New York City office
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April 2009

April 2009 » Market Analysis » NY New Developments

April 2009 New York New Developments

New Developments

New York City Department of Parks & Recreation officials showed its plans for parks around the new Yankee Stadium, which was built on land within the footprint of two parks that residents want replaced. The parks department plans to a park with a track and athletic field, plus two stories of parking, in the area. The department will also build tennis courts and parkland. The old Yankee Stadium will become Heritage Field Park by spring 2011.

Stellar Management's president is in negotiations to settle a lawsuit against Landesbank Baden, Deutsche Hypo and State Street Bank after they allegedly cut off funding for his 178,000-square-foot office tower renovation at 1140 Avenue of the Americas. The filed suit alleges that the three banks stopped funding a renovation project of the office tower, which included tenant build-outs, construction of a new glass curtain wall and other upgrades.

The New School's plan to build a $400 million, 350-foot tall building on Fifth Avenue, between 13th and 14th streets, has been cancelled. Only about $75 million in funds was raised for the project. The school is holding off on the project because of the economy, and as of the moment, there is no design for a new building.

Donald Trump's tennis club on top of Grand Central Terminal is set to close. Trump held the lease with Metro North for 30 years, paying $4 per square foot for the space. The average rent in the landmark terminal for restaurants and other retail shops is $99 per square foot. The facility will be replaced with a rest area for 1,100 conductors and train engineers, with bunk beds, showers, lockers and a lounge.

Bank of America produced $45 billion in mortgages in the fourth quarter of 2008.

Forest City Ratner is conducting a study to assess costs, risks and timing for work at its Beekman Tower in the Financial District. The developer has received a building permit that allows the top of the current structure, 38 stories, to be the building's roof.

The Port Authority of New York and New Jersey ended talks with the St. Nicholas Greek Orthodox Church, which was destroyed on Sept. 11, 2001. St. Nicholas is free to rebuild the church on its own parcel, at 155 Cedar Street, and will use eminent domain to get control of the land beneath the parcel so it can move ahead with building foundation walls and a bomb-screening center for vehicles entering the area.

The building at 1045 Avenue of the Americas is planned to be demolished. No decision has yet been made about what to build next to the 14,101-square-foot tract of land. The area's zoning permits a larger building than the current eight-story tower.

This summer, the New York City real estate market was buoyed by purchases from international buyers. That changed once the dollar surged and many overseas economies began struggling in the world financial crisis, but one group may still be showing some interest: the Chinese.

Two Virgin Megastores will close in Manhattan. Although the Virgin store at 1540 Broadway in Times Square generated millions and millions in profit, the sister store in Union Square had sales of only $40 million, earning only few million dollars in profit. The owner has decided to close those stores and look for retailers who will pay higher rents.

General Growth Properties said that its lenders are giving them until the end of the year to repair its finances, waiving default on a $2.6 billion credit agreement. The company has asked the holders of $2.3 billion worth of bonds not to call in payments until the end of 2009 to give them time to refinance, but so far not enough bond holders have agreed. The company saw $395 million in bonds come due, and another $200 million coming due April 30th.

The city's real estate brokerage houses have mounted their efforts to harness the woes of New York's commercial real estate market by creating and expanding distressed debt teams. The aim of these teams is to manage and sell both distressed properties and loans.

Sheldon Solow may owe the Fisher Brothers, with whom he had partnered to redevelop a 9.2-acre area south of the United Nations.,. The Fishers filed a lawsuit claiming that Solow breached his contract to purchase the Fishers' stake in the East River Realty Company for $111 million. Solow was to gain full control of the company by buying Fishers' stake, who agreed to buy the stake for more than $227 million.

The Metropolitan Life Insurance Company took a $38 million charge on vacant Manhattan and Queen’s office space it controls through long-term leases. The Manhattan-based insurance giant cited the poor economy, which made it difficult to sublease 100,000 square feet of unused space at 1095 Avenue of the Americas and 180,000 square feet at 27-01 Bridge Plaza North in Long Island City.

Restaurateur Simon Oren's Tour de France Group signed a lease for 15,000 square feet at 450 West 33rd Street, at 10th Avenue. Oren plans to open a two-level bistro, bakery and bar, which includes tenants like the Daily News and Associated Press. The restaurant is expected to open in six months with 130 feet of avenue frontage.

Winick Realty filed suit against the owners of Chelsea Center, a landmark commercial building at 620 Sixth Avenue, alleging the investors, led by the Chetrit Group, failed to pay more than $806,000 in commissions for the retail space.

The Bloomberg administration hopes to increase the number of supermarkets in the city, particularly in poorer neighborhoods. Three million New Yorkers live in neighborhoods without enough grocery stores, and that bringing more stores in will improve both city dwellers' health and the job market. The Department of City Planning hopes to launch a plan, which will involve lighter zoning rules and land-use and tax incentives for new supermarkets, within the next several months.

