New Developments
After many years of construction on Fulton Street, small business owners are now able to apply for grants from the city to improve storefronts that have been obstructed or damaged by the construction. The Fulton Nassau Crossroads Program, funded by the Lower Manhattan Development Corporation, offers free design, engineering and construction management, along with $275,000 for construction, to buildings located on Fulton and Nassau streets.Law firm Orrick Herrington & Sutcliffe may sign a lease for 220,000 square feet at 51 West 52nd Street. They will take the space previously occupied by UBS and Cushman & Wakefield. Cushman will be consolidating its Midtown offices at 1290 Avenue of the Americas. UBS paid around $32 million to end its lease early. Orrick is vacating 240,000-square feet at 666 Fifth Avenue.
There is little chance the Second Avenue Subway line will get built in the next 10 years.
Claremont Prep signed a 20-year lease for 200,000 square feet at 25 Broadway for its middle and high school classes starting in fall 2010. Claremont had originally leased space at 100 Church Street but backed out. The 25 Broadway space was better suited for Claremont where asking rents range from $38 to $40 per square foot.
Ismael Leyva Architects has renewed its lease for 16,000 square feet at 48 West 37th Street on the 12th and 13th floors.
New York had its coolest June since 1985 this year, and as a result, Manhattan office landlords are seeing their summer air-conditioning bills go down. Power bills for June fell $100,000 at each of the three 1 million-square-foot office buildings run by EnergyWatch, which buys power for office space. The power bill dropped nearly $72,000 at one Manhattan hospital. New York's wholesale power price has averaged $28.69 per megawatt-hour in July so far, a 71 percent drop from last summer. This month is on track to be the second-coolest July in 140 years, so bills are likely to stay low.
A potential wave of commercial real estate defaults may present a challenge for the economy and urge lenders to modify problem mortgages to avoid defaults. Federal policy makers will extend the TALF, which began accepting commercial mortgage-backed securities as collateral last month, if they feel that the financial markets are still some distance from normal operation. Since the peak of the market, commercial property prices have fallen 35 percent and more than $108 billion worth of commercial property is now in default, foreclosure or bankruptcy.
Vornado Realty Trust's agreement to be the designated developer of an office tower atop the Port Authority Bus Terminal is to expire in August. To keep the deal, Vornado's chairman would have to pay $500 million over the 99-year term of the lease. Vornado never found a tenant for the proposed 1.3 million-square-foot tower, so the continuation of the agreement seems uncertain. Vornado and the Port Authority are discussing a plan in which Vornado would expand the terminal's retail space.
When the economy is strong, many landlords turn their noses up at restaurant tenants, fearing unpleasant food odors, vermin and noise. But as retail vacancies proliferate across the city and the recession drags on, landlords are rethinking their disdain for eateries. They used to be sort of perceived as a hassle because of potential odors, but now they are seen as rent-paying tenants.
The number of independently owned restaurants in New York City fell by 1 percent year-over-year in the second quarter. New York City saw the most restaurant closings of any metropolitan area by sheer number. The drop translates to the closure of about 430 restaurants between second-quarter 2008 and second-quarter 2009. The same 1 percent drop occurred nationwide, and the number of people going out to eat fell 2.6 percent nationwide, the largest dip since 1981. The restaurant market will remain weak for at least another nine months.
The Port Authority of New York and New Jersey, which owns the World Trade Center site, may be ready to turn land over to developer Larry Silverstein once a retaining wall on the site has been moved in. The Port Authority has already paid a $300,000-per-day penalty to Silverstein for missing the deadlines set in Silverstein's lease. The Port Authority and Silverstein have been in a dispute over financing for the office towers Silverstein plans to build.
Port Authority of New York and New Jersey has developed a plan to build around developer Larry Silverstein's office tower sites at the World Trade Center, should the dispute over Silverstein's financing remain unresolved. Under the Port Authority's plan, changes would be needed at the PATH station, which is currently designed to have ventilation, exits and safety features built into Silverstein's towers. Plans for the Vehicle Security Center, the Freedom Tower, the power plant and the bus parking garage would also need to be changed. These changes could cost hundreds of millions of dollars. The changes could also incur legal challenges from Silverstein, who has already argued that design changes violate his lease.
