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August 2010

August 2010 » Market Analysis » NY New Developments

August 2010 New York New Developments

New Developments

Community Board 7 voted to disapprove Extell's plans for an eight-acre Riverside Center project, unless the developer agrees to build according to some modifications. The plan for the new development that would span 59th to 61st street and West End Avenue to the edge of the West Side Highway includes five skyscrapers, at least 2,500 apartments, 210,000 square feet of retail, a hotel, a movie theater, an underground automobile service center, a new K-8 school and three acres of open space.

The Alex is facing an $81.7 million foreclosure suit after Anglo Irish Bank sold the note on the property earlier this month. Manhattan-based Atlas Capital Group filed suit for a judgment on the property after buying the defaulted note. The suit alleges that Alexico failed to make payments on the loan since March 2009, resulting in a default on $74.9 million in loans. The loan on the 205-room luxury hotel, at 205 East 45th Street, was one of three notes on Alexico properties up for sale since early June. There is no indication as to what happened with the other two notes, at the Mark Hotel at 25 East 77th Street or the Flatotel at 135 West 52nd Street.

Moynihan Station sits adjacent to Penn Station received approval from the state's Public Authorities Control Board. The PACB, which blocked a slightly different version of the project in 2006, has now okayed $267 million worth of infrastructure construction, including expanding the concourse and doing ventilation work. The money is to come largely from federal earmarks.

Banco Popular filed a lawsuit to foreclose on the WA Condominiums in Harlem, after the developers allegedly defaulted on $13.2 million in loans. The developers borrowed $11.1 million in 2006 to build the 35-unit boutique condo, one of the high-end developments in Harlem built during the boom, at 2201 Adam Clayton Powell Boulevard at 130th Street. The developers also took out a $2 million project loan and a $2.6 million acquisition loan from MTM Realty, the latter which was later assigned to Puerto Rico-based Banco Popular. In October 2009, Galaxy General Contracting, based in the Bronx, filed suit in state Supreme Court alleging it was terminated as a contractor from the project and was met with armed guards when it tried to retrieve its equipment from the property. By February, Galaxy General filed suit to foreclose on $2.75 million in unpaid mechanic's liens.

A major hotel real estate investment trust and subsidiary of Lehman Brothers Holdings has filed for bankruptcy protection in New York, after buckling under $1.42 billion in debt. Innkeepers USA Trust currently owns more than 70 hotels across 19 states, many of which ran under widely known brand names like Marriott, Hyatt and Hilton. The Palm Beach, Fla.-based REIT aims to eliminate around $700 million worth of debt through the bankruptcy.

Room occupancy rates continue to increase in New York City to 92 percent, a higher rate than any other city in the country. The growth comes despite a surge of new hotel openings over the past 18 months, which added 37 properties with 6,425 rooms to the city's inventory. The demand, amid a continued economic slump, has come as a surprise to industry watchdogs.

Over the past few years, hoteliers have been landing in Brooklyn in unprecedented numbers, lured in large part by cheaper real estate. Contributing to the trend are budget hotels like the Sheraton Brooklyn, which opened in May, and the Best Western, as well as boutique properties like Boerum Hill's Nu Hotel. Around 40 more hotels are in the pipeline for the borough. But although land is less costly and easier to come by in Brooklyn than in Manhattan, it also comes with risk.

Investment firm Goldman Sachs Group, BRP Development and the city are developing a $45 million affordable housing and retail space at 1560 Fulton Street in Bedford-Stuyvesant, Brooklyn. The new mixed-use, mixed-income project will include 105 apartments for low- and middle-income families. The housing will be built under Mayor Michael Bloomberg's New Housing Marketplace Plan, an $8.4 billion initiative to finance 165,000 units of affordable housing by 2014. To date, the plan has financed the creation or preservation of nearly 108,600 units of affordable housing across the five boroughs.

Bank of New York Mellon is set to snatch up 450,000 square feet at 1 World Trade Center. While the bank has to wait for the Port Authority of New York & New Jersey to finish negotiations with newly announced investment partner the Durst Organization before it can begin formally pursuing the space, insiders say a transition plan is already in the works. If Mellon does move into the 1,776-foot tall tower, it would sell its current headquarters at 1 Wall Street and move some of its workforce to another building it owns at 101 Barclay Street.

A selective Chelsea middle school that's been squeezed out of its current space is officially moving to Union Square come 2015. The New York City School Construction Authority closed to acquire the two-story building at 10 East 15th Street for $39 million from the Teamsters Local 810 union. The agency plans to demolish and replace the existing structure with a new, permanent facility that will house the Clinton School for Writers and Artists and a 550-seat high school. While the spokesperson said it is too early in the design process to estimate the project's costs, the city has tapped PKSB Architects for the job, which is slated for completion by September 2015.

