If you hear a CEO say it’s time to build a new headquarters, watch out.
There’s a long and inglorious history of companies building new homes for themselves, only to have their businesses collapse a few years later.
Or in the case of some poor souls, a few months.
This is why, last week, when we wrote about Yahoo’s planned move into a massive new headquarters, we implored Carol Bartz to do all she could to reverse course. You never know what the curse could do.
For another example, take the New York Times Company. In a story on Arthur Sulzberger, Mark Bowden wrote in Vanity Fair, “Whether owing to hubris or sheer distraction, the erection of a new headquarters often seems to spell trouble for corporations.”
He couldn’t have hit the nail more squarely. The Times built a 52-floor monolith as the foundation of its business was being torn asunder. Just two years after the company moved in, it essentially used the building as collateral to get cash to keep from going under.
The Times isn’t the only media company in New York. There’s others, like Conde Nast and Hearst, who have grand, decadent monuments that look silly in the age of cost cutting and secular business problems.
Tech companies have an embarrassing track record in this department, as well. fuelled by the dot-com boom, they thought the good times would be infinite, and the space for employees would have to be equally large.
Take Inktomi, for instance. Once a dot-com era star, it quickly burned up. Unfortunately, it flamed out right around the time it decided it needed to build a new headquarters, laying off employees. The leases put it on the hook for hundreds of millions of dollars, which helped take the company down.
Even financial titans can get hit. It’s an awkward tale from the financial crisis of 2008, and you probably know it, but we won’t spoil it for you.
Just as the Internet began to change the world in 2000, the New York Times decided to sell its old building and construct a new headquarters, costing the company around $600 million. By November 2007, when it was screamingly obvious the Internet would destroy the New York Times' business, it opened this sterling property.
This is one giant mistake, reminding the Times staff every time it enters the building how the company burned money as it entered its declining years. When the Times financial situation was critical at the start of the year, it sold part of its stake in the building for $225 million in a lease-buyback arrangement with W.P. Carey.
As bad as that sounds, it's not the most insulting part of the whole arrangement. It sold its original building for $175 million in November 2004 to Tishman Speyer. Just three years later, while the Times was still in the building, Tishman sold it to a new buyer for $525 million.
image: New York Times Building
Here's an awkward one for you. Bear Stearns opened its building in 2002, after paying at least $280 million to build it. Things were good there for about 5 years or so. Then the bottom fell out.
Bear was sold to JP Morgan for $2 a share, valuing the company at $236 million. Meanwhile, the building was being valued at $1.1 to $1.4 billion by JP Morgan and the Fed. Eventually, JP Morgan raised its bid to $10, valuing the company around $1.2 billion.
In 1999, [email protected] turned in its first and only profitable quarter. Like any good company, it thought the good times would keep on keeping on. So it moved into a brand new building across the street from its old digs. From there it entered a death spiral, incinerating almost $35 billion in value.
Once a high flier in the heady days of the tech boom, Web services provider Inktomi fizzled like so many, leaving behind a glass and steel monument to its failure.
In early 2001, Inktomi abandoned plans to move some of its staff into a 380,000 sq. foot complex it was building in Foster City, California. CNET reported at the end of 2001 it had a 15 year lease worth $324.4 million.
In August 2002, the SF Gate reported the company, which was once worth billions, couldn't make its payments on the lease, so it was forced to buy the building for $114 million. (It was part of a complicated synthetic lease agreement.) Inktomi managed to avoid this mess by paying $50 million to terminate the lease in September of that year.
Intel got lucky. In 2001, it managed to stop the construction of 20 buildings around the world, CNET reported.
How much would it have cost Intel? CNET doesn't know the price tag for all the buildings, but one that was planned for Austin, Texas was slated to cost $125 million.
Intel dodged a bullet here. And it's still alive and kicking today. Coincidence? Maybe, maybe not.
The IAC building, a curvaceous, schmancy, Frank Gehry-designed building in Chelsea adds 'a much-needed touch of lightness to the Manhattan skyline, just as the city finally emerges from a period of mourning,' wrote the New York Times in March of 2007.
Why's it in the list? True, IAC isn't in a critical state, but this building proves new headquarters are omens. The year IAC moved in, it decided to break up the company, which led to a protracted legal battle between Barry Diller and John Malone.
Compared to the others on this list, it's a minor quibble. IAC has billions in cash, and as Vanity Fair reported, the building only cost around $100 million.
The AOL Time Warner centre. That has a funny ring to it, doesn't it? That's because it is called the Time Warner centre these days. It wasn't always that way.
When construction got under way in 2000, Time Warner and AOL were merging and preparing for world domination. From the time construction got under way to the time the building was opened, Time Warner shares fell 78%. Fast forward a few years, and the company is being pulled apart.
Here's two buildings that went up within a few years of each other in New York: The Hearst Tower (left) and the Conde Nast building (right).
These were once two of the most glamorous, powerful, publishing businesses, but as the Internet chews them up, they're being forced to become increasingly quotidian. 'The Glided Age of Conde Nast Is Over,' chided the New York Observer three months ago.
Ah, well. C'est la vie. At least, you have a gleaming, decadent heirloom with a commanding presence in the city. Enjoy it while you can. Who knows how long it will last.
Yahoo is working on getting the permits to build a on a piece of Santa Clara property it bought in 2006 for $112 million. The new headquarters, which are supposed to last the next 50 to 70 years, would add 2.9 million square feet of office space, and house 7,000 more employees.
Does anyone even know what Yahoo will look like in 50 to 70 years? Will it really need all this space? It's shedding staff and slimming the company in general, yet it wants to beef up its HQ.
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