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February 2013

February 2013 » Market Analysis » NY New Developments

February 2013: New York City New Developments


The Federal Emergency Management Agency gave New Yorkers whose homes were devastated by Hurricane Sandy a 30-day extension on applications for home repairs. The Transitional Sheltering Assistance program, which has helped New Yorkers continue living in participating hotels and motels, will also be extended. Governor Cuomo requested that FEMA grant extensions.

Alexander McQueen plans to decamp to 747 Madison Avenue. The designer will lease a double-height 3,300-square-foot space owned by Jeff Sutton, paying $1,300 per square foot during the 15-year lease. Fashion label Escada previously took up a portion of the retail space. Before that, Valentino occupied the space during the construction of its 717 Fifth Avenue store, and fashioned the double-height ceilings at the north end after taking over the apartment above.

The Landmarks Preservation Commission voted to allow the New York Public Library to go ahead with its intended expansion and revision of its main building on Fifth Avenue and 42nd Street. The new designs are to be done by Norman Foster. The renderings do not appear to undermine appreciably the pre-existent building, which opened in 1911 by Carrere & Hastings.

Assembly Speaker Sheldon Silver is open to a Las Vegas-style casino in some parts of New York City, as he continued to soften his opposition to the idea of casino development within the five boroughs.

Mr. Silver, a Manhattan Democrat, remains opposed to a casino with table games in Manhattan, but would be open to the idea in other areas of the city, specifically naming Coney Island and Willets Point, as well as the Aqueduct racetrack -- sites that he has been considering for some time. The Legislature wanted to have a say in the sitting of any full-scale casinos, challenging a plan by Gov. Andrew M. Cuomo to put the power in the hands of a new gambling commission.

RXR Realty has signed a 99-year triple-net lease at British department store tycoon Mohamed Al Faye's 75 Rockefeller Plaza in Midtown Manhattan, where it plans to undertake a major capital improvement to reposition the building. The 33-story building will be fully vacated by Time Warner Cable in 2014, leaving behind roughly 630,000 square feet of rentable area, and the renovations will include a new lobby and a restoration of its landmarked, classic limestone facade. The building, including retail space, will be delivered vacant and the capital improvements, being designed by Kohn Pedersen Fox Associates, are expected to be completed by the third quarter of 2015.

The City Planning Commission voted to approve a proposal to rezone Hudson Square to allow for a more mixed-use neighborhood with larger buildings. The proposal now heads to City Council, which will have 50 days to conduct a public hearing and vote on whether the rezoning will take effect.

City officials kicked off the restoration and redevelopment of the Loew's Kings Theatre in Flatbush, Brooklyn. Loew's King is the borough's largest indoor theater, and it has stood vacant since 1977. The $93.9 million project to restore the run-down property is projected to create more than 500 construction jobs and 50 permanent positions. Renovations are scheduled for completion in late 2014 after that time, the theater is poised to hold between 200 to 250 performances annually.

While Extell's One57, located on West 57th Streets between Sixth and Seventh avenues, caters to 1 percent purchasers who can afford, a $54 million full-floor unit, the developer will go farther west to develop a 725,000-square-foot {dynamic_word2} property. One-fifth of which will be reserved for low-income tenants. Extell has filed plans for a 600-unit property to be located at West 41st Street and 10th Avenue.

New renderings are out of developer Joseph Moinian's forthcoming 1.7 million-square-foot tower near Hundson Yards. The 1,000-foot tower is designed by Dan Kaplan of FXFOWLE and will twist from its base to catch the sunlight.

Union representatives and contractors accused the city's Department of Buildings of bending the rules on modular housing for Forest City Ratner's Atlantic Yards megaproject at a city council hearing. The DOB allowed the developer to prefabricate housing off-site without the supervision of licensed plumbers, electricians and steamfitters, in a clear violation of city regulations. Some said that the developer actively sought the relaxed permissions.

The Archdiocese of New York, facing declining enrollment, has decided to shutter 24 Catholic schools in the state, including several in New York City. Twenty-two elementary schools in Manhattan, the Bronx, Staten Island and seven other counties are to close at the end of the school year, as well as two high schools. In total there will be close to 5,000 students affected by the closures.

The City Point development in downtown Brooklyn has become a battleground over the use of non-union workers. The 1.8 million-square-foot project is being built on city-owned land and receives affordable housing subsidies. Washington Square Partners, which along with Acadia Realty Trust is developing the 670,000-square-foot retail space. Construction would involve at least some non-union workers in order to cut costs, expedite work and use more minority, local and female workers. Developers added that a portion of the 700-unit apartment project would also hire nonunion workers.

