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July 2008

July 2008 » Market Analysis » NY New Developments

July 2008 New York New Developments


New Developments


The city has reached a deal with a developer that will bring schools to a mixed-use development planned for Midtown East. With financing from New York City Educational Construction Fund, the World Wide Group will build a new elementary school and a new high school that would replace the High School for Art and Design. In exchange, the city will lease the developer a 1.5-acre site at East 57th Street and Second Avenue. World Wide plans to build 200,000 square feet of retail and 488,000 square feet of residential space.

Mayor Michael Bloomberg unveiled a plan to rejuvenate the south Bronx. The plan calls for adding 8,000 housing units, 80,000 square feet of commercial and retail and 160,000 square feet of hotel and conference centers. Although $3 billion has been spent since 2002 in building up the area, the Bronx remains the city's poorest borough.

Shorenstein Properties bought two towers from Macklowe Properties, the Park Avenue Tower and 850 Third Avenue for $930 million. Paramount Group may take 1301 Sixth Avenue for $1.45 billion. Deutsche Bank, which controls the towers, is selling them for 20 to 30 percent less than what Macklowe paid for them.

Paramount Group could pay $1.5 billion for Harry Macklowe's Credit Lyonnais building, which Deutsche Bank took control of earlier this year.

Rockrose Development plans to build an 800,000-square-foot office tower, at a Jackson Avenue spot called 10 Court Square, near the Citibank tower. The asking price for the tower is expected to be in the $40s to $60s per square foot range. Rockrose needs an anchor tenant to lease half the to launch the project.

The Port Authority may sell the Freedom Tower and might have approached both the Related Companies and Brookfield Properties about the project. The authority, which is being advised by Deutsche Bank, wants the $3 billion tower to be completed under its current design.

Brooklyn politicians and civic groups proposed legislation create a trust that would impose more public control over the construction of Forest City Ratner's Atlantic Yards project in Brooklyn. The Atlantic Yards development is a public project built on public land with public money; thius it is important to maximize the amount of public involvement.

Developers are looking at Manhattan's far West Side for new projects, as the area undergoes a re-zoning. The Department of City Planning has proposed making a majority of the east side of eleventh avenue a residential zone, and re-classifying the industrial zone on the west side for office space.

Proposed regulations for tax-exempt bonds could jeopardize plans for the $950 million Barclays Center, the centerpiece of Forest City Ratner's Atlantic Yards project in Brooklyn. The Barclays Center's price will increase substantially without tax-exempt financing.

Deputy Mayor, Robert Lieber, is open to the idea of the Port Authority taking over the Monihayn Station project because the authority can invest $2 billion in it, but is concerned that it will be distracted from Ground Zero. The city will not fund a subway station on 42nd Street and Tenth Avenue, but is supporting a $2 billion expansion plan for a No. 7 subway station at 34th Street and Eleventh Avenue.

Infinity Capital Management purchased a 16-story office building at 247 West 30th Street for $15.85 million.

Foreigners have their sights on New York City towers, but seem content to operate in the background. The Abu Dhabi Investment Council could spend $800 million on a 75 percent stake in the Chrysler Building, but would remain a silent partner, leaving Tishman Speyer, which has a 25 percent stake, to control the building. The trend isn't new, a Dubai fund, bought the Helmsley tower at 230 Park Avenue in November 2005 for $705 million, and also bought 450 Lexington Avenue and the Knickerbocker Hotel at 6 Times Square. The Israeli firm Elad Properties bought the Plaza for $675 million in 2004 and transformed much of it into a successful condo building.

Valter Mainetti bought the Flatiron Building. In 2006, Mainetti purchased a minority share in the landmark building, valued at $180 million today, and now he owns a 53 percent share.

The offering materials for potential buyers of Starrett City went online last week, but only for approved groups that have been given access to read the document. The Web site is private, however, and cannot be accessed by the general public.

Hunts Point Food Distribution, the largest wholesale market in the world, may be leaving its Bronx home. Hunts Point shareholders are looking for another location near a highway or rail system for easy distribution.

