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September 2010

September 2010 » Market Analysis » NY New Developments

September 2010 New York New Developments


New Developments

A deal with Silverstein Properties over how to pay for two towers was approved by the Port Authority of New York & New Jersey. The plan calls for the restoration of the east side of the site to at least street level and the completion of the WTC Transportation Hub. The funding needed for the project is now projected to be between $1.1 billion to $1.3 billion.

A crucial City Council subcommittee and committee voted in favor of an office tower at 15 Penn Plaza proposed by developer Vornado Realty Trust. Although opposition to the 1,216-foot-tall tower stemmed from its impact on the city's fabled skyline. The council backed the plan because of the 6,000 construction jobs it will create, plus the additional jobs that will be created once the 67-story tower is built, just two blocks away from the Empire State Building. This project moves New York into the future. The eight members of the zoning and franchises subcommittee voted unanimously in favor of Vornado Realty Trust's tower. Immediately following that vote, the council's land use committee approved the project with 19 in favor, 1 against and 2 abstentions.

The 350,000-square-foot Art Deco office building at 116 John Street, between Pearl and Platt streets, is slated to become residential apartments with the help of Nathan Berman's Metro Loft Management. The 35-story property is currently half-occupied with small office tenants whose leases expire over the next two to three years, so Berman's conversion will happen in phases.

Some of the largest commercial property owners in the country including Macerich, Vornado Realty Trust and Simon Property Group have recently stopped making mortgage payments to put pressure on lenders to restructure debts. In a process known as "jingle mail," some companies are also sending lenders the keys to properties whose values had fallen below the mortgage amounts. Though the companies can all afford to pay, they are opting to default because they believe that it's a good business decision

Bank of America is looking for as much as 1 million square feet of new office space in Manhattan, even as it gets comfortable in its brand new LEED-certified eponymous mammoth at 1 Bryant Park. The bank, which is looking to replace the roughly 1 million square feet it has scattered amongst some older Manhattan buildings, including 1185 Sixth Avenue and 114 West 47th Street when their leases expire and has put out requests for proposals with landlords in Midtown and Downtown. Two contenders are SJP Properties' 11 Times Square, and 1 World Trade Center.

A year after JPMorgan Chase abandoned attempts to sell off its former headquarters in Lower Manhattan; the bank's current plan for One Chase Manhattan Plaza is on hold. Last year, Chase tried to sell off the 60-story, 2.2 million-square-foot aluminum-and-glass skyscraper at 26-46 Pine Street, but decided against it after the property failed to draw many bids.

Negotiations to open an urgent-care center at the shuttered St. Vincent Hospital in Greenwich Village have been stalled by a dispute over financial terms and by demands by former officials of the institution, a Roman Catholic hospital, that birth control not be made available there.

A judge upheld a permit change allowing Fordham University to expand its Lincoln Center campus, despite the objections of nearby residents. The planned expansion, which would include new student housing, library space, a theater and a new law school, among other academic buildings, is set to take place over the next 25 years. But while the school may be enthused over its development plan, residents at the Alfred Condominium, which sits amid the campus at 161 West 61st Street off Amsterdam Avenue, are not.

Developer Jacob Chetrit filed a $50 million lawsuit against Bonjour Capital's Charles Dayan, alleging the investment partner reneged on a deal to pay off a defaulted construction loan after the lender filed to foreclose on their Beekman Street hotel project in Lower Manhattan. In a suit, Chetrit alleged that Dayan agreed to pay his share of a reduced settlement in the foreclosure case at 5 Beekman Street, where the two investors planned to convert a landmark office building into a 200-room luxury hotel. The investors bought the 10-story office tower at Nassau Street, originally built in 1883, from Ruby Schron of Cammeby's International for $61 million in 2008. The lender filed suit in 2009, alleging that Chetrit and Dayan defaulted on a $45.75 million loan.