A Lower East Side art gallery has gone to court to block a proposed 25-story hotel and condominium project developed by Ian Schrager and Ruben Schron, arguing that an environmental review is needed. Sperone Westwater Gallery, itself a relative newcomer to the area, has opposed the development on the grounds that the proposed hotel would be twice as tall as any other building in the neighborhood and hurt the property values of the gallery by blocking out existing sunlight.

JDS Development Group and Property Markets Group have secured $45 million in financing for their luxury condominium development in the former Verizon building in Hell's Kitchen, indicating that banks are becoming more receptive to condo projects. The partnership, which acquired the upper floors of the Ralph Thomas Walker-designed telephone building at 435 West 50th Street for over $25 million in 2011, aims to convert the upper floors into 71 luxury condos. Starwood Capital will supply additional equity.

Two new public middle schools and a special needs program will likely be built in the West Village. In order to reduce the burden on area schools, city officials are considering a 900-student facility within a seven-story, 177,000-square-foot building at 75 Morton Street, which is currently owned by the state and is used for the Office for People with Developmental Disabilities.

Deutsche Bank has filed suit against Sochin Downtown Realty and Morgan's Hotel Group to foreclose on $196 million in loans backed by the Mondrian Soho. Deutsche Bank, in the suit filed in New York State Supreme Court, alleged that Sochin defaulted after failing to make a payment, the extended maturity date on the loans. According to the suit, Sochin originally took out three loans with CapitalSource Finance in July 2007, including a $97.6 million building loan, a $61.3 million project loan and a $36.3 million acquisition loan. The company later hired Morgan's Hotel Group to manage the 270-room property.

Businesses at South Street Seaport's Pier 17 have been ordered to vacate the premises in anticipation of a major redevelopment project to begin in July. The Dallas, Texas-based Howard Hughes Corporation owns the pier and is slated to begin construction on an all-glass two-story structure with approximately 120,000 square feet of high-end retail space. Retail in the neighborhood which has seen steadily rising prices and several new residential projects was brought to a dramatic halt by Hurricane Sandy.

With new projects such as 51 Astor Place and the Hyatt Union Square, Fourth Avenue is being reincarnated as a high-end neighborhood. The Hyatt Union Square, which is yet to announce an opening date, will offer 178 upscale rooms and suites starting at $319 a night. It is located at East 13th Street, north of the Fumihiko Maki-designed 51 Astor Place, a 13-story mixed-use office and school building being developed by Minskoff Equities. The transformation has been in the works for a while.

American Realty Capital New York Recovery REIT Inc. has paid $10.9 million for the long-term master lease which has 50 years remaining, on a retail and garage space at 350 Bleecker Street in the West Village. The off-market deal for the 14,510-square-foot space closed on Dec. 31, partly in order to avoid the impending increase in capital gains taxes. The seller had owned the property since the 1970s. The building's 6,290 square feet of ground floor retail space is fully leased by upscale shoe store JMC Shoes and the only U.S. outlet of European retailer SP Fashions.

Two Trees Management's proposed 32-story residential tower in Downtown Brooklyn's BAM Cultural District would require a zoning change. Current zoning allows only 53 percent of the space to be residential, but the developer is looking to build 300 to 400 residential units, which would occupy 86 percent of the floor space. Two Trees is also looking to include 50,000 square feet of cultural space that would house three Brooklyn Academy of Music theaters and a rehearsal space. The developer is justifying the zoning change by saying it would lead to better use of the space.

Mayor Michael Bloomberg defended his decision to fast-track rezoning in Midtown East at the groundbreaking ceremony for Brookfield Office Properties' Manhattan West megaproject. The mayor dismissed concerns that the rezoning would see a flight of corporate tenants to Midtown East at the expense of the new towers at Manhattan West.

The city invested $2 billion to create the 7 train near the construction project, which is to be paid back in property taxes. But if development halts, the city would stand to lose a large sum. Also, Hudson Yards would provide additional competition, as the developers have begun a major push to woo prospective corporate tenants. There is a lot of development going on all over the city, not only on the West Side but downtown, at the World Trade Center, in Brooklyn and Long Island City said the mayor.

