Calif. Surrounded by cheering Facebook employees and wearing his signature hoodie, the 28-year-old pushed the button that signals the opening of the stock market in New York.
    The company and its early investors raised $16 billion in the offering, which valued Facebook at $104 billion. That makes Facebook the most valuable U.S. company to ever go public.
    Now, the stock market will assign a dollar value to Facebook that will rise and fall with investor whims. It will be subject to broad economic forces and held accountable for profit it earns—or loses— from one quarter to the next.
    But Facebook is one of the rare companies whose IPO transcends Wall Street's money lust. It is a cultural touchstone for the way technology reshapes our lives. Since its start as a scrappy network for college students, Facebook has come to define social networking by getting 900 million people around the world to share everything from photos of their pets to their deepest thoughts.
    It has done so while becoming one of the few profitable Internet companies to go public recently. It had net income of $205 million in the first three months of 2012, on revenue of $1.06 billion. In all of 2011, it earned $1 billion, up from $606 million a year earlier. That's a far cry from 2007, when it posted a net loss of $138 million and revenue of $153 million. The company makes most of its money from advertising. It also takes a cut from the money people spend on virtual items in Facebook games such as "FarmVille."
    Facebook's public debut marks a new milestone in the history of the Internet. In 1995, Netscape Communications' IPO gave people their first chance to invest in a company whose graphical Web browser made the Internet more engaging and easier to navigate. Its hotly anticipated IPO lit the fuse that ignited the dot-com boom. That explosion of entrepreneurial activity and investment culminated five years later in a devastating bust that obliterated the notion that the Internet had hatched a "new economy".
    It took Google Inc.'s IPO in 2004 to prove that an Internet company with a disruptive idea could be profitable. In the process, the Internet search leader is forcing other industries to adapt to a new order where people have come to expect to be able to find just about anything they want by entering a few words into a box on any device with an Internet connection.
    Facebook's IPO heralds a new phase of the Internet's evolution. This social era makes connections among people as important as Google's massive index of Web links. Still, the IPO will raise new pressures for Facebook to generate more revenue, perhaps by digging further into the trove of revealing information that people share on the network to sell even more targeted ads.
    Facebook's IPO almost certainly will enrich other up-and-coming entrepreneurs as Mr. Zuckerberg uses the company's cash and stock to buy other startups in an effort to being in other talented engineers and promising technology. That's what has been doing for years. Since it went public in 2004, Google has spent $10.2 billion buying nearly 200 other companies. Those figures don't include Google's still-pending $12.5 billion acquisition of cellphone maker Motorola Mobility Holdings Inc., which is still awaiting regulatory approval in China.
    Mr. Zuckerberg's biggest deal so far came when he agreed to buy Instagram, a maker of a popular mobile app for photos, for $1 billion. Because most of the deal is being paid for in stock, Instagram is already getting richer. Based on Facebook's IPO price of $38 per share, Instagram is in line to receive nearly $1.2 billion.
    Though Mr. Zuckerberg rang the Nasdaq opening bell from California, people outside the stock market in Times Square snapped photos of a big blue Facebook sign that lit up the building. Some of them used their smart phones to check in to the Nasdaq on Facebook. Frederick Nolde, who was visiting from Richmond, Va., said he bought 100 shares through the online brokerage eTrade.
    He thinks the company is worth $100 billion. "I think Google is a good comparison, and it's worth $200 [billion] to $300 billion. The real question is how they do in mobile. If they can figure that out, they'll do well."