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September 2012

September 2012 » Market Analysis » NY New Developments

September 2012 New York New Developments


New Developments

The Related Companies has won wage-cutting agreements with some four dozen construction unions in its efforts to save money at the $15 billion development of Hudson Yards. The developer, one of the most outspoken for the need to cut construction costs during contract negotiations with unions last year, got the groups to agree to cut wages and benefit packages by 10 percent to ensure they would be commissioned to work the massive construction project expected to carry on for the next decade. The deal is not yet final.

With public support, the Kingsbridge Armory ice rink plan may appear to be a done deal but Young Woo’s development firm, is behind a competing proposal. The firm wants to bring Mercado Mirabo (a market you can see) to the site, which would include space for a food court, a movie theater, a rock climbing wall, a sports arena, a hip hop museum and weekend markets. The project would create 1,500 Bronx jobs, including 800 permanent ones.

George Comfort & Sons put Worldwide Plaza on the market this month, is also in talks to buy 75 Rockefeller Plaza. The 600,000-square-foot tower is owned by Mohamed Al Fayed, a London-based retailing magnate.

The Fulton Street Mall, and the surrounding areas, is getting a makeover. The Brooklyn shopping area is becoming a place where national retailers are setting up shops. Raymour & Flanigan is set to open a 28,000-square-foot store in Feburary 2013 at 490 Fulton Street. Other area retailers include Victoria’s Secret, Armani Exchange, Nordstrom Rack, and Century 21.


Worldwide Plaza, the behemoth office building located at 825 Eighth Avenue, will go up for auction 1.8-million-square-foot tower. The owners of the 59-story tower are George Comfort & Sons and RGC Longview.

Tourists won’t be the only shoppers stampeding to Rockefeller Center if Tishman Speyer gets its way. Tishman is remaking the retail at its iconic complex, in an effort to bridge the gap between the tenants of Fifth Avenue in the streets numbered in the mid-40s and those in the 50s. Rock Center draws around 350,000 people per day, and half a million people during the holidays. The asking rent for the 21,600-square-foot Faconnable space that’s currently on the market, at 636 Fifth Avenue, is more than $1,800 per foot. Two years ago, asking rents were closer to $1,000 per foot.

Outlet malls are all the rage in the outer boroughs. Thor Equities President Joe Sitt is considering bringing one to the former Revere Sugar Refinery on the Red Hook waterfront between the Ikea and Fairway stores. Lightstone Group was planning to bring outlets to the Whitestone Cinema site in Castle Hill. BFC Partners is in talks with the Bloomberg administration to build a 500,000-square-foot outlet mall on Staten Island near the ferry terminal. The mall would join a proposed 600-foot Ferris wheel in St. George, on the northern tip of the island, on parking lots flanking the baseball stadium the Staten Island Yankees call home.

The world’s largest H&M store is coming to New York City. The retailer has just signed a 57,000-square-foot lease at 589 Fifth Avenue. The location is just a few blocks from H&M’s current New York flagship, at 640 Fifth Avenue at 51st Street.

Howard Hughes Corp. has reached an agreement with the city’s Economic Development Corporation to overhaul Pier 17 in Lower Manhattan. Construction is projected is set to begin next year, and be completed by 2015.

Another developer has big plans for the Astoria waterfront, joining two other proposed projects for the western Queens neighborhood.

The partnership closed on the deal for the fee interest, the Naftali Group, and plans on developing a Gene Kaufman-designed 30-story student housing facility to cater to Pace University students. Upon completion of the development, the partnership will convey a long-term ground lease condominium interest in the building to Pace University for approximately 29 floors of student housing together with ground-floor school-related space.

CUNY’s New Community College opened at 50 West 40th Street, marking the first new community college to open in the city in more than 40 years. The Bryant Park space will begin the academic year with a total of 330 first-year students.

Mayor Bloomberg’s massive Midtown East rezoning plan does not go far enough and will therefore not produce the sweeping changes necessary in the aging office district. Bloomberg believes that the area desperately needs larger, newer office stock to keep high-profile firms in that area of the city. But the program the mayor is proposing requires too much red tape and too many expenses to be implemented successfully.

