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November 2011

November 2011 » Market Analysis » NY New Developments

November 2011 New York New Developments


New Developments

The Chelsea Art Museum located at 556 West 22nd Street is about to be replaced by Hewlett-Packard, which has special plans for the building. HP signed a 10-year lease for the entire 34,500 feet inside the three-story museum building at 556 West 22nd Street near 11th Avenue..

Drastic job and spending cuts are in the cards for 2013 for the New York City construction industry, according to a report released today by the New York Building Congress entitled "New York City Construction Outlook 2011-2013." Construction spending is expected to total $27.7 billion this year.
The average number of construction jobs will fall by 4,900 this year to 106,900 The Building Congress expects the number of jobs to plummet to 91,800, down 40,000 from the 2008 peak.

The auction of Anglo Irish Bank's troubled $9.5 billion U.S. loan portfolio has surprised some industry observers -- and spread fear among some borrowers, who worry about having new lenders take over their troubled projects. Three lenders divvied up Anglo Irish's portfolio. No one but a bank could really afford to buy the performing loans. non performers inevitably went to different buyers. Lone Star Funds acquired about $5 billion in sub- and nonperforming loans, while Wells Fargo and JPMorgan Chase acquired the remaining performing loans in separate transactions.

The Bloomberg administration's wants Roosevelt Island for a new applied science graduate school for New York University who would prefer to open one in Downtown Brooklyn at the former Metropolitan Transportation Authority headquarters at 370 Jay Street and transform it into its Center for Urban Science and Progress. "It would make Brooklyn the urban center of the universe," said Paul Horn, NYU's senior vice provost for research.

CIM Group has taken control of an extended-stay hotel tower at 47 East 34th Street. BridgeStreet Corporate Housing currently uses the building for extended-stay residences, though its $400,000-per-month lease is slated to expire on Dec. 31. CIM, which owned the defaulted note with a $93.2 million judgment, took control of the 36-story building for $54 million. IStar Financial sold CIM the $84 million senior mortgage debt this year, after a final judgment was issued against the previous owner Esplanade Capital.

TF Cornerstone is more than halfway into the $1 billion-plus development of seven buildings on the Long Island City waterfront. Despite the impressive scale of the 3 million square feet of development on 21 acres with 3,500 market-rate apartments, and the resident-friendly public park space that has replaced roads.

A massive $350 million mixed-use development project in the Bronx one of the largest private rezonings proposed for that borough in decades received the final green light by the city's Urban Land Use Review Process. The proposal calls for the creation of ten mixed-use buildings comprising 1325 housing units and 46,000 square feet of retail space that will be built in Crotona Park East and West Farms on a five-acre former industrial plot adjacent the Sheridan Expressway. The developer, Signature Urban Properties, is projecting that 663 homes would be set aside as affordable housing. The project is expected to take seven years to build.

Marty Markowitz has found a way to capitalize on his role as a power broker for development in the borough. Real estate developers and other Brooklyn businessmen currying favor with Markowitz have donated somewhere between $20 million to $45 million to his four Brooklyn charities. The charities all work to fund projects that improve the lives of Brooklyn residents and Markowitz claims there's no wrong-doing involved.

A new 181-unit luxury rental building with a retail will be built on Broadway and 77th Street with a $125 million loan funded by the issuance of bonds provided by the New York State Housing Finance Agency. The building, the Larstrand, will be developed by Friedland Properties and its representative Rose Associates. CVS has already agreed to lease part of the retail space. Thirty-seven of the units at the Larstrand will be designated as affordable.

Vornado Realty Trust and SL Green Realty are planning a transformation of the office towers at 280 Park Avenue that they acquired for almost $500 million. The group has commissioned architects KPF to oversee facade modifications to the structure.
The MTA will lease all the space in the forthcoming Fulton Street Transit Center to one company and let that firm manage it. The agency hopes to make it a shopping and dining destination. Once complete in 2014, the three-story glass and steel structure at the corner of Fulton Street and Broadway will have 70,000 square feet of retail space.

Bluerock Real Estate's high-end development known as the Charles at 1355 First Avenue between 72nd and 73rd streets, is being held up because an previous lender wants to remain in the deal even though its $5.57 million second mortgage was paid off in full. The lender, known only as Glacier 1355 First Avenue LP, won't formally cancel the mortgage obligation despite the fact that the note has been paid off.