Embattled developer Kent Swig is in danger of losing 80 Broad Street after one of his lenders foreclosed on the property last week, because Swig had defaulted on the $12 million loan. Lane Capital Partners purchased the loan on the 75-year old, 36-story tower in the Financial District. The deal for his company to take over the property still hadn't closed. Last year, Swig lost a major residential real estate project, Sheffield 57, to foreclosure and auction, and earlier this year, he closed his commercial brokerage company, Helmsley Spear.

The Sapir Organization reached an agreement with McLaughlin & Stern, a Manhattan-based law firm, to extend its lease at 260 Madison Avenue until 2021 and add two additional floors for a total of 100,000 square feet of space. Asking rents at the property have ranged from $55 to $60 per square foot. The lease extension adds 36,000 square feet of space to a firm that already leased the top eight floors of the Midtown office building.

The number of mortgage-related firms that closed or failed increased by 27 percent during the first half of 2010 from the first half of the year in 2009. The increase was driven by the failure of financial institutions. Bank and credit union failures doubled when compared to the first half of 2009, while non-bank closings fell by more than two-thirds. However, despite the rise in financial institution closings, the number of bank failures has recently eased.

Prolific hotel developer Sam Chang of the McSam Hotel Group will be opening a Holiday Inn Express in the Financial District. The 26-story, 112-unit hotel will be located at 124-126 Water Street, at the corner of Water Street and Wall Street, in close proximity to the New York Stock Exchange. The hotel is among the first Holiday Inns to open in Lower Manhattan with the brand's new signage, created to give the chain a more contemporary image.

Investor Mendel Mendlowits was able to regain control of his Upper West Side rental complex after he refinanced the property in the middle of a foreclosure suit from iStar Financial. State Supreme Court Judge issued an order discharging Peter Weiss of Manhattan-based property management firm Walter & Samuels, as court-appointed receiver and transferring the 134-unit tenement complex, at 201 West 92nd Street and 200 West 93rd Street, back to Mendlowits.

Construction is starting at World Trade Center Tower 3, one of four planned skyscrapers in a spiral structure to be built by Silverstein Properties at the World Trade Center site. We now have the entire WTC site under development, with 7.5 million square feet of space from Towers 2, 3 and 4. First up in what is expected to be a four-year project at Tower 3 is the mobilization stage, a precursor to the excavation period, when the foundation contractor, the Laquila Group, will start drilling through the rock to create the tower's footing.

As threatened, Toll Brothers has walked away from its $5.75 million down payment on the Gowanus Canal site of a would-be 477-unit mixed-income housing development, because of the waterway's recent designation as a Superfund site. Toll Brothers had been in contract to purchase three parcels on the banks of the Gowanus for $20.6 million since 2004, but fought hard against the federal government's Superfund designation.

Construction will begin on the Times Square Pedestrian Plaza. The design was based on NASA infrared satellite data of Manhattan. It suggests a river flowing through the center of Times Square and will be reconstructed starting in 2012.

The Durst Organization has won the bidding for a stake in One World Trade Center, beating out Stephen Ross and his Related Companies for the chance to invest in the planned 1,776-foot-tall tower. The board of the Port Authority of New York & New Jersey, which is building the tower, came to the decision, pending a 30-day negotiation period during which a contract will be drafted. Durst, which is expected to invest about $100 million in the project, was once a staunch critic of the tower, having publicly chided it.

Coney Island's Luna Park closed on a $47 million bank loan. The five-tower, 1,576-unit cooperative had been threatening to drop out of a state housing program for middle-income residents and to convert to market-rate apartments. Instead a deal marked the last piece of an aid package that also includes commitments for $21 million in government grants and loans for the complex that will eventually be forgiven. As part of the funding package, Luna Park agreed to remain in the state's Mitchell-Lama program for at least another 20 years, with incentives to remain an additional 10 years.

Deutsche Bank is in the process of acquiring one of the former AIG headquarters buildings from Youngwoo & Associates and its Korean banking partners, Kumho Investment Bank. The deal involves breaking down the walls that separate four to five floors between 72 Wall Street and 60 Wall Street, the bank's adjacent leased building. The plan also calls for leveling out and extending the bank's trading floors into the two buildings. .

Unsold listings in the Urban Glass House, the 330 Spring Street condo that was architect Philip Johnson's final work, may be attributed to the city's plans to build a garage for the Department of Sanitation across the street. Nearly a third of the building's 40 units were bought within weeks of its 2005 debut, but not one apartment has been resold in five years. Six have been on the market for months and four have been marked down, by 17 percent from 6 percent. Most are asking about the same or below their original selling price.

While local officials began publicly debating a new use for the post-demolition Deutsche Bank tower site, another battle over the one-time office building at 130 Liberty Street has been unfolding. After the company in charge of the tower's demolition filed a complaint in court claiming that the city had stiffed it out of $80 million for work at the site, the Lower Manhattan Development Corporation is firing back. The group filed a court document criticizing Bovis for having the gall to request more money after the repeated delays on the project.

