Fortress Investment Group is Putting a Futuristic Spin On A Historic Foundation

Fortress Investment Group's Futuristc Spin on Times Square

The Fortress Investment Group has been a trailblazer during its rich two-decade existence. First as a groundbreaking hedge fund, then as the first such fund to go public on the New York Stock Exchange (NYSE: FIG) in 2007, and finally with its purchase by Japan’s SoftBank Group Corporation — one the world’s biggest developers and financiers of cutting-edge technology. Fortress has, over its relatively brief existence, led the way — and its latest project breaks new ground yet again.

With the announcement of a new mega real estate deal — the $2.5 billion TSX Broadway project in the heart of New York City’s Times Square — it once again throws down the gauntlet. In partnership with long-time New York real estate players L&L Holding Company and Maefield Development, Fortress Investment Group will be part of creating an influential hotel, retail, entertainment, and signage development in one of the world’s most famous places. It is a multifaceted project that will be setting the standard for luxury and destination retail trends moving forward.

The concept underlying what will surely become a new landmark at 1568 Broadway is a grand “experiential retail” location of global import. Times Square is one of the most visited places on earth, with 50 million people passing through it every year. According to reports, such global business titans as Amazon, Disney, Facebook, Samsung, YouTube, and Walmart have shown initial interest in being tenants.

Fortress Investment Group: TSX Broadway Development Project

The Project

With a completion date scheduled for 2021, features of this remarkable project include a new 46-story building that will go up around the current 1,700-seat Palace Theater. The Broadway icon’s interior will not only be fully restored to its original opulent glory from opening night over a century ago — it will also be lifted 30-feet above its current location to occupy the third floor of the new building. In addition, an exterior stage, also on the third-floor level, will be suspended over the area near TKTS Times Square at Broadway and 47th Street. This new performance space will be the first, and only, permanent outdoor stage in the Square.

TSX Broadway will also be home to a luxury hotel featuring 30 “Ball Drop Suites” from which to watch the annual New Year’s Eve blowout. Ten floors — 75,000 square feet in total — of new retail space will be incorporated into the tower, with 100 feet of it facing Times Square and an overall ground-level retail area totaling over 15,000 square feet. In excess of15 million people are expected to go through TSX Broadway annually.

Times Square is the world’s signage Mecca. The project will make its mark here as well, with an 18,000 square-foot wraparound LED screen and additional LED-lighting on the entire building. The screen will be one of the largest and most sophisticated in the world and will become a major visual element of Times Square.

The press release announcing the project made it clear that TSX Broadway was about more than just real estate. In explaining what retail tenants of the new project will be getting, marketing was the lead: “TSX Broadway will provide a single brand with the most powerful marketing tool in the world, creating a dominant brand presence in the heart of the world’s most visited pedestrian destination”

The project will join a long line of innovative and spectacular developments that have marked the history of Times Square and 42nd Street.

The History of Times Square

Fortress Investment Group, L&L, Maefield
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Times Square is, of course, one of the most recognizable, culturally important, and financially valuable areas in the world. The heart of American theater and backdrop to countless television shows and motion pictures —not to mention the New Year’s Eve Times Square ball drop — developing a project in one of the world’s most identifiable few blocks is to plunge into the flow of not only the Big Apple’s history, but of global culture itself.

Transportation first gave structure and purpose to the area — and is still one of the underlying factors in its vitality. In the late 19th century the area was known as Long Acre Square, named after the carriage district in London, since that was its function in New York City as well. Home to the American Horse Exchange, it was a far cry from what it is today — serving as an open area for the horses that were so important to city’s transportation infrastructure at the time.

But the coming of electricity — and the Interborough Rapid Transit Company (IRT), the predecessor to today’s subway system — changed the economics of the locale rapidly. The city’s need for horses lessened and, relatively suddenly, there was open land ready for development that was now also easily accessible to the city’s population that, at the time, was concentrated “downtown.”

This would not be the last time that the economic facts of the area would alter quickly — and set it off on a new and dynamic course.

The area around 42nd Street at the juncture of Broadway and Seventh Avenue quickly became a boom area. This included The New York Times building its new headquarters between 42nd and 43rd streets in 1905 —becoming the second tallest building in the city at that time. Soon thereafter Long Acre Square, by a declaration of then Mayor George B. McClellan, became Times Square. The owner of the Times, Adolph S. Ochs, decided to celebrate his achievement by throwing a New Year’s Eve party. A tradition was born.