One57, Extell Development's 90-story condominium, has some asking prices hitting $6,000 per square foot. The 1,000-foot tall property, at 157 West 57th Street between Sixth and Seventh avenues, is slated to replace 8 Spruce Street as the city's tallest residential building. Foreign buyers -- primarily from China -- have already snapped up some of the units since the developer began shopping them privately last month.

Building a hotel in New York City may be cheaper than purchasing one, as hotel property prices keep escalating. New York developers are planning to open around 50 new hotels in the city before 2013 and 68 more by 2014. Most developers would argue that it's better to open a hotel in 2013 than in 2012, but in New York City, a market that leads the cycle, next year should be good." Manhattan hotels have sold for an average of $505,157 per room so far in 2011, up from $344,799 in 2010 and $413,644 in 2009.

Cornell and Stanford is seeking $400 million for a new science graduate school on Roosevelt Island, The buildings that go well beyond the environmental standards set by Mayor Michael Bloomberg. Cornell plan calls for four acres of solar panels, 500 geothermal wells, and two major buildings that would consume no more energy than they produce. Additionally, on hot days the building would actually generate additional power and feed it into the grid.

A Hell's Kitchen development site, stalled for more than 30 years, has begun construction, for 1,258 apartments, more than half of which are affordable, a new school and stores. The $520 million four-building complex, called Gotham West, is being developed by the Gotham Organization. It will have a 31-story market-rate apartment building with 556 units, 682 affordable units across other buildings, 20 condominiums, a 670-seat school, stores and private gardens.

The NBC Sports division may move out of 30 Rockefeller Plaza to Connecticut. The company has already agreed to move to Stamford to take advantage of increased tax credits that the city has been offering to businesses. Gov. Dan Malloy of Connecticut has launched a "First Five" program, which offers tax credits and loans to the first five businesses in the state to promise to create at least 200 jobs.

Credit Suisse is planning to close down its commercial mortgage-backed securities division after it announced more layoffs. A final decision would be made within the next 30 days.

Douglaston Development plans to break ground on 3 Northside Piers in Williamsburg The $300 million project. Douglaston plans to build a 40-story rental tower where rents range from $55 to $60 per square-foot. L&M and RD will help on Douglaston's version of the tower.

Sam Zell's Equity Residential and Toll Brothers are closing in on the acquisition of 400 Park Avenue South, , with plans to build a residential tower with condominium units above rentals. The site, is currently a 20,000-square-foot parking lot owned by A&R Kalimian Realty. A&R obtained approval for a 40-story, 435-unit rental building. The price Equity Residential and Toll Brothers plan to pay for the site was not revealed, but reported to be $400/SF for each of its 420,000 buildable square feet.

Jamestown Properties and Rockwood Capital is providing equity to Murray Hill Properties and Crown Acquisitions for their $390 million purchase of 530 Fifth Avenue. Jamestown and Rockwood will be the controlling equity holders. The four firms are putting about $200 million in equity into the purchase and taking out about $220 million in debt. Crown is slated to manage leasing the retail space in the building, which is occupied by Fossil Store and LensCrafters, and will soon be home to a Syms

815 Sixth Avenue a stalled development site has hit is entering foreclosure auction Nov. 9 with a lien of more than $27.1 million. Adellco purchased the 3,823-square-foot lot at 28th Street in 2005 for $19.8 million with plans to build an ultra-slim Costas Kondyllis-designed condominium named Remy that included an Aloft hotel. However the plan stalled at the outset of the recession, and the firm defaulted on a $22 million loan, which was picked up by Lexin Capital in March of this year.