The Department of City Planning certified a rezoning proposal for the Hudson Square neighborhood that paves the way for residential development. Hudson Square is currently zoned for manufacturing, and the rezoning is meant to preserve some of the existing structures, encourage more open space, while bringing schools and housing to the neighborhood. The goal is to allow for residential development without stifling the influx of tech and new media businesses to the area’s loft-style office space.

A $68 million deal to transforming the top 30 floors of the iconic Woolworth Building into 40 luxury condominiums has been finalized and the units are expected to be ready for occupancy by 2015. An investment group led by Alchemy Properties closed on the upper portion of the building from a partnership of the Witkoff Group and Cammeby’s International, which will continue to lease the bottom 28 floors as offices.

Institutional construction spending in New York City continues to shrink and stifle builders. The city’s private and public institutions embarked on $704 million worth of construction projects in the first six months of 2012, down 41 percent from the $1.2 billion spent over the same period a year ago. There is a continued downward trend, as institutional construction starts totaled $3.8 billion for all of 2009, $2.9 billion in 2010 and $2.4 billion last year. This year’s pace is just $1.4 billion.

Overall New York City construction starts fell 31 percent in 2011 and as a result the city’s building industry employed fewer people in the first quarter of 2012 than it has at any point in the last 13 years.

Much of the decline in institutional spending is due to a sharp drop in spending by public elementary and secondary schools. The value of their new construction projects fell by 62 percent annually in the first six months of the year to just $169 million. These institutions account for 37 percent of all value over the last four years. Hospital and health care construction starts, which historically has accounted for 26 percent of outlays, grew 19.2 percent to $273 million.

With large construction projects on the docket for Columbia Unviersity’s Manhattanville expansion, New York University’s expansion, the Cornell NYC Tech school slated for Roosevelt Island and the City University of New York’s $2.1 billion worth of construction plans over the next five years,.

According to the founder of Fortress Investment Group and a board member of the Hudson River Park Trust, people didn’t understand the problem until it was too late. Now, the park is more likely than ever to close. The pier needs $100 million in infrastructure repair and has become a financial liability for the Trust, which was supposed to ensure that the 5-mile-long Hudson River Park was self-supporting. Over the next decade, the park is expected to generate $200 million in revenue on expenses of more than $280 million.

New York City’s largest office landlord, SL Green, announced a joint venture with Stonehenge Partners on a luxury residential redevelopment project in Morningside Heights. The partnership will enter a 99-year ground lease for the 96-unit 1080 Amsterdam Avenue, located at 113th Street, just a few blocks south of Columbia University which it paid $13 million.

For the last two years a group of New York hospitals have been working to bring a proton therapy method to the city’s cancer patients. The hospitals include Memorial Sloan Kettering, NYU, Mount Sinai, Montefiore Medical Center, and Continuum Health Partners. They are now focusing on 2485 Second Avenue in Harlem. The site, owned by car dealer Alan Potamkin and running the full block between East 127th and East 128th streets all the way to Third Avenue, is ideal for the New York Proton Center partnership because it needs a rectangle of about 40,000 square feet so that the protons can run in a straight line to better treat patients. The hospitals have a letter of intent in place for a ground-lease on the site to build a VOA-designed 120,000-square-foot structure that would open in 2015 or 2016 and treat 1,300 to 1,400 people per year. This is still well short of the demand for proton therapy among New York-area cancer patients.

Simone Development is bringing a much-needed hotel to the East Bronx. The developer is planning a seven-story hotel on the upper floors of a new, 300,000-square-foot building planned for the 42-acre Hutchinson Metro Center, located off the Hutchinson River Parkway between the Pelham Bay and Morris Park neighborhoods. The hotel will be flagged by Marriott’s Residence Inn extended-stay brand and will feature 125 rooms.

Vornado Realty Trust’s CEO is bullish on Upper Fifth Avenue. The firm expected to receive a huge bump in rent as the lease for a large retail location on Fifth Avenue ends. In just the next couple of years, one of our best leases on Fifth Avenue expires. Re-leasing there could produce an annual increase in rent of more than $20 million.