AXA Equitable, the life insurance company, has plans to downsize its 1290 Sixth Avenue operations and move employees to Jersey City, potentially putting 400,000 square feet of its current 500,000-square-foot space on the market. The exodus from Sixth Avenue began when Societe Generale left 400,000 square feet at 1221 Sixth Avenue for new offices at 245 Park Avenue. Even Dewey & LeBoeuf's collapse delivered 500,000 square feet of space at 1301 Sixth Avenue. Most recently, Microsoft landed a deal for space at 11 Times Square, leaving its 1290 Sixth Avenue home.

A bill that takes aim at city landlords who make surface cosmetic repairs to their properties but do not address underlying structural issues is expected to get approval from the City Council. This bill addresses an increasing problem of investors who acquire older properties to flip them for profit without making needed repairs, such as finding the source of a leak rather than just plastering over a water-logged wall.

The gossip blog Gawker has a new landlord after a four building portfolio traded along Elizabeth Street in Nolita in a $45.2 million deal financed by Deutsche Bank. New Rochelle-based S.W. Management -- run by Stanley Wasserman and his two sons Alan and Mark acquired four buildings from Ozi Management located at 198-200, 202, 204-206 and 208-210 Elizabeth Street. Gawker has leased the top floor of the four-story 208-210 Elizabeth Street building which includes 15,000 square feet of office space and 5,000 square feet of retail for nearly five years.

More than two months after Hurricane Sandy smashed into New York City, some Lower Manhattan landlords are being forced to reach into their own pockets and in some cases deeply to pay for repairs to their buildings. That's because while insurance companies are footing the bill for hundreds of millions of dollars in damages to elevators, electrical systems and other infrastructure in hard-hit buildings, the carriers are not covering all the damage. A quarter of the large commercial building landlords who were hardest hit by the storm have already maxed out their flood insurance payouts, and have to pony up the difference themselves. In some cases that can cost well over $1 million.

The merchants of the Hunts Point Terminal Produce Market in the Bronx are issuing a collective sigh of relief after reaching a deal with the city that otherwise could have ended in a move to New Jersey. The city has made a tentative deal with the 46 merchants who operate the Bronx market to extend their lease by 10 years, preserving some 4,000 NYC jobs that New Jersey advocates had been pining for.

If Midtown South is too expensive then NoMad may be the answer. The cleverly-named area north of Madison Park may become the preferred spot for creative businesses priced out of office space elsewhere in the area. NoMad has the cool cultural pull to attract start-up firms without the hefty rents. In addition, the neighborhood provides proximity to others who work in similar start-up fields.

* Developer Alexico Group has offloaded a troubled First Avenue development site, plans for which went belly-up as a result of the financial crisis. The firm, which stalled several of its projects, including 56 Leonard Street, after the collapse of Lehman Brothers in 2008, has sold another stalled site at 953-961 First Avenue, at East 53rd Street, to the homebuilder Toll Brothers. The deal for the site, which closed December 28, was for $64 million.

Ralph Lauren Corp., which has roughly 800,000 square feet of office space in New York City, has spoken to Related Companies about the possibility of moving into the North Tower office property planned at the Hudson Yard. The bulk of Ralph Lauren's office space is at 655 Madison Avenue; its lease for the space expires in 2022. A second tower at Hudson Yards couldn't open up until 2016 at the very earliest.

* The owners of 11 Madison Avenue have decided not to sell the Midtown South office building, and are concentrating on renewing major tenant Credit Suisse's lease instead. The Sapir Organization and CIM Group had been looking to sell the 2.2-million-square-foot tower for $1.5 billion, which could have been one of the city's largest office sales to date. Though Sapir and CIM had apparently generated lucrative offers for the property, between East 24th and East 25th streets, the owners said they would generate higher profits by renewing a lease with Credit Suisse, which occupies more than three-quarters of the building. The lease expires in 2017.

The Mandell School, a private school long situated on the Upper West Side, is planning a new West Village preschool location. Mandell had previously proposed opening a new preschool in Tribeca or Battery Park City, but instead decided to plant its new nursery school in some of the commercial space at the historic Archive Building, a Rockrose property at 633 Washington Street. The school is expected to open its doors in time for the beginning of the 2013-2014 school year.

Microsoft will pay rent in the low $60s per square foot to lease its 200,000-square-foot office space at 11 Times Square; a good deal compared to the roughly $75-per-square-foot that comparable properties are commanding. The deal is the result of the building's developer, a joint venture between Steven Pozycki, the CEO of SJP Properties, and Prudential Financial wanting to secure a major tenant inside the 1.1 million-square-foot building.

