November 21, 2007 / 8:30 PM / in 11 years

Walgreens to return to New York's Times Square

NEW YORK (Reuters) - Walgreens will be spending New Year’s Eve in Times Square starting next year, with the likes of Chevrolet, Yahoo, and News Corp.

The sign at a Walgreens store is seen in Golden, Colorado, June 25, 2007. REUTERS/Rick Wilking

The national drug store chain has signed a 20-year lease to rent out almost all the interior of One Times Square, the skinny tower that holds up some of the world’s most photographed and televised eye-popping billboards that light up the night.

“It really is one of the most visible branding locations in the country,” said Jeffrey Katz, president and chief executive of Sherwood Equities Inc., a minority owner that manages the building. “It’s the epicenter of Times Square. It’s where the ball drops every New Year’s Eve.”

The base of the building has been without a permanent occupant since 2001, when Time Warner Inc, then AOL Time Warner, closed down its U.S.-based Warner Bros. Studio Stores. In 2003 it served as the set for the campaign headquarters in the remake of the film “The Manchurian Candidate.”

Its landlords, Sherwood and German investment firm Jamestown Properties, could afford to take their time finding the right tenant because the media company’s lease extended until 2009.

Six years, three brokers, and two almost-deals later, the space has a tenant.

“We wanted someone who would activate the base of the building and take advantage of the branding opportunity,” Jeffrey Ackemann, Jamestown managing director, said. “We knew it would take a long time to find the perfect tenant, and we feel like we did.”

The value of the building is not in the occupancy. In fact, the $20 million-plus rent from its 19 signs dwarfs Walgreens’ rent for the inside.

The blaring signs and the “zipper” — the electronic strip that broadcasts headlines from the Wall Street Journal — make the building a tourist favorite for vacation snapshots.

“The more important aspect is the branding opportunities because they get the terrific sign opportunities on Broadway and Seventh (Avenue) and along the top of the building to really get your brand out for all the reasons that Budweiser is there, that GM is there, that Yahoo and News Corporation are there,” Ackemann said.

The new Walgreens will occupy the first three floors, Katz said. Walgreen Co declined to comment beyond saying the store will occupy 27,287 square feet and should open either in the spring or summer of 2008.

Eventually, Walgreen signs will broadcast its specials as well as its own brand on the building’s east and west sides.

“They have a whole graphics package that has been very artfully done,” Katz said. “They have designed a very, very strong solution to brand Walgreens on the building.”

For Walgreens, the Times Square location is more of a return engagement than a first appearance. The company opened its first East Coast store in 1927 in the Paramount Theater building in Times Square, which became a hangout for Broadway actors. It left Manhattan in the 1970s. Since then, Duane Reade Holdings Inc has become the dominant drug store operator in midtown Manhattan.

Jamestown bought the building in 1997 for $110 million from Lehman Brothers Holdings Inc, which had snapped it up for $27.5 million two years earlier during a New York real estate market slump.

The first rooftop celebration at One Times Square occurred in 1904, as The New York Times newspaper inaugurated its headquarters and celebrated the area’s renaming from Longacre Square to Times Square with a fireworks display. When the building opened, it was the second-tallest in Manhattan, at 363 feet.

The first lowering of the ball for New Year’s Eve was in 1907.

In 1967, Allied Chemical Co stripped the Gothic-style tower down to the steel and reclad it in a modernistic facade that hides behind the advertising.

Reporting by Ilaina Jonas, editing by Gerald E. McCormick

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