Although the Times outgrew its new digs within a decade, having located a major media player in the area had set loose a trend. By the outbreak of World War I, only 25 years after the area was basically used for large-scale horse storage, the majority of the city’s legitimate theaters had relocated there from downtown. Naturally, restaurants and hotels —including already established ones like the Astor and the Knickerbocker — accompanied this “uptown” development.

This intensifying development required infrastructure expansion — which resulted in the area also becoming a transport hub as the city grew “uptown.” The fact that today’s 42nd Street subway is the busiest in the city is rooted in this era, when it became a major nexus of both north/south and east/west transport in Manhattan.

Crucial not only to modern transportation, electrification also allowed for the development of sophisticated, outdoor advertising, using thousands of light bulbs on signage overlooking the square. Today’s LED behemoths are founded on the premise of the electrical signage that came to be during the Roaring 20s.

But economic facts-on-the-ground once again turned on a dime. The Great Depression hit the area hard and the “legitimate” theater took a profound blow. The 1930s saw Times Square become synonymous with “red light” entertainment, as burlesque and peep shows moved into vacant holdings in the area, along with dance halls and penny arcades. This was the state of things for decades thereafter, intensifying in the 1970s as changes in obscenity laws and the economics of the pornography industry — not to mention the drug trade and prostitution — hardened Times Square’s place in the “sleaze business” (an era explored in HBO’s The Deuce).

Finally, in 1981 Mayor Ed Koch unveiled the 42nd Street Development Project, another in a string of efforts to alter the area’s economics and, thus, street-level culture. Culminating in the nonprofit The New 42nd Street that was established jointly by the State on New York and New York City in 1990, the plan used eminent domain and a number of other tools — while facing a myriad of lawsuits — that slowly altered the tenor of Times Square. A major step was Disney’s bringing its first Broadway show, The Lion King, to the New Amsterdam Theater in 1993. This was one of the initial steps in the merging of the entertainment, real estate, and retail sectors that have come to dominate Times Square today.

The Players

The three principals in this mega-development — along with Palace Theatre owner the Nederlander Organization — bring together the global reach of Fortress Investment, the New York City real estate expertise of the L&L Holding Company, and the infrastructure and construction of knowledge Maefield Development.

Fortress Investment Group

An investment management company with a rich history of innovation, Fortress is now part of the SoftBank Group — one of the world’s most valuable and important conglomerates. SoftBank’s extensive holdings in telecommunications, robotics, and tech investment make Fortress’s role in one of the world’s most high-profile tech and entertainment bazaars a natural fit.

Based in New York since its founding in 1998, Fortress Investment Group has long specialized in complicated real estate purchase and development transactions. The evaluation, and later management of, physical assets has been a constant aspect of Fortress’s portfolio, which is one replete with sophisticated investments in challenging and unusual circumstances. Mergers and acquisitions have been an area of expertise as well during Fortress’s run, though the TSX Broadway might be its most high-profile plunge into real estate development (which is natural, given that there isn’t much real estate in the world more high profile that Times Square).

The current principals at Fortress Investment Group are Randal Nardone and Wes Edens (New York) and Peter Briger (San Francisco).

L&L Holding Company

Having developed over 9 million square feet of commercial property in New York since its founding in 2000, L&L is a private real estate company with a staff of over 250. The company brings stellar expertise in, and understanding of, the Big Apple real estate market.

Founded by David Levinson and Robert Lapidus, the company has built its reputation with strong partnerships and an ability to “reimagine” existing buildings. Its vertical integration strategy enables L&L to encapsulate acquisition, development, and leasing in its deals, making it a perfect fit for a project as complex as TSX Broadway. From managing a major construction project in one of the world’s busiest places (including literally raising a historic landmark theatre into position 30 feet above where its currently located) to leasing prime commercial space to some of the world’s largest corporations, TSX Broadway is sure to bring out L&L’s best.

Maefield Development

Also a vertically integrated company specializing in real estate development, Maefield’s expertise lies in planning — including site selection, traffic feasibility, design, permitting and approvals — along with construction, building management/operations, and post-occupancy construction. Since its founding in 1991 by Mark Siffin, it has developed over 6 million square feet of retail/office space and the creation of over 4,600 single- and multi-family residential projects.

