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May 2009

May 2009 » Market Analysis » NY New Developments

May 2009 New York New Developments

New Developments

Hyatt Hotel & Resorts is opening two new hotels in the next year under its new brand name called Andaz. One hotel is scheduled to open across from Bryant Park on 41st Street and Fifth Avenue next year, and the second, at 75 Wall Street, is to open in September. The 41st Street hotel will offer time-share units on the top floors, and the downtown hotel, converted from the former JP Morgan Chase building, will have 253 rooms, with condo units on the 18th through 42nd floors.

Hotel Developer Sam Chang filed plans for a 225-key Hyatt Place hotel at 208-210 East 52nd Street near Third Avenue with the City Department of Buildings. It will be the first Hyatt Place hotel in Manhattan. The 29-story Gene Kaufman-designed hotel will be select service, and have a restaurant. He expects the hotel to open in 2011, but the date depends on the city's approval process. He is building the hotel to own, not to sell on completion. Chang has been a prolific hotel developer, particularly active in Manhattan's Times Square area.

Major Developments

Canada's largest pension fund may seize Harry Macklowe's 1330 Avenue of the Americas in a foreclosure auction. Macklowe defaulted on his $130 million loan in January. He bought 1330 Avenue of the Americas, between 53rd and 54th streets, for $498 million in 2006, and the building is about 31 percent vacant.

The Port Authority of New York and New Jersey will not help to finance more than one of Larry Silverstein's three planned office towers at the World Trade Center site. Financing more than one tower would risk public money at a time when the leasing outlook appears bleak. The authority would be willing to finance one tower and then build portions of the other two that would allow retail on the site, and when the credit market improves. Silverstein could seek funding for additional towers.

Deloitte may leave its headquarters at the World Financial Center and has issued a request for proposals to landlords in search of 600,000 to 800,000 square feet of office space. Buildings of interest are 11 Times Square and the future 4 World Trade Center.

Browsing Manhattan's diamond district, one sees dozens of vacant booths, empty showcases and for rent signs. Business is down 50 percent over the past year. The city's jewelry industry is facing a tough credit landscape as lenders who once specialized in gem financing are cutting back or even exiting the niche. The combination of plummeting demand and dwindling credit threatens to shrink the city's industry, which employs 25,000 people, and endangers plans for a city-subsidized 41-story tower designed to strengthen the diamond district.

Today with commercial values plummeting in Manhattan, office values are lower on average by at least 30 percent due to three things: market rent has come down, vacancy rates have risen and cap rates have risen. Even trophy properties, which have historically outperformed the real estate market in New York City, can't stave off the effects of the credit crunch.

The Landmarks Preservation Commission approved plans for a theater at 192 Water Street. Developer Kay Water Properties plans to convert the former Fancy Basket Company factory into a six-story, 18-unit condominium above a theater and recording studio. The project still has a partial stop work order, but construction of the theater is apparently progressing.

Retailers are grabbing space in areas of Manhattan where rents have dropped but foot traffic continues to be high.

General Growth Properties' bankruptcy filing will change the nation's mall business and this gives rival Simon Property Group an opportunity to buy more mall properties. General Growth hopes to keep the company intact, but has already tried to sell off several properties, including South Street Seaport.

Capital Associates acquired the ground lease at 21-27 Ninth Avenue at 13th Street, in the Meatpacking District, giving the company control and redevelopment rights of four three-story 19th-century buildings. Their acquisition and development costs are estimated at around $150 million. The buildings stand in the Gansevoort Market Historic District. The developer hopes to shore up the facades, demolish the interiors and create a new building for a high-end retailer. Work is to be completed by the fall of 2010.

Months after Lehman Brothers filed to foreclose at their 25 Broad condominium project in the Financial District, developer Kent Swig is facing additional litigation for failing to pay $533,000 in benefits awarded by an arbitrator.

The High Line Building at 450 West 14th Street has topped out at 15 stories tall. The commercial tower has 100,000 square feet of office space on 11 floors as well as retail space at the base of the High Line's main entrance. Fashion designer Helmut Lang has leased two full floors of office and showroom space in the building, which is expected to be completed this fall.

The Greenwich Village Society for Historic Preservation is supporting a rezoning of a sliver of the far West Village, from 10th to 12th streets, between Greenwich and Washington streets. The stretch of six blocks is in a protected historic district but some sites are being targeted for commercial development. The City Planning Commission has agreed to review the rezoning.

The deconstruction of the former Deutsche Bank building at 130 Liberty Street seems to be three weeks behind schedule. The project was originally to be completed by October 16.

Luxury furniture retailer Maurice Villency may close its flagship store at 200 East 57th Street at Third Avenue. The space is 26,100 square feet on two levels. The store's lease runs until 2022 and has an asking rent of $3.4 million per year.

Citigroup has put up space at 485 Lexington Avenue up for sublease.

At least 14 projects along 10 blocks of East and West 125th Street have been delayed or canceled. The dormant development sites have doubled the retail vacancy rate along one five-block section of the strip to 16 percent. The 14 projects include the death of Harlem Park, a proposed $435 million tower at Park Avenue. Lawsuits have delayed at least three other projects.

Harry Macklowe's Properties is embroiled in a court battle with investment firm Jay Goldman & Co., in a dispute over whether the tenant defaulted on its lease at 510 Madison Avenue, or is being locked out of the speculative office tower. Macklowe signed Jay Goldman, one of the city's largest hedge funds, to a lease estimated at 10 years at $125 per square foot, in December 2007.

Empty storefronts dotting Manhattan streets are reminders of the walloping delivered by the economy over the last two years.

The City Council approved the $15 billion West Side rail yards project. The Related Companies' project on the 26-acre site will include housing, parks and office towers, though the economy has delayed construction. The Council approved several required zoning changes.

Friends of the High Line are asking the City Council zoning committee to save the High Line's northern third section, which curves around the rail yards from 30th to 34th streets, between 10th and 12th avenues. The section is in limbo because it is still property of the railroad company, while the rest of the High Line is owned by the city.

Construction unions and builders are moving toward an agreement to lower labor costs and allow for some projects in the city to move forward, despite the weak economy. The pending agreement would cut labor costs by 15 to 20 percent. Some developers fear the agreement won't translate into substantial savings.

More than $100 million in renovations are to be made at 330 Madison Avenue at 42nd Street. The 39-story, 742,000-square-foot building has nearly 180,000 square feet of available space.

The New York metro area has 189 commercial properties valued at $9.16 billion in financial distress. The bulk of the real estate is office buildings, which make up $5 billion of the distressed assets, followed by retail properties at $1.6 billion and apartments. Manhattan is 32nd among United States markets ranked by the amount of distressed assets as a percent of total assets.

Fordham University New York City's Planning Commission voted unanimously to approve the University's plan to expand its Lincoln Center campus. Fordham plans to build seven additional buildings on the campus, bounded by Columbus and Amsterdam Avenues and West 60th and 62nd streets, including a new law school and dorms. The expansion still needs approval from the City Council before the university can proceed.

Seven years after the above ground structure of the United States Customs House was cleared after being damaged in the September 11 terrorist attacks, a permit was filed to demolish remaining underground steel structures. The demolition is to clear the way for construction of One World Trade Center, which is being developed on part of the old 6 World Trade Center footprint.

The number of commercial landlords suing their Manhattan tenants for non-payment surged in the first quarter of 2009. There were 40 percent more commercial non-payment landlord-tenant cases in court in the first three months of the year compared to last year.
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