A Marriott Edition hotel, a boutique outfit that Marriott International launched in 2007, is being planned for Times Square at 47th Street and Seventh Avenue. The project will be a 36-story hotel and retail development. The brand has struck a tentative agreement with a development group including Steven Witkoff and Mark Siffin, who are investors, and Winthrop Realty Trust to brand and operate the property.

Joseph Sitt's Thor Equities has {dynamic_word3} from Extell a block-long retail space in the former Helmsley Carlton House on Madison Avenue for $277 million, one of the highest total prices ever paid for a retail property on the street. Thor beat out Vornado Realty Trust, which had placed a competing $280 million offer for the retail space, located at 680 Madison Avenue and 61st Street, between Barneys and Hermes.

A $48.6 million deal for a building that traded for $30 million only 18 months ago, a $250 per square foot to $400 per square foot price increase, is further evidence that Garment District real estate is on the rise. The 118,200 square-foot former apparel factory at 256 West 38th Street sold to American Realty Capital New York Recovery REIT. The seller was a joint venture between East End Capital and GreenOak Real Estate.

Related Companies has bought a scrapyard along the High Line for $65 million. The property is comprised of two lots located at 507 West 27th Street and 514 West 28th Street between Tenth and Eleventh avenues. At 17,275 square feet and 14,800 square feet, respectively, the two lots have a combined maximum floor-to-area ratio of 241,204 square feet, making them a ripe prospect for residential or commercial development.

A member of one of New York City's dynastic real estate families has filed his company's first building plans, for a 19-story residential tower in West Chelsea. SR Capital filed plans with the city's Department of Buildings to construct the building at 551 West 21st Street on the corner of 11th Avenue that has a total of about 161,642 square feet. Most of that is residential space for 44 apartments, but it also includes 8,896 square feet of commercial space.

New York City's Human Resources Administration has signed a 175,000-square-foot lease in the Hunt's Point section of the Bronx. The HRA will move into a complex of four connected buildings that make up the Bank Note complex in Hunts Point, an industrial waterfront area in the eastern part of the Bronx. Taconic Investment Partners, which along with Denham Wolf Real Estate Services acquired the building in 2007, has the lease for 20 years.

There's now a new plan to save Pier 40, off the West Village. Developer Douglas Durst finds it better to keep the pier as is and to reuse the space to create room for downtown tenants, such as tech firms, art galleries and retail stores. The plan could yield a $10 million annual profit.

La Belle Epoque may be history, but one of France's oldest absinthe makers is moving up in the world. Pernod Ricard, a brand once eponymous with bohemianism, has struck a deal to take the floors 16 to 18 at 250 Park Avenue. The expansion comes after Pernod Ricard USA and Pernod Ricard America, also owners of liquor brands Absolut Vodka and Jameson Irish Whiskey, signed an 82,000-square-foot lease for three floors, with an option for a fourth, at Park Avenue and East 20th Street in May of last year. The additional floors will feature an open layout and an exposed, distillery-like environment, with a lounge and conference rooms.

The rapidly expanding office suite company WeWork is looking for the Financial District for its largest space yet. WeWork is considering a 125,000-square-foot lease at 222 Broadway. The 32-story, 750,000-square-foot office building was acquired by Beacon Capital and L & L Holding Company for $230 million. The company is looking to secure the downtown location as rising rents and limited supply have prompted some tenants to leave the tech-heavy Midtown South. WeWork founder Adam Neumann has been snagging space for his company in neighborhoods such as Tribeca and Soho.

The Dwight School, a private prep school on the Upper West Side, has just signed a 20-year lease to open an athletic facility at the East River Landing co-op in East Harlem. The school will rent the 40,000-square-foot sports pavilion from 1199 Housing Corp., which owns East River Landing, a Mitchell-Lama apartment complex on First Avenue between 109th and 110th Street. The sports facility and pool recently underwent $6 million in renovations, but was too costly for the co-op to maintain.

Time Warner is reaching out to brokers to assess the value of its Manhattan headquarters, as it prepares to move into a new location or consolidate its more than 4 million square feet of New York City office space. Over the last two years, the company has been considering new locations, including the West Side rail yards and Brookfield Place. Though the company owns its million-square-foot headquarters by Columbus Circle, the majority of its other office space is leased. If Time Warner were to make a move to a new location, it may likely sell the Time Warner Center.
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