Crains New York - May 14, 2012 - (Page 4)

Pineapple distress: Snafus sully test firm Pearson under fire for errors in exams BY SHANE DIXON KAVANAUGH A British media giant’s publicrelations debacle in New York intensified last week as a top state education official pummeled Pearson PLC over state standardized tests that the company botched. “I think the mistakes that have been revealed are really disturbing,” said Board of Regents Chancellor Merryl Tisch at a Crain’s breakfast, referring to nearly 30 errors in last month’s English and math exams, including a puzzling New York expansion “They’re one of the best comreading passage about a race between a hare and a pineapple. “I panies out there,” said Tim Nollen, would suggest to Pearson that they a senior media analyst at Macquarie Bank. “They’re doing a superb take this really seriously.” Analysts said the snafu will not job at running their operation.” It will soon have a larger footlikely hinder the steady growth of Pearson’s education arm, which print in New York City, which is has gobbled up competitors in re- home to 1,800 Pearson employees. cent years and now dwarfs its lead- The London-based firm aning rival, CTB/McGraw-Hill. Yet nounced last year that it would add the controversy cast a spotlight on 628 jobs in Manhattan, helped by the burgeoning high-stakes test- $13.5 million in city subsidies. The expansion will ining industry and emclude a development boldened critics of team focused on crethe company, whose ating more digital edholdings also inucational materials, a clude Penguin company spokesBooks and the Fiwoman said. nancial Times. Mr. Nollen said “If there were a the bad press surtest for accountabilirounding Pearson’s ty—which there is blunders in New not—Pearson would York was an “aberrahave flunked out long tion” and doesn’t seago,” said Robert riously threaten its Schaeffer, public edgrowth plans here. ucation director for “Financially and FairTest, an advocacy perception-wise, it group opposed to won’t make much of standardized testing. a difference,” he The company, said. “Unless there’s which has lucrative Merryl Tisch, chancellor, some rot we’re not educational assess- New York Board of Regents aware of.” ment contracts with Nevertheless, 18 states, is no Pearson is scramstranger to testing bling to patch things dustups. It paid $7 million in 2002 to settle a class- up. In a memo obtained by NY1 action lawsuit in Minnesota after last week, an executive vice presistate education officials revealed dent at the company told state edthe company had wrongly graded ucation officials: “Pearson agrees 47,000 graduation exams. In 2010, that we need to work diligently to delays in delivering scores for the improve.” The memo added, “We strive Florida Comprehensive Assessment Test—for which it has a $254 for continuous improvement and million contract—cost the compa- pledge to continue to learn and imny $15 million in fines and penal- prove as we work together.” ties. Testing problems for Pearson have also surfaced in Wyoming, Damage control But some damage has been Arkansas, Oklahoma and Virginia. Despite its stumbles, Pearson’s done.The hare-versus-fruit flub in education business—which in- particular has been ridiculed by edcludes everything from publishing ucators and national publications textbooks to running online learn- including The New York Times, The ing courses for colleges—is boom- Washington Post and Time. “In the media capital of the ing. Revenues for its education services in North America topped world,” said Mr. Schaeffer, “a $4.1 billion in 2011, up 56% since pineapple could get the best of 2007, according to the company’s Pearson.” 2011 annual report. While a Pearson spokeswoman declined to say how much of that revenue came from standardized testing, it appears to be growing robustly. In 2010, the company won a five-year, $500 million contract with Texas to create and administer state exams. Last year, Pearson not only landed its five-year, $32 million deal to write and administer New York’s statewide tests, replacing McGraw-Hill, it also inked deals with Kentucky and Arizona. A $550M bet pays off How the Malkins turned the stodgy Empire State into a lucrative green trendsetter BY DANIEL GROSS I n the United States, commercial buildings account for about $108 billion in energy use and 17% of greenhouse-gas emissions each year. In New York City, buildings consume 80% of the energy. And the efficiencies embedded in the existing skyline produce anxiety. ¶ As China sprouts new skyscrapers equipped with the latest gadgets and standards for sustainable living, we’re stuck with the limestone, brick and steel structures that were put up 60, 70 or 100 years ago. Most of the buildings that will be in New York in 2040 have already been built, and most of them are the equivalent of gas-guzzling pickup trucks. ¶ But simply allocating a few billion dollars to a Cash for Clunkers scheme won’t magically transform America’s building fleet from a Hummer into a Prius. It makes much more sense to transform existing buildings than to build energy-efficient ones from scratch. ¶ Focusing on energy efficiency can help reflate and reinvigorate damaged, declining assets. That is exactly what happened at the Empire State Building. Several years ago, the Empire State Building was perhaps the most famous office building that nobody wanted to be in. When it rose in 16 months amid the gloom of 1930-31, the Art Deco spire was an example of entrepreneurial gumption, a blossoming of can-do spirit amid the Great Depression. But the building didn’t keep up with the times. Superseded by the World Trade Center as the tallest building in New York, and by pretty much every postwar building as more modern and desirable, it was hamstrung by small floor plates and narrow windows. A partnership of Harry Helmsley (best remembered for being Leona’s husband) and Malkin Properties, led by the founder Lawrence Wien and his son-in-law Peter Malkin, bought the Empire State Building in 1961. Entangled in long-running litigation, the feuding partners were collecting B-list rents from B-list clients. In August 2006, a settlement left Malkin Properties, now led by Peter Malkin and his son, Anthony Malkin, in control as managing agent and owner. Faced with a choice of selling the trophy asset or fixing it up, the Malkins chose to look inward, embarking on a $550 million effort to spruce up the building and make it a more attractive destination for tourism and business. Malkin Properties restored the Art Deco lobby, reengineered the tourist experience, replaced all the elevator cabs and spruced up the bathrooms and common-area hallways.“We were really bringing the building into the 21st century,” said Anthony Malkin. As with any significant building project, this effort had See EMPIRE on Page 23 ‘The mistakes ... are really disturbing’ EMPIRE STATE OF MIND: Focusing on energy efficiency helped reflate and reinvigorate an aging real estate asset. 4 | Crain’s New York Business | May 14, 2012 photos: buck ennis

Table of Contents for the Digital Edition of Crains New York - May 14, 2012

Crains New York - May 14, 2012
Contents
Brooklyn Brewery taps new leaders
Out-of-town broker hits a local wall
Pearson’s test flubs could cost it dearly
Enrollments are up at summer camps
Real Estate Report: Third Ave. bargains

Crains New York - May 14, 2012