It's faster than a speeding bullet. Not Superman. It's the rapid exchange of information made possible by sophisticated telecommunication technologies and everybody wants it: NOW!

Office workers, industrial workers, retail workers and apartment dwellers want access to the wide array of telecommunication services available in the marketplace and real estate owners are working diligently and creatively to meet their tenant's demands. Some firms are staffing up, some are hiring consultants and others are forming strategic telecom alliances. Whichever direction they're going in, it's clear their tenants are reaping the rewards of the managed telecom services made available to them by real estate owners.

Open Access

"We have taken an aggressive open access position," said Rich Greninger, managing director, operations, CarrAmerica, Washington, D.C. "We're driven to that policy because our customers tell us, through surveys, advisory groups and direct dialogue, they want choice and they want choice as it relates to telecom service."

By mid-February, CarrAmerica had secured about 350 license agreements with 25 telecom companies that enabled it to offer multiple telecommunications choices to its tenant customers in 86 percent of its 320-plus properties across the country. As CarrAmerica brings on new providers, it does so in a carefully, thought out and well managed way.

"We feel we provide positive service to our customers and we are doing it in an organized environment," said Greninger.

For example, the firm was approached by several telecom providers that wanted access to a property that only had 1,200 sq. ft. available for telecom equipment. One large provider asked for 500 sq. ft. of that space. Instead of losing nearly half of the space available to one provider, CarrAmerica was able to engineer their equipment so it took up only 200 sq. ft., leaving plenty of space for others.

"We had eight or nine companies, some by tenant request, that expressed an interest in coming into our building. Through a rationalized access agreement we were able to provide access to all of them," he said.

"We're always trying to stay a step ahead of our tenants' needs. We think what we have to offer is a true amenity to the buildings."

Not only does CarrAmerica manage their telecommunications installations for space constraints, they manage installations to secure tenant networks by separating some providers in caged areas.

"Where we don't have that capability, we lock the equipment in community rooms where they must follow a strict sign-in and sign- out procedure so we know who's been in there," said Grenninger.

Recognizing the confusion that can be created from the multitude of providers and services available in the marketplace, CarrAmerica brought in a telecom expert. Barry Krell, vice president, telecommunications, is charged with educating the engineers and property managers on the national CarrAmerica staff.

"I teach them basic telecom so that when prospective tenants ask questions, they're not in the dark. They need to understand what our agreements say, who we're doing business with, and how it all works," he said.

CarrAmerica, like seven other publicly traded real estate companies, has taken an equity position in telecommunications start-up Broadband Office Inc. (see Portfolio, "Broadening the Band," Jan/Feb 2000). They will also participate in the revenue the start-up generates. This new company will be the preferred provider to its tenants and will offer a multitude of services.

"We chose Broadband over 10 other firms that were doing the same thing," said Krell. "With Broadband we were able to get a seat on the board of directors that enables us to influence the level of service to our tenants. We want to make sure our buildings are wired for the future."

Preferred, But Not Exclusive

Also a Broadband participant, DukeWeeks is focused on small to medium sized-business tenants that don't typically have the resources to devote to telecommunications issues. Broadband, with its goal to become the dominant provider to those types of business, will meet their needs, according to David Meisenhelder, vice president asset services. Participation in Broadband also ensures that buildings in smaller, less desirable markets will also be served.

"Broadband Office is going to provide a very reliable state-of-the-art system with a full customer support center open 24 hours a day, seven days a week, 365 days a year," he said. It will offer Internet access, advanced computer services, private networking, web sites, application hosting, application services and advanced data services."

"Each market will have local technicians and sales people to service clients and that is important. Larger companies have staffs that can handle all that and provide the expertise and resources to make decisions," said Meisenhelder.

While Broadband is the preferred provider to DukeWeeks, Indianapolis, IN, the REIT has not signed an exclusive agreement. Other providers are contracted at the property sites. "Broadband is not the only provider in our office buildings. We have agreements with other telecommunications providers. Tenant choice is what is driving that."

Providing services to telecom end-users is just one side of the telecom issue. These providers need facilities to operate from and their unique needs must also be met, as DukeWeeks has learned. "They have their own special requirements for installation," said Meisenhelder, adding, "The telecom industry is a voracious user of space in today's office and industrial environment."

The REIT has leased space to telecommunications provider, Nextlink. As a landlord, DukeWeeks must meet the specific needs of their high-tech client. "We provided Nextlink with dual feeds into the building so they would have diverse and redundant capabilities into the facility, a build out for their switch area, and a motor generator set for emergency backup power so they have almost no risk in terms of system shutdown," he said.