The company has worked throughout New York, gaining in-depth experience working with city agencies and private construction companies. From retail and housing developments in residential neighborhood to Times Square, there’s not much that Maefield hasn’t seen in New York City.

And TSX Broadway will not be its first “Broadway production.” In 2010 it began acquisitions that resulted — in partnership with the Witkoff Group — in the recently completed of 20 Times Square on the corner of 47th Street at Broadway and Seventh Avenue. Anchored by the Marriott Edition hotel, this 350,000-square-foot project includes over 75,000 square feet of retail, 40,000 square feet of food and entertainment space, and another big addition to the visuals of Times Square with an 18,000-square-foot LED sign.

Tapping Into Trends in Branded Retail

Fortress Investment Group is changing Times Square retail
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One of the underlying business strategies of the TSX Broadway project is embracing the “consumer experience” trend. Instead of a slight variation of the retail experience, one that can be found in every large-scale shopping mall in the world, this new ideal is the creation of retail space that is bold, immersive, unique, and a destination in itself — combining not just retail and advertising, but entertainment as well — and blurring the line between them.

“The future of Times Square will be shaped by its ability to maintain a lasting tradition of innovation and creativity. The area’s existing real estate is not equipped to host global brands with the most innovative technology,” explained L&L’s Levinson as part of the public unveiling of the project. “Through a dramatic intervention, TSX Broadway will replace an aging hotel and sub-par retail with a state-of-the-art, experiential global branding platform in the heart of Times Square, the most visited pedestrian destination on earth.”

The expectation is that TSX Broadway will host not only tourists, theatergoers, and restaurant visitors, but also people attending high-profile product rollouts, album release parties, and e-sports events. In addition, interactive spaces will bring virtual reality (VR) experiences to the forefront of this merging of retail, advertising, and traditional entertainment. Instead of theatre and restaurants drawing people to the retail space, it will in itself be so unusual and intense that it will become a self-fulfilling destination.

This will, in turn, create social media buzz, tapping into the power of high-tech word-of-mouth branding. People will come to the project to experience the latest in tech gear and products, oftentimes share their experience to their own network of friends and followers, and thereby raise the profile of TSX Broadway and its tenants.

“The future of Times Square will be shaped by its ability to maintain a lasting tradition of innovation and creativity. The area’s existing real estate is not equipped to host global brands with the most innovative technology. Through a dramatic intervention, TSX Broadway will replace an aging hotel and sub-par retail with a state-of-the-art, experiential global branding platform in the heart of Times Square, the most visited pedestrian destination on earth.”

This fits in with broad developments that are being recognized by marketers and others who follow consumer trends. As a 2014 white paper by the Liquid Agency —a company specializing in branding with an office in not only New York, but one in Silicon Valley as well —  stresses, “social currency is the new goal.”

What this means is that the future of world-class retail spaces is about going big — and bold — or staying home.

“The experience needs to go beyond simply merging physical and digital platforms. It needs to be integrated at a personal level with the needs, wants, and lifestyle of each individual consumer. Brands and retailers need to strike an emotional and meaningful connection throughout the shopping experience,” the white paper entitled The Future of Retail: Success At Retail Is About Creating Great Experiences; Just Like Dating explains.

“The connection should be so strong, consumers feel compelled to come back for more and share the experience with their community, which, thanks to social media, has grown from what may have been 10 people before, to hundreds and thousands of interconnected friends and influencers throughout the world. To leverage these connections, the smartest brands will find innovative ways to build kinship among shoppers and will start to focus less on actual currency and more on social currency to maximize ROI.”

The TSX Broadway project is a full embrace of this kind of interaction between in-person and virtual experiences, designed to be a place that will be a destination for cutting-edge interconnectivity.

Or, as L&L’s Levinson explained it more succinctly, “I think what happens in that building is going to be shared around the world on iPhones and iPads and streams.”

And this circles back to why Fortress Investment Group would be a player in the project. SoftBank, of which Fortress is now an independent subsidiary, is one of the world’s leading investors in tech, including all aspect of telecommunications, the Internet of Things, and artificial intelligence.

SoftBank’s $100 billion Vision Fund is backed by tech giants like Apple and Qualcomm and seeks to be a driver of new products and services. The kind of innovative, trendsetting products that TSX Broadway will, in part, be a showcase for — along with the traditional hospitality and entertainment aspects of the project — are the same companies that Fortress Investment Group’s new owner is financing around the world.

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