A Russian developer is accusing CIM Group of breaking a verbal agreement to work together to build on a vacant site at 33rd Street and Madison Avenue, and instead buying the $29 million mortgage and foreclose on it, a lawsuit filed in New York State Supreme Court. NMP-Group, controlled by Russian developer Natalia Pirogova, says in the suit that CIM Group used privileged information to snap up the note in August from lender Garrison Investment Group despite making promises in March 2011 to work with NMP in a joint venture to build a mixed-use tower at the site, at 172-176 Madison Avenue

Larry Silverstein, the developer of the 2.2 million-square-foot building, had previously said that if a private tenant takes the space the city's HRA commitment "may not be necessary." He and the Port Authority of New York & New Jersey, which owns the site, would prefer private tenants to fill the space, in part because they would pay more. The HRA lease starts at $56.50 per foot for its 582,000-square-foot space, about $10 to $15 less than tenants have paid in recent deals for space in nearby 7 World Trade Center. The New York City Human Resources Administration will be moving its staff into 4 World Trade Center in early 2015. The HRA will take 582,000 square feet on floors 22 to 35 in the 2.3 million-square-foot tower. The agency will be moving out of its current three locations at 180 Water Street, 2 Washington Street and 250 Church Street. Those three current locations total approximately 700,000 square feet, and about 3,000 employees will be making the move.

Local Harlem residents and business owners are speaking out against the possibility of a Walmart opening at a vacant plot of land at 125th Street and Lenox Avenue, saying that the big-box retailer would destroy the neighborhood's businesses. This is just the latest in New York's Walmart saga. Earlier this year, the store was said to be considering a Related Co. site in East New York. Despite political opposition, many New Yorkers are growing more willing to welcome the store into their city. As previously reported, retail sales to New York City residents in suburban stores like Walmart are up 10 percent from a year ago, and city dwellers are on pace to spend $215 million at the area's stores this year.

Despite low Manhattan office vacancy rates, 120 Park Avenue and 42nd Street remain empty, with some suggesting that the landlord is purposefully dragging its heels and holding out for higher rents as the market begins its recovery. The landlord is currently trading proposals for the available 114,000 square feet, with a number of tenants, asking around $85 per square foot.

Related Companies and Brookfield Office Properties each plan to begin construction at its property early next year. At Hudson Yards, at the LIRR storage area between 10th and 12th avenues and 30th and 33rd streets, Related is close to an agreement with Coach for 600,000-square-feet in the first building set to rise at the sites southeast corner. But financing for the building may not be complete until the developer can ink another tenant.

Overseas buyers make up up one third of New York City condominium purchasers and 15 percent of total purchases. That is down from the peak market of 2000, when 30 percent of total buyers were foreign. The biggest overseas buyers today are those in Russia, China, Brazil and Argentina, a change from the early years of the new millennium when they hailed from Europe, and particularly Ireland.

Hotel operator Shimmie Horn inked a 40-year renewal lease valued at $33 million for the landmarked Hotel Belleclaire at 250 West 77th Street on the Upper West Side.. Horn has operated a 242-room hotel at the highly-ornamented Emery Roth-designed building, at Broadway, since he first signed a lease in 1999. The new agreement extends the lease, which was set to expire this year, to June 2051. Included in the lease is an option to purchase the building, which can be exercised between 2026 and 2051.

A key state health planning agency approved the plans for a North Shore-LIJ emergency medical care facility on the former campus of St. Vincent's Hospital. The New York State Public Health and Health Planning Council signed off on a 140,000-square-foot 24-hour urgent care center in the O'Toole building on Seventh Avenue in Greenwich Village. Next, the plan must be approved by the state health commissioner, which has already given some indication that it favors the plan

An official in the city's Department of Housing Preservation and Development responsible for the construction of affordable housing was arrested on federal racketeering conspiracy and bribery charges with six developers, two of them lawyers. Wendell Walters, assistant commissioner for new construction, transformed the agency into a racketeering enterprise along with developer Stevenson Dunn. Walters is alleged to have taken approximately $600,000 in bribes and kickbacks on about $22 million in moderately priced housing projects overseen by HPD in the Bronx, Queens and Brooklyn between 2002 and 2011. Walters had played a key role in Mayor Michael Bloomberg's $8.5 billion housing plan to preserve and build 165,000 apartments for half a million middle-class and working-class New Yorkers by 2014

Mayor Michael Bloomberg and the heads of the State Assembly and State Senate have agreed on a memorandum of understanding that will provide the financing framework to close the gap in the Manhattan Greenway on the East Side of Manhattan through a land deal with the United Nations. The deal involves the sale of a portion of Robert Moses Playground to the U.N. for construction of a new building. The complicated land deal was first put into motion by legislation signed by Governor Andrew Cuomo in July, but the city and state government leaders still had to come to an agreement on details by Oct. 10.