A joint venture between Pershing Square Capital Management and Winthrop Realty Services will not be allowed to foreclose on Stuyvesant Town and Peter Cooper Village. The ruling comes one day after Bank of America and U.S. Bancorp, trustees for the senior lenders of the residential complex, sued to block the joint venture from foreclosing on the 110-building property. The suit charged that the partnership breached terms of the agreement for the property, which outlines how the loan will be paid by all the different creditors.

A state Supreme Court judge ruled that MetLife could remain liable for over $200 million in rent overcharges at Stuyvesant Town and Peter Cooper Village, which the insurance firm owned prior to the 2006 sale to Tishman Speyer. The decision means that thousands of current and former Stuyvesant Town and Peter Cooper Village tenants will be able to pursue MetLife for retroactive rent that was charged prior to the $5.4 billion sale of the complex.

Wilbur Ross, the investor who has been interested in a takeover of the foreclosed Stuyvesant Town and Peter Cooper Village has no plans to back out even after hedge funder Bill Ackman's recent move to wrest control of the 11,227-unit complex. His partners are the LeFrak Orgniazation and Centerbridge Partners, and the trio had planned since January, when developer Tishman Speyer defaulted on its $3 billion mortgage on the property, to wait until the time was right to swoop in.

The state and the city have re-entered negotiations with Vornado Realty Trust and the Related Companies over the sale of 1 million square feet of air rights for the new Moynihan Station. The developers entered into an agreement with the state in 2006 to develop the Farley Post Office into a new train station and to use the air rights to build an adjacent mixed-use development topped by a 67-story tower.

Sam Nazarian, the U.S. hotelier, is property-hunting in New York, while he also plans to renovate the Ritz Plaza Hotel in Miami Beach and rework debt on a Las Vegas casino. Nazarian may strike a deal for his SLS Hotel brand in New York City within a year, as the travel industry recovers. He expects to spend $65 million in cash improving the Florida property and is also looking for locations in London, Chicago and Washington.

American Apparel, with 20 Manhattan and Brooklyn stores, may be forced to close or sublease as many as one-third of those locations as the chain's financial situation grows direr. The California-based company said that it has more than $120 million in debt and may not have enough cash to last until the end of the year.

Management at the Empire State Building is concerned that a new skyscraper will obstruct views of their iconic landmark and bring on unwelcome changes to the Manhattan skyline. A proposal to build 15 Penn Plaza, a 67-story, 1,200-foot office building down the street from the Empire State Building, will be the subject of a hearing in front of the City Council. The proposal, which will need Mayor Michael Bloomberg's approval, following a hearing, was already voted down.

Developer Sharif El-Gamal has no plans to back down from his most controversial project yet, Park51, the mosque and Islamic community center planned near Ground Zero. El-Gamal owns upward of 400,000 square feet of real estate in New York City, and considers the brouhaha surrounding Park51, a big distraction. His commitment to building an Islamic community center in Lower Manhattan seems to grow in direct proportion to the level of controversy fomented by his opponents.

The Royal Bank of Scotland has sold the first mortgage note on 292 Madison Avenue for $30 million. An entity owned by real estate investment and development group JEMB Realty bought the note on the 210,000-square-foot building, which sits on the corner of East 41st Street. Although it is not clear what JEMB president intends to do with the stake, some say this could be a first move toward foreclosing on the building down the road.

TIAA-CREF was the winner bidder with a bid of $190 million on the property, Pzifer property at 685 Third Avenue. At nearly 560,000 square feet, the price per square foot for the building was around $340. In June, more than a dozen bidders were vying for the building with prices around $150 million. The closing price is about 27 percent over those offers.

Extell Development lost a major West Side development site it assembled for at least $44 million to its lender. Gary Barnett's Extell gave up the parcel near Hudson Yards at 356-366 10th Avenue, priced just over the first mortgage value of $28.8 million, to its lender Barclays Capital Real Estate after a European partner refused to keep funding the project. Extell turned over the site, between 30th and 31st streets, to Barclays.

