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December 2008

December 2008 » Market Analysis » NY New Developments

December 2008 New York New Developments

New Developments

Recently, banks have begun lending to one another, signifying a slight thaw in credit markets. Yet, the commercial real estate market still seems limited in its ability to get financing. This inability to line up financing has scuttled some major building and lease sales in the past few months, one such example is 17 State Street in the Financial District.

About 150,000 jobs have been cut at major financial institutions, and more layoffs may be on the way. Some firms may shed an additional 5 percent of jobs this year if the market doesn't turn around. Citibank has cut 22,000 jobs over the past four quarters, and just last week, UBS fired 700 employees, the first phase of a plan to trim 2,000 jobs at the bank.

As the new stadium projects for the Mets and Yankees approach completion, the cost to taxpayers has risen beyond Mayor Bloomberg's original predictions. The cost to the city for infrastructure surrounding the stadiums is now about $458 million, compared to the $281 million predicted in 2005.

Circuit City Stores Inc. announced it is closing about 20 percent of its stores in the U.S. The retailer is shutting down 155 of more than 700 stores, including three locations in the city. Circuit City will reduce new store openings and plans to work with landlords to renegotiate leased, lower rent or terminate agreements.

In the first nine months of the year, $18.7 billion in buildings and building portfolios traded, compared to $42.2 billion during the same time last year,. Class A office made up for 55 percent of investment deals this year, a number that is expected to dwindle in 2009 because of the credit and foreign markets drying up.

The M.T.A. and Related Companies will not sign a contract this week for a $15 billion residential and commercial development above the M.T.A.'s West Side rail yards. The M.T.A. and Related, which is working with Goldman Sachs on the project, have agreed to a 90-day extension of the contract deadline.

The Port Authority is moving along with plans to replace the central terminal at LaGuardia Airport. The PA authorized a $40 million study that will result in a new design for the 45-year-old terminal. The study should be completed in 2010, and construction is to begin in 2011.

The Hudson River Park Trust released three development proposals: one each by the Durst Organization, Related Companies and Youngwoo & Associates, for the park's 880-foot Pier 57, at the end of West 15th Street in Chelsea. Revenue from the project will be used to maintain Hudson River Park. The Cipriani Organization and Witkoff Group were chosen in 2005 to transform the pier, but withdrew after costs soared.

The slump in commercial building sales is threatening to take a sizable bite out of New York City tax revenues, which could force Mayor Bloomberg to make even more drastic choices than he already has to keep the city budget balanced.

Private equity real estate investment funds are waiting rather than investing in commercial and residential real estate. The consensus of real estate leaders is to be cautious and wait until the dust settles before returning to investing in real estate.

The City Council approved the 111-block rezoning in the East Village and Lower East Side. The zone runs from Grand to 13th streets, bounded by the Bowery and Avenue D. The rezoning limits building heights to 80 feet on side streets and 120 feet on main streets.

Mercedes-Benz USA is planning to build a new flagship sales and service center under a 918-unit, $700 million condominium proposed by developer Two Trees Management. The dealership, which would cost $220 million, would take up the first two floors of the building and three underground levels on 11th Avenue between 53rd and 54th streets, and replace the current Mercedes dealership near the eastern entrance to the Lincoln Tunnel.

The city Landmarks Preservation Commission voted to landmark the I.M. Pei-designed Silver Towers and its central Pablo Picasso sculpture, "Portrait of Sylvette," in Greenwich Village at 100 and 110 Bleecker Street and 505 LaGuardia Place. New York University owns the buildings, and is planning on building a 40-story building within the complex.

SJP Properties' 11 Times Square recently topped off, which will bring 1.1 million square feet of commercial to the market. A glut of office is coming online like the commercial planned at Ground Zero, when vacancy and availability rates are high. 11 Times Square will not open for another year, and the Freedom Tower is not expected to open until 2013.

The outline of the National September 11 Memorial & Museum at the World Trade Center is taking shape near Fulton Street, with one corner of the north pool at the memorial completed. There will be two pools, with waterfalls streaming into them, marking the locations of the towers. The goal is to complete construction by Sept. 11, 2011.

Jonathan Rose Companies broke ground on the first affordable housing and mixed-income apartment building in East Harlem developed to be environmentally friendly LEED Silver standards. The 12-story, 185-unit rental building will rise at 124th Street and Second Avenue. The development will also have ground-floor retail space.

