Wednesday, July 9, 2008

"NEW YORK, NEW YORK..."

Decide in Haste, Repent at Leisure

With complex financials and background materials distributed four hours before its meeting on July 2, UJC's Executive Committee unanimously recommended that UJC agree to a buy-out of its Lease at 111 Eighth Avenue and enter into a new long-term Lease south of Wall Street (at 25 Broadway) in downtown Manhattan as well as renew a $25 million line of credit. $7 million of the Line would be drawn "...as bridge financing required for the move" even though the existing 111 Lease would be bought out for $4 million. (It seems that UJC's leaders have determined that the 65,000 square feet will require an $8,000,000 build-out.) The leased premises will accommodate no employee growth...none. Further, UJC will be required to move out, and, therefore, in, by year-end. The buyout and new Lease negotiations, other than as follows, were very well done. Seems simple -- an expert Lease Task Force, chaired by Chattanooga's Michael Lebovitz, but appointed without any notice...none...to either the UJC Executive Committee or the Board, studied and recommended the deal and UJC's leaders strongly supported it. But, as with all things UJC, things are never as simple as they seem.

The UJC Board decision to approve the transaction (At least I believe that ultimately it was approved. The results were not announced on the call very. Actually the Resolution approving the transaction was rejected initially by a single vote. UJC leaders -- somehow knowing how each Board member voted -- attempted to strongarm a few to change their vote. I have no doubt they will succeed.) was made on the same day that the Chicago Tribune published an article: Suburban office space losing occupancy and value. A little over one year ago, I wrote and asked UJC's leaders that UJC examine, as one real estate alternative, moving the enterprise to....Chicago (or, even, New Jersey). The Chicago O'Hare Corridor here had (and has) experienced major vacancies and represents a depressed market for high quality office buildings; brokers here (with offices in New York City as well) estimated a potential savings to the federations from such a move to Chicago at $1.5 million per year over the life of a ten year lease (at the time based on same square footage UJC presently occupies.) The savings per year would be greater the longer the Term. Further, the opportunity to lease in a single user building in the O'Hare area could readily result in a Lease exempt from real estate taxes with further major savings. Other major savings (common area, maintenance, etc.) would be available in such a scenario. (Or, in a multi-tenant building, UJC might negotiate an ownership structure of its space as the Chicago Federation did for its new offices, exempting their space from taxes.) But, as I pointed out, it was not just the dollars -- a move to Chicago would bring UJC closer to its constituency, to its owners -- as they say in those ads: "priceless." (I should add that on yesterday's Board meeting conference call I was in the queue to ask some of these questions. As time was running out and the Chairs were anxious...extremely anxious...to bring these matters to a vote, I was shut out by a Motion to Call the Question raised by a past UJC Chair.)

In response, I received a nasty note from Chairman Kanfer including a sarcastic reference to JAFI's North American location in mid-town Manhattan. A move out of New York City would not be considered...period. It appeared from Kanfer's letter that UJC's relevance to other national and international agencies was more important than its relevance to the federations that own it. There is no denying the reality that any move out of the NYC metropolitan area would have a tremendous impact on staff.

But, the Chairman missed my point: I wasn't arguing that UJC must move to Chicago; only that in any consideration of the entity's move out of 111, that consideration be given to the cost savings and engagement opportunities of a move out of NYC compared and contrasted with the "disruptions" such a move might create. That consideration was not to be even though one might have thought that UJC's leaders' fiduciary responsibilities would have included examining every significant potential reduction of its costs -- particularly at a time UJC was (and is) experiencing extreme budgetary pressures and work force reductions. But...no. Maybe it is a terrible idea, at one and the same time, to potentially save tens of millions of federation dollars and come closer to the federation lay and professional leaders with whom engagement barely exists, but why not discuss and debate, why not compare and contrast?

As UJC has determined to remain in New York City, it appears the deal now approved by the owners (I think) is a good one even as the process was, as usual, a terrible one... Manhattan... Manhattan, New York, New York, now and forever. Kal ha'kavod.

Rwexler

3 comments:

Yetta said...

Interesting to note that several of our owners knew of the move before UJC employees did. Internal communications aren't great either.

long time observer said...

Richard, your loyalty to your home town is commendable, but your logic is not. Yes, there are a number of cities around the continent where I'm sure you could find office space that is cheaper than in NY (although by moving downtown, still in recovery mode, UJC is getting a very good deal). That doesn't make them suitable headquarters for UJC. Like it or not, the center of gravity for national Jewish organizational life is still NY (with Washington, DC running second). Maybe that will change some day, but it's the reality now, and for UJC to be elsewhere would be just silly.

As for getting closer to the federations, well, in under four hours, starting in NY and without setting foot on an airplane, I can be in the offices of 45 federations. Can you do that from Chicago?

Finally, how about the professional staff, about whom you have consistently and admirably expressed concern in your posts? Do you expect that significant numbers can pick up, leave spouses or partners with careers of their own, children, friends and families, homes they probably can't sell, and move? Won't happen. And what is the cost of recruiting and training a whole new staff? The business literature says: a lot.

So, Richard, I'm pleased that you liked the deal in the end. Did you ever think that maybe the UJC leadership did consider your suggestion last year and rejected it? I certainly would have.

RWEX said...

To: long time observer,

Thanks for your Comment. Yes, I realize that a move out of New York City would cause disruption -- I think I noted that in the Post. I also indicated that the weighing of alternatives should have included a discussion of locations other than New York for the reasons stated in the Post. Your arguments are undeniable; they could have been made in that discussion and debate and, no doubt would have been persuasive.

UJC leadership and the Task Force might have debated the alternative of moving from Manhattan -- given Joe Kanfer's dismissive e-mail to me so promptly after my letter suggesting an analysis, at least, I don't think so.