Despite rising slowly in fits and starts on West 47th Street in the Diamond District, Gary Barnett's 34-story International Gem Tower is set to spark the most profound real estate changes in a generation along the famously insular strip. The planned tower at 50 West 47th Street has just three basement floors constructed and a projected completion date in 2012, but it has contracts or purchase commitments for a total of about 150,000 of the 200,000 square feet. Barnett's Extell Development Company needs to secure construction financing.

Equity Residential is eyeing a vacant piece of land in the Financial District, a sign that the Chicago-based apartment building operator believes the New York market is on the rebound. Sam Zell, Equity's chairman, is one of several investors planning to bid on a development site at 133-135 Greenwich Street during a bankruptcy auction with the minimum bid starting at $14.5 million.

Cemeteries all over New York City are running out of burial space, and available plots are selling at a premium, with the cost tripled in some places compared to a decade ago. Per square foot, plots in centrally located cemeteries rival the most expensive real estate in the city. A private mausoleum at Woodlawn Cemetery in the Bronx can cost more than $1,000 per square foot, and above ground mausoleums can sell for more than $3 million.

Bedbugs have been discovered at One Time Warner Center, the Manhattan offices of Time Warner in Columbus Square, and at the headquarters of the Brooklyn district attorney, at 350 Jay Street. This latest outbreak follows a summer-long bedbug infestation around the city, including at the Hollister store in Soho, Abercrombie & Fitch at the South Street Seaport, a triage room at Kings County Hospital in Brooklyn and at a Victoria's Secret on the East Side.

For months, state officials have been questioning the safety, design and impact of highway
ramps that are crucial to the $3 billion development of Willets Point in Queens. The state officials who have expressed concern are some of the same officials whose approval is needed for the project to move forward.

After $150 million and more than a decade, the Federal Reserve Bank of New York's building at 33 Liberty Street is ready for the 21st century. The 870,000-square-foot bank, modeled after the Florentine palazzos of the Italian Renaissance, had been in need of nearly every kind of upgrade. The 22-story building, which houses 1,400 employees and 14.8 million pounds of gold bars, got air conditioning, fire alarms and sprinkler systems, as well as modern lighting and updates to its Internet connection and phone lines.

Mezzanine lenders at 295 Madison Avenue have filed suit against Westbrook Partners and the Moinian Group, seeking a $21 million judgment after a dispute broke out over whether the investors were granted a loan extension for the office tower. The lenders in a lawsuit filed in New York State Supreme Court, are demanding the investors pay back the $20.7 million loan after a dispute erupted over whether they agreed during a series of meetings earlier this year to extend the loan, which matures less than a month from today.

Morgan Stanley has been getting nibbles from multiple U.S. private equity firms looking to take on a stake in the bank's beleaguered real estate funds management business. Among those who are interested: KKR and TPG, both of which have little in the way of property operations, and Colony Capital, which handed over its stalled, $2 billion Xanadu complex in New Jersey's the Meadowlands to creditors.
Plans for the redevelopment and expansion of Delta Air Lines Terminal 4 at John F. Kennedy

International Airport which call for nine new international gates, construction of a connector between Terminal 2 and Terminal 4, an expanded baggage claim area and ultimately the demolition of Terminal 3 were unveiled for the $1.2 billion project is scheduled to begin in September, with the first phase of development and full relocation of Delta's Terminal 3 operations slated for completion in May 2013.

Lenders foreclosed on the $2 billion stalled Xanadu project in the Meadowlands and are already in talks with the Related Companies for a partnership that would restart construction on the unfinished complex. The creditors include Credit Suisse, Capmark Financial and an affiliate of Fortress Investment Group. The retail and entertainment center is to have an 800-foot indoor ski slope, skydiving wind tunnels and the largest Ferris wheel in North America.

Africa Israel Investments has set a deadline of mid-August for bids on a new high-end hotel in the former New York Times building in Times Square, which it hopes to open by 2012. The company, which spent $200 million to gut the long-vacant property at 229 West 43rd Street, between Seventh and Eighth avenues, has received more than 70 inquiries from hotel operators looking to buy the seven floors that will be designated as hotel space in the iconic building, which once housed the Times' printing presses and offices.

