Landlord blasts RDA move
The landlord whose Chappaqua office campus is about to be vacated by The Reader”™s Digest Association Inc., which could shed a $130 million long-term lease deal there, is “exploring all options” in the wake of the bankrupt publisher”™s announced plans to relocate its Westchester operations to downtown White Plains and midtown Manhattan.
And officials in the town of New Castle, where Reader”™s Digest has been the community”™s corporate mainstay for 70 years, said they will review their legal options with respect to the landlord and the large commercial space the publisher plans to abandon.
In an internal memo given wide public release, Reader”™s Digest President and CEO Mary Berner   recently told employees the company will move its corporate headquarters and 125 staff from Chappaqua to 750 Third Avenue at Grand Central Square. The space recently was vacated by Conde Nast Publications. Berner worked in the same building in her previous stint as president and CEO of Fairchild Publications Inc., like Conde Nast a business entity of the Newhouse family.
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Berner said 525 employees and contractors will move from Chappaqua to Westchester One at 44 South Broadway in White Plains. The company”™s spurned landlord said RDA plans to lease space on three floors of the 23-story building, where other tenants include Disney Publishing Worldwide. Calls to the Stamford, Conn., office of Cushman & Wakefield, leasing agent at the Westchester One, were not returned.
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Berner in her memo gave no timetable for the moves, which must be approved by the U.S. Bankruptcy Court judge reviewing the company”™s Chapter 11 reorganization plan. A confirmation hearing on the plan is scheduled Dec. 17 at the federal courthouse in White Plains.
Berner said the moves will bring significant savings on total rent and maintenance costs. ?Reader”™s Digest in 2004 sold its landmark 116-acre campus in Chappaqua for $59 million to a partnership of Summit Development L.L.C., of Southport, Conn., and Greenfield Partners L.L.C., of South Norwalk, Conn. The publisher leases about 290,000 square feet of space in the 690,000-square-foot office complex. About 15 years remain on its 20-year lease there.
Summit/Greenfield officials issued a statement saying they were “deeply disappointed” by the Reader”™s Digest decision, calling the imminent departure “a significant loss not only for our company, but for Chappaqua and the town of New Castle.”
The owner said its largest tenant was walking away from a 20-year lease that began in 2005 and a $130 million obligation. “Reader”™s Digest”™s founders Dewitt and Lila Acheson Wallace, whose deep commitment to their thousands of Chappaqua-based employees and the local community were legendary, would be appalled by the latest actions of today”™s Digest owners,” Summit/Greenfield spokesman Geoffrey Thompson said in the statement. The company”™s relocation decision leaves the Wallace legacy “forever shattered,” he said.
The landlord”™s statement further read: “We find it outrageous that the Digest is making the arguments of cost savings and a need for efficiency as the motive when they have signed a new lease (in Manhattan) at a rental rate significantly higher than the current rental rate at its headquarters, and when the new lease in White Plains requires separating its employees onto the 7th, 8th, and 18th floors,” a layout inconvenient for meetings with co-workers.
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“Reader”™s Digest, once a great American success story, now joins a long list of American companies who have irresponsibly piled on mountains of debt in order to grow their business through acquisitions rather than managing their business with traditional skills,” the statement continued. “They then hide behind bankruptcy to avoid addressing their own bad business decisions and obligations.”
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Summit/Greenfield partners also urged New Castle officials to lift the “grossly unrealistic and now utterly impractical restrictions” on leasing space in the building to be vacated by RDA. Town zoning law limits occupancy in the office complex to four tenants and requires the owner to rent at least 200,000 square feet of office space to one tenant.
Summit/Greenfield partners said the Reader”™s Digest departure will result in a major drop in property value for what is the largest single taxpaying property in the town and the Chappaqua school district.
Town of New Castle Supervisor Barbara Gerrard did not return calls for comment on the impact of RDA”™s planned relocation. In a statement posted on the town website, officials said the broken lease “presents difficult issues” regarding the 200,000-square-foot single-tenant requirement.
Saying it was important not to erode the town”™s small commercial base, officials said they will review their options “to resolve this issue in a fair and productive way.”