Strategic Opportunities

While the industry meets the needs of telecom providers, it is the demands of end-users like office and apartment tenants that must be addressed in a competitive marketplace.

"Our strategy is to deliver more service to our customer," said Michael Sheinkop, Equity Office Property, Chicago, IL, owners of 291 property assets equaling 77 million sq. ft. "Nobody is inclined to take one solution from any provider. We've actually dedicated a team at Equity Office that focuses on strategic opportunities because there is so much going on. Our customers will benefit, our employees know how important it is and investors will benefit."

Once agreements are made with providers, in-house staff oversee equipment setup to ensure safety, efficiency and effectiveness for tenants. A sales support team meets with the telecommunications providers sales team to discuss the approach that will be used to sell services to Equity Office tenants.

"One of the things we clearly want to do is add a little discipline to the process," said Sheinkop. "Tenants are demanding telecommunications services and they're willing to pay for it. The number one requested service is help with high speed connection." Equity Office staff has spent hours researching tenant needs and talking with telecommunications providers like MCI, AT&T, Winstar, and Teligent, building relationships with each, and ultimately reaching service agreements.

"We ended up with a program that can't be exclusive, can't discriminate," he said. "Our core partners are providing high speed connectivity, big bandwidth, wide area networks services, LAN, video conference services, voice conference services. We have selected very good partners who are very well thought of and have many great things working. We have a lot of good feelings about these companies."

The REIT has formed strategic alliances with ARC (77 million sq. ft. wired), Broadband Office (55 million sq. ft. wired), OnSite Access (22 million sq. ft. wired). In the third quarter, the REIT had over 30 million square feet of its portfolio wired with plans to complete the entire portfolio by years end with at least one provider.

Tenants' Needs Drive the Market

Reckson Associates Realty Corporation, Melville, NY, formed a non-exclusive alliance with OnSite Access, a provider of both voice and data services, which will be wiring its entire office portfolio of 78 buildings that house 1,500 tenants. The REIT will get a percentage base of the revenues. Rates to tenants are expected to be lower than some of the larger service providers.

"Our standards of excellence are extremely high and we wouldn't get involved with anyone unless they met our own standards," said Mitchell Rechler, co-chief operating officer and executive vice president. "We're always trying to stay a step ahead of our tenants' needs. We think what we have to offer is a true amenity to the buildings."

To assist tenants with their telecom needs, Reckson has staffed its buildings with communications managers. "We created this new position to work with the clients. We now have four covering Long Island, Manhattan, and Westchester NY, Connecticut and New Jersey properties. Tenants are responding very well."

Although real estate companies like Boston Properties Inc., Boston, MA, and Cornerstone Properties Inc., New York, NY, have elected to partner with telecommunications start-ups like Cypress Communications Inc., Atlanta, GA, some companies prefer to let others do their negotiating. Brandywine REIT, Newtown Square, PA, selected U.S.RealTel as their telecommunications agent and negotiator. While still insuring their tenants needs are met, the REIT doesn't have the added cost of staffing up with telecom experts.

"Their role is to market our space to all the telecommunications companies out there," said Barbara Yamarick, vice president of tenant services and property management. "Our purpose is that we want to bring high speed Internet access as well as competitive local and long distance service to all of our tenants."

U.S. RealTel maintains a master lease on Brandywine property rooftops and riser space. They then go out and negotiate with providers and once they have made an agreement final approval comes from Yamarick.

"This way, we just write an amendment on the master lease," she said. "They do the engineering and radio frequency surveys and I approve all the business terms. Our goal is to have this service in all of our buildings. We have a suburban portfolio, so it's a little harder to get fiber optics. We have to get a little more creative on how we supply those services to our tenants."

The REIT has 272 buildings, and 1,400 tenants in five states in the mid-Atlantic region. Since some buildings are more attractive than others, the REIT is attempting to bundle services so telecommunications providers have to take some of the less attractive properties with those that are highly profitable so their tenant's needs are met.

"We have over 100 deals either signed or pending right now," said Yamarick. "We found a solution that met our needs."

"We handle all the access issues, payment of rent, when and how they get into the building, what the installation looks like, and how they can market themselves," said Bud Blinick, senior vice president, U.S. RealTel, Chicago, IL. "The best part is they have the final say so. They're not being forced."

With two agreements in place and a portfolio wired with fiber-optic cable, Washington Real Estate Investment Trust executives continue to poll tenants on their telecommunications needs.

"This technology world is changing faster than we can possibly keep up with it," said Larry Finger, senior vice president and chief financial officer of the Rockville, MD, REIT. "We certainly don't think that since we've signed two agreements, we're set. We are conducting a study to find what other services might be appropriate over the next two and three years."