Trump Soho Property owners and residents living near the Trump Soho tower, under construction until 2009, are debating how they want development to proceed within an 18-block area around the 43-story hotel-condo. The area is currently a manufacturing zone that allows buildings as large as the Trump project to rise. Property owners and residents want a height limit on new developments, and a limit on air-rights transfers.

The Lower Manhattan Development Corporation has been looking at ways to make the buildings on the World Trade Center site greener. Each office tower plans to meet the standards needed to qualify for a LEED Gold rating, but the LMDC also hopes to make the 16-acre site sustainable by maximizing the amount of sunlight that hits the open spaces and filtering the sunlight below ground through vents.

Community members expressed strong support for renovations to the Battery Maritime Building at 11 South Street in Lower Manhattan. It is unclear whether developer Dermot Company will have enough money to complete the $150 million project.

Barclays bank will hold on to its $400 million naming rights for the planned Nets arena at the Atlantic Yards project. The deal had depended on developer Bruce Ratner's securing financing for the entire project which will not happen because there is still litigation pending against the project. Barclays agreed to an extension on the deal.

The city announced that Fiterman Hall, the damaged and abandoned building destroyed on Sept. 11, 2001, will be demolished, and a new classroom building for the CUNY Borough of Manhattan Community College will rise in its place. Decontamination and demolition of the building, at 30 West Broadway, is expected to be completed in 2009. The project is estimated to cost $325 million and ready for occupancy by 2012.

Top architects, including Jean Nouvel, Frank Gehry, Annabelle Selldorf and Shigeru Ban, are working on structures next to the new $170 million public park in a part of the city where there were previously only elevated rail tracks. These architects have recently designed residential and commercial buildings along the High Line, a one-and-a-half-mile stretch of elevated rail tracks along 10th and 11th avenues between 34th and Gansevoort streets in Chelsea and the Meatpacking District.

Nearly 100 commercial mortgage-backed securities loans are coming due over the next two years, forcing those real estate borrowers to find financing in a far more difficult lending environment than when the notes were written. In the city, there are 52 such commercial real estate loans expiring in 2009 and 43 in 2010. Such loans are typically held for five years, but neither the terms nor the additional information on the 95 securities was immediately available.

As part of budget cuts, the state will close the East River State Park in Williamsburg from January to March. The waterfront green is between North Sixth and North Ninth streets, and it first opened this year.

Developer Sam Chang owns 10 hotels in the city, and has 23 more under construction, of the 28 Sam Chang hotels that were expected to come online in 2008, with 4,648 rooms, only about 14 hotels, with 2,514 rooms, will have opened this year.

Entertainment giant Viacom has renewed its lease there for more than one million square feet. The lease will keep Viacom in the Times Square building at 1515 Broadway through mid-2015.

The East River Science Park, with 1.1 million square feet of laboratory and office space, is most likely to become a popular spot for small bioscience firms and the law firms and investment banks that work with them. The first of the park's three towers, all between 28th and 29th streets near the FDR Drive, is to open in early 2010. Rents are expected to range from $50 to $75 per square foot.

The British architect Richard Rogers has won the contest to design the planned tower on top of the Port Authority Bus Terminal. Vornado Realty Trust is developing the proposed 42-story office building, and Rogers beat out designs by architect firms Pelli Clark Pelli and KPF. Vornado currently has no tenants signed to take in the tower, which will go up across the street from 11 Times Square.

1095 Sixth Avenue just underwent a two-year, $250 million renovation, and now firms who signed leased in 2006 and 2007 say they can no longer afford to move in. Real estate finance company iStar Financial, Metropolitan Life Insurance and Centerline Capital Group, all said they won't be moving in. The companies signed leased for as much as $132 a square foot, and now would be lucky to get $95 a square foot.

The Department of Design and Construction has put a planned 911 call center in the Bronx on hold after project costs rose from the $670 million originally projected to $957 million. The city had hoped to finish the building by the end of next year.

The Yankees have to pay the city $11 million in back rent for underpaying the city between 2003 and 2006. Under the team's rental agreement, the Yankees pay the city a percentage of all revenue from tickets, parking and cable television. Between 2003 and 2006, the Yankees took in more than $1 billion, and paid the city $17 million. The Yankees have already paid $7.3 million, plus $635,132 in interest, and the remaining $4 million plus interest will be paid on March 10, 2009.
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