New York Major Developments:The city is taking another attempt at rezoning the Garment District, a move that will likely rollback rules that require landlords to lease a portion of their building to the fashion industry. The possible rezoning is connected to the Mayor’s plans to build a new manufacturing campus in Brooklyn. The Bloomberg administration tried to rezone the Garment District in 2009, but stopped the plan due to opposition.
In the fourth quarter of 2016, absorption rate was negative in all three Manhattan office submarkets: Downtown, Midtown, and Midtown South for a total net absorption of negative 277,988 square feet.
As vacant storefronts continue along Third Avenue, Thor Equities has reduced asking rents at one of its Upper East Side retail properties by 44%. Thor dropped the asking rent at 1251 Third Avenue from $1.8 million to $1 million a year. The space covers 13,000 feet across two floors and includes 150 feet of wraparound corner sidewalk frontage. There are several large vacancies along Third Avenue, especially between 59th and 79th streets.
Madison Capital obtained a $51.4 million loan from Mesa West Capital for its purchase of the ground lease at 71 Fifth Avenue. Madison Capital paid $85 million up front for the ground lease for the 11-story Flatiron District office-and-retail building, with annual rent payments starting at $3.5 million. Samco Properties and the family of WeWork’s global real estate chief Mark Lapidus own the 153,000-square-foot building, which is fully leased. Ovation Corporate Travel is the largest tenant, at 26,000 square feet.
EPIC obtained a $65 million loan to refinance four of its lower Manhattan properties. Two commercial condos in Soho at 73 Wooster and 388 West Broadway, and two commercial buildings at 17 West 14th Street and 40 Thompson Street from TD Bank.
The city’s Economic Development Corporation selected to develop the city-owned site at 124 East 14th Street last year. The anchor tenant will be Civic Hall, and there will be 58,000 square feet of flexible workspace for growth-stage tech companies, with shorter-term lease options from six months to five years. There will also be a 36,500-square-foot tech-training center that will have event space, classrooms and breakout spaces. The $250 million, Davis Brody Bond-designed project was first announced in 2015.
Lam Generation is fighting Edison Properties and the Kaufman Organization to continue building a $120 million Marriott International hotel in Chelsea. The developer needs access to 119 West 24th Street owned by a company affiliated with Edison and ground leased to Kaufman to install window and skylight protection. The companies have not been able to negotiate a license agreement, so Lam filed a lawsuit to gain entry. Lam purchased 112 West 25th Street in 2013 for $67.5 million from Extell Development. The developer plans to build a 341-key, 181,998-square-foot, hotel on the site, which was formerly home to the Antiques Garage Flea Market. The project is expected to take 24 months to construct, but Lam is concerned that delays could put mezzanine financing and his Marriott license at risk.
Walter & Samuels obtained a $60 million refinancing of its Upper West Side building that houses the West End Secondary School. The three-story, 75,000-square-foot property at 227-241 West 61st Street comprises of 160,000 buildable square feet. The New York City School Construction Authority fully leases the property and is in the process of a $20 million renovation to modernize the space. The West End Secondary School, a public middle school that is expected to grow to include grades sixth through 12th by 2012, now operates there.
Lawmakers from the Garden State are accusing New York Governor Andrew Cuomo and Mayor Bill de Blasio of working to intentionally slow down the construction of the proposed new Manhattan bus terminal.
The Hospital for Special Surgery is taking 65,000 square feet at Frank 57 West, one of Durst’s three residential buildings on a block bounded by West 57th and 58th streets and 11th and 12th Avenues. The hospital, which has a main location at East 70th Street, will function as an outpatient clinic.
Discount shoe purveyor Payless Shoes is considering shuttering some 1,000 stores to deal with its $600 million debt load. The retailer is debating whether or not to restructure in or out of court. The company might file for bankruptcy if it cannot reach a deal with its creditors.
The developers behind the Gansevoort project in the Meatpacking District are barred from doing construction or demolition work on multiple buildings connected to the development, while a lawsuit against them progresses. The Save Gansevoort group filed a lawsuit against the developers and the Landmarks Preservation Commission seeking to stop what it calls a “massive, out-of-character development”.
Gentrification and new development are taking over Chinatown. The neighborhood’s restaurant scene is on the front lines, with old-time eateries being replaced by new types of cuisine and bank branches. Beyond the restaurant scene, rental and condo development has found its way to Chinatown in recent years.
Air rights became pricier in Manhattan in 2016, as the dollar transaction volume rose despite a dip in the number of deals. Developers paid $292 per square foot on average for rights to build taller, up from $277 in 2015. The number of air rights deals fell to 31, from 51 in 2015, but the aggregate sum paid rose to $469.2 million from $434.6 million. Dollar volume on Manhattan air rights through the end of September totaled $70.69 million, a 74% decline from the year prior. Areas near the High Line were seeing air rights trade for around $750 to $800 per square foot. The planned rezoning of Midtown East could flood the market with air rights, and the city is currently debating whether to set a price floor for deals in that area.
Big institutions have begun selling off commercial real estate, another sign that the market is weakening amid rising interest rates and a surge in new supply. The uptick in seller interest comes as demands for trophy properties shrinks. Overall, commercial real estate sales volume fell by $58.3 billion, or 11% in the first half of 2016.
The de Blasio administration killed a plan to make theaters owners pay more than the current $17.60 per square foot into the Theater Sub district Fund when they sell off their air rights. The administration’s plan was to make them pay 20% of any deal into the fund and a minimum price per square foot of $346. However, the Department of City Planning pulled the application because of a disagreement with legislators. The Council opposed the floor price, and the Real Estate Board of New York had argued it would have a negative impact on theater owners in market downturns. The city has so far collected $9.6 million through the Theater Sub district Fund, and recently spent $2.2 million of air rights proceeds on diversity initiatives in the theater industry.
Brookfield Property Partners just obtained a $550 million loan for its office tower at 200 Liberty Street. Kiwoom Milestone US, an affiliate of investment adviser Civitas Alternative Investments, provided the financing, which consolidates a new mortgage of $240 million and a 2007 loan from German American Capital Corporation.
The city has selected Jonathan Rose Companies to build a 751,000-square-foot mixed-use development in East Harlem. The project will include a YMCA, a supermarket, a healthcare center, a charter school and a community center. The development will be located between East 111th and 112th streets, on city-owned lots between Madison and Park avenues. The city is gearing up to rezone parts of the neighborhood under the mayor’s mandatory inclusionary housing program. The rezoning plan paves the way for buildings of up to 30 stories along part of East 125th Street and Park Avenue between 115th and 124th streets.
Extell Development obtained $73.5 million to refinance five commercial buildings in Chelsea, the Flatiron District and the Upper West Side. Deutsche Bank provided the financing, which includes $26.5 million in new loans and consolidates $47 million of existing loans on the properties. The properties include two adjacent buildings at 140 and 142 West 24th Street in Chelsea which it just acquired for $9 million.
The William Kaufman Organization and an arm of Travelers Companies landed $65 million in refinancing for the 417,240-square-foot office tower at 747 Third Avenue.
Macy’s may have received a takeover offer from Canadian retailer Hudson’s Bay. The talks are preliminary and a deal is not yet assured.
Eliot Spitzer and the Related Companies are to build a 1.4 million-square-foot apartment-and-office development on a pair of adjacent sites they own in Hudson Yards. Related signed a contract in 2013 to buy its site at 517 West 34th Street. Spitzer paid $123 million to assemble his site next door.