The World Monuments Fund has placed 510 Fifth Avenue on its biannual list of cultural heritage sites at risk. The controversy over proposed structural changes to the property by Vornado, said that the case "raises questions about the legality of recent alterations and the capacity of the New York City Landmarks Commission to enforce protective regulations." The building is one of 67 sites worldwide included on the list. Other United States sites include the New York Studio School of Drawing, Painting and Sculpture at 8 West 8th Street, the Orange County Government Center in Goshen, N.Y and the Manitoga building in Garrison, N.Y

The city's Landmarks Preservation Commission rejected developer Jared Kushner's application to build atop the landmarked Puck Building in Soho, saying he will need to rethink his plans for rooftop additions to the 203,000-square-foot, mixed-use building at 295 Lafayette Street. Kushner's plan had involved redoing the top floors of the 10-story Romanesque Revival-style building and creating energy efficient penthouse units. Kushner said he would continue to refine the design in accordance with the commission's advice. "We look forward to continue working together to achieve the right outcome for the building," he said

Led by two forthcoming hotels from Hidrock Realty, the Fashion District is undergoing a hotel boom. Hidrock Realty , is bringing hotels to 25 37th Street, between Fifth and Sixth avenues, and 960 Sixth Avenue, at West 35th Street. Demolition is nearly complete at the 37th Street site, which will become a new 173-room, 70,000-square-foot SpringHill Suites. Meanwhile, the Sixth Avenue office building, which Hidrock acquired in a foreclosure auction, will be converted into a 100,000-square-foot, 167-room Courtyard by Marriott, with a rooftop bar.

Taconic Investment Partners completed raising $220 million for a fund focused on buying New York City properties. The firm is targeting "value-add and opportunistic multifamily, office and retail assets in New York City," expecting to earn a 15 percent to 17 percent net return on the investments. "The shifting real estate landscape and capital markets disruption are likely to provide opportunities for significant long-term upside potential," company co-CEO Paul Pariser, said. Even as Taconic did well with the Google sale, at 375 Pearl Street. Taconic purchased the tower in 2007 for $173 million and sold it this June for $120 million.

New York City real estate developers may be defrauding the government out of hundreds of millions of dollars every year in unpaid taxes. Curnutt said many real estate partnerships in particular are avoiding the taxes they owe. If an individual decides to partner up with someone to develop a property, he said, they get a loan from a lender. They then deduct a portion of that loan each year when they file taxes. However, when they sell the building, they owe the government the cumulative amount they saved from the deductions.

Gap will close one-quarter of its New York City locations.

Blackstone Group plans to add new retail space in the public plaza along 42nd Street between Times Square and Bryant Park. The plans include new retail in Equity Office's tower at 1095 Sixth Avenue and in a renovated three-story building at 120 West 42nd Street, that will also have two underground levels. The entire $25 million project is scheduled to be completed in fall 2012. Blackstone hopes that the new retail and the Plaza will complement each other going forward.

Related Companies has closed down a one-acre park squeezed between two skyscrapers spanning 92nd to 93rd streets and Second to Third avenue holding it hostage until the city agrees to give it several million dollars in tax breaks for an adjoining rental property. Related purchased the site from the city for $10 million in 1983 under a plan to revive the area. Per the agreement, the company had to maintain the park through June 2008, but has kept it clean and safe until now. It will return the park to the ownership of the city if granted the tax breaks.

The recession helped deep-pocketed national real estate investment trusts find their way into the New York market, and they are now aggressively picking up existing properties and building new developments all over the city. The high costs and hard-to-navigate public approval process for construction in the city, New York development used to be an almost an entirely private enterprise, ruled by local developers such as the Related Companies and the Rudins.


While global economic concerns have landlords of vacant U.S. retail spaces scrambling for any tenant, in Manhattan, landlords are patiently awaiting the perfect tenant for their trophy spaces. For example, it's not for lack of interest that the 55,000-square-foot retail space in SJP Properties' 11 Times Square, at 42nd Street and Eighth Avenue, has sat vacant for two years. Rather the developer wants to land a big-name and raise the profile of the one million-square-foot tower.
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