By Paul Rosta
When Brookfield Office Properties Inc. delivers its combined fourth-quarter and full-year financial report for 2011 early this year, the New York City-based REIT will have no shortage of highlights to report. In December, Brookfield led a consortium in the $215 million purchase of Denver’s second-tallest building, the 54-story, 1.4 million-square-foot trophy tower located at 1801 California St. That deal followed one of the nation’s biggest office renewals of the year: a 767,000-square-foot lease with Bank of America/Merrill Lynch at the World Financial Center in Downtown Manhattan.
Yet the most remarkable event of 2011 for Brookfield—as unusual as anything encountered by a U.S. real estate firm in the last few years—will probably not appear on a financial statement. That, of course, was Brookfield’s unsought role last fall as the host of the Occupy Wall Street protests. The demonstrators picked a park managed by the REIT as the site of the occupation because of its proximity to Downtown Manhattan’s financial district. For decades, Brookfield had owned and maintained the park as a public amenity without incident. In a matter of weeks, Occupy Wall Street turned it into the subject of national debate and sparked imitators around the country.
Whether the circumstances of Occupy Wall Street are duplicated in another major city, the degree of the challenges—and Brookfield’s response—raises broader questions for real estate investors, operators and managers. As the owner of a property that became the focus of global attention overnight, Brookfield faced a host of legal, political, ethical and media relations dilemmas. The challenges addressed by Brookfield should strike a responsive chord across the industry. Many executives, if not most, will face a situation that compares with the Zuccotti Park incident in degree of difficulty, if not the specifics. Brookfield’s public conduct during the crisis offers food for thought to executives dealing with difficult, high-profile situations not of their own making.
“The situation in Zuccotti Park was unusual, but when you’re in real estate, you’re constantly faced with unusual situations,” said Stuart Saft, partner & chair of the global real estate practice at the law firm Dewey & Leboeuf L.L.P.
To begin with, the occupation of Zuccotti Park presented Brookfield and New York City officials with hard-to-reconcile imperatives. On one side was the need to practice good corporate citizenship and to respect the protesters’ First Amendment rights, priorities that New York City Mayor Michael Bloomberg made clear early in the occupation.
On the other side of the dilemma, Brook- field also had obligations to keep the park safe, clean and available to the public at large— even though steps taken toward that end risked public misunderstanding and ill will. Evicting a group of protesters that had gained public sympathy and favorable media attention had little obvious upside. Throughout the occupation, the company also had to carry on the regular business of a large, publicly traded real estate investor and operator while dealing with a politically sensitive issue.
Dealt this unattractive hand, Brookfield could only make the best of a situation that offered little upside. Brookfield itself has so far refrained from talking publicly about its strategy, and could not be reached to comment for this article. But all evidence suggests so far that the REIT managed the occupation of Zuccotti Park with model patience and restraint.
“I think they handled it as well as anybody could have,” said Jahn Brodwin, managing director with the advisory firm FTI Schonbraun Mc- Cann. “I think what they did was they allowed the fire to burn itself out, with a little nudging.”
One challenge for Brookfield during the occupation stemmed from Zuccotti Park’s dual identity. Under a zoning variance common in New York City, Brookfield, like other Manhattan developers, provided privately owned open space to the public in exchange for permission to add height to its development projects. Toward that end, Brookfield established Liberty Park—renamed in 2005 for John Zuccotti, the firm’s co-chairman and a former city official. The public side of that public-private equation places considerable restrictions on the owner that became an issue in this case. For instance, zoning regulations limited Brookfield’s latitude to evacuate and close the park, even though it owns the space.
A telling incident unfolded 27 days into the occupation. Brookfield announced a cleanup scheduled for 7 a.m. Friday, Oct. 14, that would have required the protesters to leave the park, at least temporarily. Prior to the announced action, the company informed protesters that they would not be allowed to bring back items that aid overnight stays, like tents, tarps and sleeping bags.
A confrontation between police and protesters seemed imminent. On the eve of the planned cleanup, however, Brookfield announced that it was putting the action on hold. Its stated reasons for the change emerged the following morning in a statement by Cas Halloway, the city’s deputy mayor. “Brookfield believes they can work out an arrangement with the protesters that ensures the park remains clean, safe (and) available for public use, and that the situation is respectful of residents and businesses downtown,” Halloway said, “and we will continue to monitor the situation.”
Occupy Wall Street seized on the postponement as a victory; there are suggestions that complexities behind the scenes had mounted for Brookfield and the city. Bloomberg himself dropped a strong hint. “My understanding is that Brookfield got lots of calls from many elected officials threatening them,” the mayor said during his weekly radio program on WOR-AM.
That pause only delayed a final reckoning, however. Brookfield and city officials were increasingly concerned that the round-the-clock
habitation of the park posed unacceptable risks to public health and safety, as well as effectively preventing its use by others. The legal basis for removing the demonstrators was confirmed by judicial rulings: According to established case law, constitutional guarantees of free speech and free assembly do not imply an unlimited right to occupy a public space indefinitely.
Outreach & Communication
As the police cleared the park after midnight on Nov. 15, Brookfield communicated enhanced safety and security measures to tenants at One Liberty Place. In an email obtained by the Village Voice, Brookfield named preferred building entrances in case the operation interrupted access at other points. The memo added that management would keep tenants informed by email and the building’s public address system, and promised to alert police to suspicious activity.
Though Occupy Wall Street’s supporters roundly criticized the removal of the encampment, police accomplished the action with a minimum of the violence that had marred similar operations. In a brief statement issued later that morning, Brookfield thanked Bloom- berg and participating city agencies. Given the “dangerous, unhealthy and unsafe” conditions at the park, the REIT explained, “it would have been irresponsible not to request that the city take action.”
Moreover, Brookfield continued, “we have a legal obligation to the city and to this neighborhood to keep the park accessible to all who wish to enjoy it, which had become impossible.” As demonstrators regroup for the next few months, winter weather will probably put a temporary chill on the nationwide protests sparked by the Zuccotti Park occupation.
Yet veteran industry advisors warn against complacency. Brookfield’s experience, they say, sends an urgent message. “Come the spring, we’re going to see more of this,” Saft predicted. In the meantime, he said, take the opportunity to get ready. Waiting until a surprise incident occurs, and then being forced to improvise, is a poor substitute for a strategy to address the unexpected: “It’s really something to plan (for) way in advance,” he said.