The city's leading real estate trade association criticized the Bloomberg administration's proposed waterfront rezoning plan. It potentially shrinks the building's footprint and provides confusing rules for designing areas such as public seating and tree placement.

The Yankees, Mets and Dallas Cowboys are opening three of the most expensive stadiums ever built this year with premium-priced seats and luxury amenities, just as big corporations are trying to cut costs during the recession. The Yankees have hundreds of premium seats still unsold, and a buyer has backed out of buying a Mets luxury suite.

Manhattan companies that provide temporary office space are going head- to- head with firms looking for tenants to sublease conventional space, and are lowering rents to beat out the competition. Unlike offices on the direct market, which require a 10-year lease, offices that can be subleased are often smaller, may come fully furnished and offer shorter and more flexible terms, similar to what temporary offices provide.

Wal-Mart's real estate scouts have been looking near 620 Sixth Avenue at 18th Street. The company currently has no stores in New York City.

Developer Harry Macklowe must pay his former top deputy $3.4 million plus interest from the sale of three buildings.

Governor David Paterson's administration is launching new green building requirements to reduce real estate development's carbon footprint in New York. The state Department of Environmental Conservation is moving to require developers planning large-scale developments to account for impacts on climate change, and the policies would have developers estimate the level of greenhouse gases their developments would create. They hope to institute the new policies soon.

Donald Trump and Deutsche Bank Trust Company Americas have signed an agreement suspending litigation on the Trump International Hotel & Tower Chicago. The bank and Trump have been going head- to- head for months in lawsuits over the building's finances. Closings and move-ins have already begun at the building.

Mortimer Zuckerman's Boston Properties will pay off some of the debt coming due next year on three of its Manhattan buildings. Boston Properties, along with Goldman Sachs Group and Meraas Capital, bought the General Motors building, 2 Grand Central Tower, 125 West 55th Street and 540 Madison Avenue for $3.95 billion. Next year, $272.2 million worth of debt on the latter three buildings is to come due.

Mattress retailer Sleepy's is trying to cut its rent obligations by 25 percent. David Acker, president of the bedding chain, sent letters to its 700-plus landlords around the country asking for rent reductions to prevent the store from closing its doors. The retailer has 40 stores in the city.

Senator Charles Schumer has called for $100 million in federal stimulus money to convert the James A. Farley Post Office into an annex to Penn Station, expanding the city's transportation infrastructure and employing more workers. The developers for the project, Stephen Ross, CEO and founder of the Related Companies, and Steven Roth, CEO of Vornado Realty Trust, were chosen nearly four years ago, but the project has stalled due to lack of financing and other problems. Schumer also asked the Port Authority of New York and New Jersey to invest $1 billion in the project. The project could involve relocating New Jersey Transit, the Long Island Rail Road or Amtrak out of Penn Station and into the Farley building.

A dozen Manhattan properties near Penn Station could be seized through eminent domain in order to build a train between New Jersey and Manhattan. The $8.75 billion plan would create a new six-rail station 14 stories below 34th Street that would connect with Penn Station. A dozen properties are needed on 33rd and 34th streets, between Sixth and Eighth avenues, to make way for the new tunnel and to create five more street entrances and sidewalk space. Chris Ward, executive director of the Port Authority, said the agency is hoping to work with the businesses to relocate them.

Foreclosure Proceedings and cancelled projects

There are more than 19,600 distressed office buildings, 40 percent leased or less, available in 50 of the country's largest office space markets, but few building sales are taking place. The number of distressed office properties has grown 8.6 percent in the past year. Distressed sales are still slow because of tightened credit, lenders' and investors' unwillingness to take risks, and the continued difference between asking and selling prices.

Moinian Group and Westbrook purchased 475 Fifth Avenue for $162 million and planned to redevelop it but could not find new tenants. Westbrook Partners is in negotiations with Barclays Capital to return 475 Fifth Avenue, between 40th and 41st streets, after defaulting on loans.

The owner of a vacant lot facing Bryant Park for which a 32-story hotel is planned could lose the site it bought for $45 million, if its lender is victorious in a foreclosure lawsuit. The developer has defaulted on its loan.

Harry Macklowe’s personal cash investment in the Drake Hotel development site has grown to $250 million, including millions of dollars Deutsche Bank made him pay to retire the mezzanine debt on the property. Macklowe bought the now-demolished hotel at the corner of Park Avenue and 56th Street in a highly leveraged deal for $418 million, with an additional $190 million of his own equity. Macklowe has sought to block the foreclosure sale which could wipe out his $250 million equity position.

Real estate investor John Zaccaro, husband of vice presidential candidate Geraldine Ferraro, and their son are battling partners in a Soho mixed-use development that is in danger of having its $29.8 million mortgage foreclosed on.
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