As the tight credit market crimps property deals in New York City, sellers are beginning to offer help to their potential buyers in the form of financing for up to 80 percent of the purchase price. According to the experts, the financing scheme, which sellers hope will spur sales, is a natural development in a down market as banks tighten lending requirements, demand more cash in deals or decline to offer loans altogether, leaving sellers few options. The blockbuster example of the seller financing formula is the reported offer by Deutsche Bank to bankroll part of the sale of seven buildings that were once in the Equity Office Properties portfolio, which Harry Macklowe bought for $7 billion in 2007

Manhattan Class A vacancy rate rose to 6.9 percent in May, up from 6.4 percent in April and 5.3 percent at the beginning of the year. Large blocks of Midtown's vacancy rate increased to 7.1 percent. Downtown, the vacancy rate increased to 6.3 percent from 5.9 percent in April.

London has again been ranked ahead of New York City as the world's most influential financial capital for the second year in a row.

While many developers have been racing to get started on projects before changes in the 421-a tax abatement take effect, another group has thrown in the towel, tripped up by the deadline and the faltering economy.

The insurance giant, AIG, has taken over Goldman Sachs' lease of 800,000 square feet at Moinian's 180 Maiden Lane, in one of the year's biggest leases so far. AIG will begin moving in this September and will take all 30 floors by 2011. The company will remain headquartered at 70 Pine Street and denied it will sell the art deco tower, which could be converted to residential use.

Goldman is exiting several Downtown properties as it prepares to move into its new Battery Park City headquarters.

Hunter College's Brookdale campus has gotten first-round bids of $200 million-plus from Edward Minskoff, LCOR, Extell and New York University. CUNY wants to sell or lease the 4.2-acre complex bounded by First Avenue and the FDR Drive and East 25th and 26th streets. Up to 1 million square feet of new residential or education facilities could be built on the property. The winning bidder must build a new high school to replace the city's Julia Richman Education Complex at 317 East 67th Street. CUNY plans to tear down the school and build a new science complex.

Under the city's new, the Gowanus Canal zone could become an area of housing, commerce and green open while the canal is cleaned up. Toll Brothers wants to build 447 units of luxury and below-market housing in the rezoning site, and outside the zone a developer has been chosen to build 774 units of housing, pending the clean up.

Gov. David A. Paterson named Buffalo banking executive as chairman of the state's economic development agency. Wilmers will remain chairman and chief executive of M&T Bank Corporation, but will serve the state for no salary and will not need approval from the Commission on Public Integrity for his business interests.

Extell Development has purchased a property at 30 West 47th Street for $50.1 million. The building is near Extell's 40-story Diamond Tower, being built at 44 West 47th Street, with a second address at 55 West 46th Street.

The weak dollar is bringing more foreign visitors to the hotel industry. Tourism will play an increasingly important roll as Wall Street slows down.

Despite a slowdown in leasing and an increase in vacancy in Manhattan's office market, asking rents continued to increase in April. A quick look at the deals around town reveals that net effective taking rents are on their way down. The average asking rent in Manhattan continues to rise, up over $1 to $66.42 per square foot, from $65.38 per square foot in March, and $56.63 per square foot one year earlier.

The World Trade Center's construction could see more delays as the Paterson administration studies the budgets and timelines set by the Pataki administration. Delays are expected for the National September 11 Memorial and Museum, the Calatrava-designed PATH station and maybe even the. The tower is seen as closer to its target date, 2012, than the other projects, but it might not be completed until 2013 at the earliest.

40 Mercer Street in Soho will be taking bids on the retail portion of the 13-story luxury apartment building. The unit for sale has a street address of 465 Broadway, with 9,400 square feet on the ground floor. Bose, Dermalogica, Wachovia and Vivienne Tam currently lease the space.

The Freedom Tower got its first private-sector tenant, a Chinese real estate company. The Beijing Vantone Real Estate Company signed a lease and plans to build the China Center, a commerce and cultural center, on floors 64 to 69. Federal and state governments have agreed to lease 1 million square feet at the tower. The Partnership for New York City will invest up to $5 million in the $90 million project, which will create a 189,000-square-foot space. Vantone's annual rent will start at about $80 per square foot.

Mort Zuckerman's Boston Properties has gotten the go-ahead to enter and begin shoring up a Joseph Moinian-owned building on West 54th Street, as part of Boston's 1 million-square-foot Eighth Avenue office tower, called 250 West 55th Street. Moinian had blocked access to 241 West 54th Street, which it needs to reinforce so it can finish demolishing the building next door, No. 247.
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