While 'Great Recession' has been painful, other real estate downturns have hit New York City much harder. Economists have determined that this recession, nationally, was the longest and deepest since the Great Depression. So it was only logical to expect that Manhattan, the epicenter of this financial crisis, would ultimately bear its worst brunt. So far, that hasn't happened. Job losses and declines in housing values have been less severe than predicted, and most observers believe the recession to be officially over, with economic indicators across the board showing signs of a recovery.

Midtown office building owner Olmstead Properties is suing hotel real estate investment trust Hersha Hospitality Trust and others for $10 million in the latest chapter in a four-year dispute at the site of a stalled hotel project four blocks north of Penn Station. In the lawsuit, Olmstead claims a demolition company hired by Hersha damaged Olmstead's 24-story headquarters building at 575 Eighth Avenue at 38th Street, as the contractor began to tear down an adjacent structure to make way for a hotel project that remains un-built. Olmstead is seeking $5 million for actual damages it claims to have suffered and $5 million in punitive damages.

The 265,000-square-foot retail condominium that houses Barney's flagship store at 660 Madison Avenue has been refinanced for $100 million in one of the largest New York City commercial mortgage-backed security deals since the downturn. Landlord Flagship Partners, which owns the 13-story building's first nine floors, took out a 10-year fixed-rate loan. That loan will be part of a U.S. conduit offering, to be priced later and securitized by Goldman Sachs and Starwood Capital.

General Growth Properties, owner of the South Street Seaport in Lower Manhattan, will file its Chapter 11 reorganization plan on or around July 9. General Growth asked for one extension until October 2010 to file the plan and another extension until December 2010 to solicit acceptances of any plan. The extra time would allow them to explore all financing options. The company, which also owns about 200 shopping malls nationwide, filed for Chapter 11, the biggest real estate bankruptcy case in U.S. history.

U.S. commercial real estate prices rose 3.6 percent in May, the second straight monthly increase after a 1.7 percent rise in April. In May there were 107 re-sales, down slightly from 114 in April. By dollar volume, the amount of repeat sales almost doubled, to over $1.5 billion in May from less than $800 million in April. Nationwide, as of the end of May, prices were 38.9 percent below their October 2007 peak and had rebounded 8.6 percent from their October 2009 low

A planned cultural center at Hudson Yards has won a $100,000 grant from the National Endowment for the Arts, planting a spotlight on an as-yet little-known project underway as part of the redevelopment of the 26-acre rail yards site on Manhattan's West Side. The building, slated for a 22,000-square-foot footprint on 30th Street between 11th and 12th avenues, would include a five-story museum and rental exhibition space called Culture Shed.

Shelling out $2.9 billion for properties across the country, investors are demonstrating confidence that the hotel sector rebounded in the first half of the year. The uptick in sales is occurring after the hospitality sector, hit by dramatic declines in revenue per available room, or revpar, saw property sale prices decrease more than any other commercial property category.

Aecom Technology has acquired Tishman Construction in a $245 million deal. New York City-based Tishman, one of the largest construction companies in the country, has overseen numerous high-profile projects including the original World Trade Center, One Bryant Park, the first LEED-Platinum skyscraper in the world and Disney World's Epcot Center. Daniel Tishman will remain chairman and CEO of the 900-employee construction company, while also assuming a role as a vice chairman and board member with publicly traded Aecom.

Two developers have pledged to spend $850 million on Flushing Commons, a 600-unit, 420,000-square-foot commercial space in Queens, the current site of a five-acre parking lot in one of the city's busiest commercial strips. Developers TDC Development and Construction, and Rockefeller Group Development were chosen in 2005 by the city, which sees the project as an opportunity to cash in on a thriving area. But local opponents are criticizing the project, which is slated for completion in 2013.

Chelsea Star, the 44-room budget hotel at 300 West 30th Street, on Eighth Avenue near Madison Square Garden and Penn Station, is on the market for just over $20 million. The three-building property has 40,000 square feet of air rights, as well as 155 square feet of retail frontage, which currently has a Subway sandwich shop and three other tenants.

Manhattan-based landlord Baruch Singer sold a stalled development site in Chinatown for $16.5 million after failing to convert the property into a 16-story residential building. Singer sold the site at 86 Canal Street to Elmhurst, Queens-based Wing Fung Realty Group, led by investor Andy Chau, who plans to develop the site into a 30-unit condominium. Singer originally acquired the site for $20.5 million in 2007, tearing down a five-story building in favor of a planned 79,000-square-foot apartment building with office, retail and community space.

A Philadelphia-based mezzanine lender that acquired W New York - Union Square in a 2009 foreclosure sale, has reached an agreement to settle a complicated series of bankruptcy cases and sell the property to a new venture, led by Host Hotels & Resorts. LEM originally bought the property in a foreclosure auction for $2 million, plus the assumption of $212 million in debt. The deal was the first major sale by Dubai-based Istithmar World after that country entered into a mini debt crisis the previous month. By March, LEM threw the property in bankruptcy protection just before senior lender DekaBank was scheduled to auction off a loan at the property.
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