Nathan Berman’s Metro Loft Management no longer controls 70 Pine Street the Lower Manhattan tower. Metro Loft sold its interest in the project back to Eastbridge, which turned to Rose Associates to oversee the conversion.

India-based Sahara India Pariwar may take an 85 percent stake in hotelier Sant Singh Chatwal’s Dream Downtown Hotel. The deal is said to value the hotel at 355 West 16th Street, between Eighth and Ninth avenues, at $100 million.

Market dynamics are increasingly compelling users of commercial real estate to buy their spaces instead of renting them. As rents creep ever higher, especially for retail space in Manhattan, property prices remain somewhat depressed and interest rates for large corporations to finance purchases descend lower and lower, it’s beginning to make more financial sense for companies to buy their space.
Nordstrom’s decision to buy its Manhattan retail space, and similar decisions by the Federal Reserve at 33 Maiden Lane, Coach at Hudson Yards and Young & Rubicam at 3 Columbus Circle. At Hudson Yards, Coach’s decision to buy helped finance construction elsewhere on the mixed-use project.

A comprehensive study of New York City buildings found that if the least green buildings attained merely the median level of efficiency, greenhouse gas emissions would be cut by 24 percent in the city. The bottom 10 percent of the more than 15,400 buildings surveyed used three- to five-times as much energy as some of their counterparts.

Vornado Realty Trust has just signed a 20-year lease for the retail space underneath the Marriott Marquis Times Square hotel, Host Hotels & Resorts. The trust will spend as much as $140 million to expand the space, at 1535 Broadway, convert the underground parking lot into additional selling space, and create a six-story, 300-foot-long LED sign.

The city’s Office of Management and Budget released a report that showed the number of office workers rose by 93,000 over the last two years. The amount of available office space only fell by 9.3 million square feet. That came to about 100 square feet per person, which is below the rule of thumb of 225 [to] 250 square feet per employee.

Citigroup is looking at a similar consolidation. Last month the bank put 238,021 square feet of sublease space at 666 Fifth Avenue on the market with Citigroup has less than two years remaining on its lease. Citigroup is shifting staff to 399 Park Avenue and 601 Lexington Avenue.

The Downtown market is Manhattan’s most affordable, with average asking rents of $38.50 per foot in July, up $0.22. At the same time, the availability rate was down by 0.2 points to 10.4 percent.

Retail rents in Harlem are tracing the path taken by home prices and rents in the area since the boom. More national chains are replacing the neighborhood’s mom-and-pop businesses. The average retail rent in the second quarter this year was $100 per foot, up 33 percent from $75 the prior-year quarter, which itself was a 50 percent increase of retail rates in 2010.

Real estate investors Aurora Capital Associates purchased the discount clothing chain Daffy’s.
Aurora is now searching for subtenants for all of Daffy’s 19 stores in the New York metropolitan area.

Special servicer CW Capital has filed suit to foreclose on a 356,000-square-foot pre-war office tower at 315 Park Avenue South owned by BCN Development’s Craig Nassi. Nassi bought the building for $265 million in 2007, and is delinquent on a securitized loan of more than $200 million.

Law firms, which have long been pioneers in the Manhattan office market, are upholding that tradition seeking space downtown and on the Far West Side, as prices even in once relatively affordable markets, such as the Columbus Circle area, have risen.

It’s looking increasingly likely that the Seward Park redevelopment planned for the Lower East Side will ditch the “long-stalled” modifier attached to it for the last 45 years. After decades of disagreement between developers, officials and activists, a project proposal will be brought to City Council soon.

The city is moving to gain permanent control of a site directly underneath the elevated park to make room for an Emergency Medical Services station.

The Brooklyn Navy Yard Development Corporation and developer Douglas Steiner have reached an agreement to convert the Naval Annex Historic Campus, the perhaps most neglected section of the Navy Yard, into a media, technology and film hub. Steiner owns the nearby Steiner Studios, and other investment properties in Brooklyn, and would link the project to his film studio to create a 50-acre tech and media campus.