A federal district court judge ruled that developer Lev Leviev must return deposits to three buyers at the District condominium after he failed to register the property under the Interstate Land Sales Full Disclosure Act. The case marks the first time that a federal judge awarded rescission in a New York ILSA case since the global credit markets collapsed in 2008, and the first such ruling in more than 20 years. Experts say the case could swing the legal pendulum away from developers in several significant cases.

The developer of Flushing's massive Sky View Parc mixed-use complex is looking for $150 million in financing to complete the first phase of its delayed condo and retail project, which is already over budget. Onex Real Estate Partners, the general partner for the 1,000-unit, 15-acre development, wants a three-year extension on its $519.3 million construction loan, plus an additional $144.6 million. The deal is most likely to be reached within weeks.

The owner of the 19th century building that houses the Chelsea Art Museum has filed for bankruptcy in a move that could force the museum to shut its doors. Dorothea Keeser, the owner of the 556 West 22nd Street property and co-founder of the museum, plans to sell the building, worth an estimated $20 million, unless she is able to refinance the debt and develop the rooftop. The news has vultures circling the well-located property, which sits on 11th Avenue near the new High Line Park.

The American Folk Art Museum, which has struggled financially almost since the day it opened its new building in 2001, is trying to reach an agreement that will keep the museum in its current location at 45 West 53rd Street. Six months after disclosing that it could no longer make payments on its $32 million bond, the museum is still in protracted negotiations to restructure its debt with the company that insured its bonds. Both sides say they are optimistic they will reach an agreement.

The Port Authority of New York & New Jersey has approved the terms of the Durst Organization's partnership deal for a 10 percent stake in 1 World Trade Center. The Dursts will pay $100 million, a number that could rise to $300 million in the future, for their share of the $3.3 billion, 1,776-foot-tall tower, for which the developers will head up the leasing and property management efforts once the deal is complete. Just a few days ago, publishing giant Condé Nast tentatively signed on to move its headquarters to 1 World Trade Center in 2014 from another of Durst's Manhattan skyscrapers at 4 Times Square though believed Durst was not involved in the Condé Nast negotiations, where it occupies 800,000 square feet.

Joseph Moinian is seeking a joint venture partner for a new hotel project at 237 West 54th Street, a vacant, five-story building he owns between Broadway and Eighth Avenue. Current zoning for the site allows for up to 144,000 square feet, and Moinian is angling for a boutique hotel that would contain as many as 400 guest rooms. The block once looked to be poised for a development boom, with plans for a new Marriott Courtyard Hotel and Boston Properties office tower, both in the works two years ago.

The value of construction projects started by New York City public and private institutions amounted to $8.1 billion over a two-year period ending April. The public sector was responsible for 60 percent of spending. More than 1,500 construction projects were started by city-based institutions over the two-year period. Construction of new government facilities totaled $4.8 billion in value, in direct contrast with the office sector, which has seen very little ground-up construction outside the World Trade Center in recent years.

Almost 20 of the 70 businesses on Second Avenue around 91st and 97th streets have shuttered since construction on the new East Side subway line began three years ago, and the ones that remain are struggling to stay afloat. The numbers come from the Second Avenue Business Association, whose director owns a pizza shop on 92nd Street and says that he has been suffering from foot traffic that's down by nearly a third and reduced parking because of the ongoing construction.

The fruit and vegetable merchants that occupy the run-down Terminal Produce Cooperative Market at Hunts Point in the South Bronx are threatening to leave the city-owned facility, the largest of its kind in the world, after a push by a regulator to impose new rules and increase fees. The 46 vendors, who together supply 60 percent of the city's produce, have long endured poor conditions and overcrowding at the 112-acre property, which they say is the reason they have lost many of their customers to wholesalers.
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