Vornado Realty Trust is moving forward with its plans to demolish two small mid-block commercial buildings in Midtown that are tied to a large condominium development on Central Park South.

The large real estate investment trust filed plans with the city’s Department of Buildings to demolish 231 West 58th Street, a three-story structure, and 229 West 58th Street, which has five floors. The properties are located between Broadway and Seventh Avenue.

Spacecutter, a design studio, issued a concept proposal to convert a one-story brick warehouse near McCarren Park in Williamsburg into a 60,000-square-foot market space called the Williamsburg Market. The cost would total $9 million.

Madison Avenue north of East 60th Street is undergoing a resurgence. It’s not only the classic, ultra-luxury brands that are driving the growth; downtown clothing boutiques that appeal to a younger audience are also filling up the storefronts. Vince, Sandro and Yigal Azrouel have opened on Madison Avenue in the 70s. In total, nearly 50 stores have opened on Madison Avenue on the Upper East Side in the last 18 months. Traditional Madison Avenue brands, such as Lanvin and Chanel, have expanded their presence on Madison.
Fendi store is looking to depart 677 Fifth Avenue for the 5,620-square-foot space at 598 Madison Avenue currently occupied by Mont Blanc, which has its sights set on the larger, 10,300-square-foot two-story Baccarat corner store at 625 Madison Avenue. Baccarat’s negotiations for 25,000 square feet on three levels at 635 Madison Avenue, which was formerly home to a store from now-bankrupt Searle.

Rockrose Development closed on its purchase of a 19,475-square on West 39th Street development parcel and the Imperatore family began exploring a sale of a 1 million-square-foot development site across 11th Avenue from the Javits Center. The acquisition of the site, at 528-534 West 39th Street, paves the way for a residential development totaling 528 units as well as an additional 1 million square feet of commercial development. Chetrit has entered contract to buy property in the area for $26 million.

DDG Partners is in contract to buy the four-building Soho Tootsie Roll factory complex from Lehman Brothers Holdings. DDG paid around $39 million for the properties and may instigate a condominium conversion. The block-through properties contain 56,000 square feet at 325 West Broadway, on the corner of Grand Street, and have Wooster Street frontage.

The Katan Group is again taking legal action to have greater say over the fate of the Domino Sugar Factory development site it owns with CPC Resources. Katan Group filed a lawsuit to block the contracted $180 million sale of the site to Two Trees Management. Joseph Chetrit was willing to pay as much as Two Trees, Sage Capital was willing to pay $10 million more and a firm called Heritage was offering $200 million for the development site.

Chicago-based Strategic Hotels & Resorts is regaining ownership of the Jumeirah Essex House on Central Park South. The firm paid Dubai Investment Group between $350 million and $400 million for the 509-room property at 160 Central Park South. Dubai had purchased it from Strategic in 2005 for about $440 million.

The federal Superfund program is preparing to take on its biggest challenges in its three decades of existence: cleaning urban waterways. Most of these sites are in New York and New Jersey, the states with the most Superfund-eligible sites, and include the Passaic River in New Jersey, the Gowanus Canal in Brooklyn, Newton Creek on the Brooklyn-Queens border and the final section of the Hudson River.

The proposed public offering of the Empire State Building states the building’s net operating income is projected to rise to $160.6 million in 2015, up from $76.8 million this June. By 2026 income should rise to $248.5 million and by 2041 it is expected to reach $422 million.

Irish Bank Resolution Corp., the Irish government entity that took over Anglo Irish Bank, sold the Apthorp’s mortgage debt to Arefin U.S. Investment, an affiliate of Area. The $385 million mortgage debt had a balance of $225 million at the end of 2011.

While the aqueduct racino has drawn huge crowds, a record $1.13 billion was wagered at the new facility in July — local residents in South Ozone Park, Queens say they have yet to see spillover benefits from the casino complex. While the racino has contributed $329 million in taxes to the state, and 61 percent of the 1,750 jobs provided by the facility have gone to Queen’s residents, there are still many underdeveloped strips along Rockaway Boulevard in South Ozone Park.
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