The World Trade Center financing dispute between Larry Silverstein and the Port Authority of New York and New Jersey may cost the Port Authority as much as $2.7 billion. There could be up to $1 billion in lost rent, infrastructure expenses of as much as $1.1 billion, and $600 million needed to build retail stores that could be the bases for towers in the future. Silverstein has asked the Port Authority to give financial guarantees of $2.6 billion for his construction of two office towers. The Port Authority has offered to guarantee financing only if Silverstein raises $625 million from lenders or investors. Port Authority spokesman Stephen Sigmund said the $2.7 billion estimate is incorrect and Silverstein's proposal would be more expensive.
The Port Authority of New York and New Jersey offered to guarantee financing for both of developer Larry Silverstein's office towers on Church Street at the World Trade Center site, which are expected to cost about $4.2 billion. Silverstein would only receive up to $1.2 billion in financing for the second tower if he raised $625 million from lenders or investors. Assembly Speaker Silver does not think the proposal gets Silverstein and the Port Authority any closer to a deal. If the dispute is not resolved, the commemoration could be in danger.
Nordstrom Rack, a discount unit of retailer Nordstrom, will open at One Union Square South, occupying 32,136 square feet on the lower level of the former Virgin Megastore space. The store, the first Nordstrom Rack in Manhattan, is to open in spring 2010. The retail space facing Union Square Park usually gets $400 per square foot and the Virgin Megastore space could rent for even more. Best Buy is also coming to One Union Square South and is expected to open a 46,000-square-foot store in the former Circuit City space during the fourth quarter of this year.
Lehman Brothers Holding, the bankrupt company now controlled by restructuring firm Alvarez & Marshal, has signed a 150,000-square-foot sublease at 1271 Sixth Avenue from Time Inc., which controls most of the building. Lehman also ended the 500,000-square-foot sublease it has held at the building since 2007. The new sublease has different time frames for different floors. Lehman has floors 35, 38 and 40, and parts of floors 39 and 46.
Commercial lenders are facing reality but not all at once. In addition to reluctance to admit they have bad loans on commercial properties, lenders have been trying to avoid taking large losses in a single quarter. In many cases, they are holding onto underwater real estate loans not only because they don't want to accept low-ball offers, but also because they cannot afford the appearance of a large single-quarter loss.
To help entrepreneurs get on their feet, New York City’s Economic Development Corporation plans to open more business incubators like the one at 160 Varick Street in Lower Manhattan. The EDC is looking for commercial landlords willing to donate office space for the incubators. Industries such as food manufacturing, fashion, Web-based technology and architecture could be served by the new program. The agency is seeking building owners who can provide 5,000 to 20,000 square feet of office space for free or for no more than $10 a square foot, though landlords demanding higher rents can still submit proposals.
While their larger counterparts are laying off attorneys as the recession continues, small law firms are increasing staff. The personnel growth has not meant additional real estate transactions for law firms. Law firms occupying 5,000 square feet or more saw a 4.57 percent decrease in average asking rent. The average asking rent for law firm space is now $70.92 per square foot, more than $10 higher than the average per square foot cost of Manhattan office space overall. The largest law firm real estate transaction of the quarter was Wachtell Lipton Rosen and Katz's renewal of 240,930 square feet at 51 West 52nd Street.
Hotel developer Sam Chang has lined up a buyer for his budget hotels on West 39th Street. Chang has a deal set to close for the three hotels in one building with separate entrances at 337, 339 and 343 West 39th Street. The buyer may be Hersha Hospitality, a Philadelphia-based, publicly traded REIT and an affiliate of the Hersha Trust, which has partnered with McSam before.
After being stalled for three years, plans for an arts center at the World Trade Center site seem to be back on track. The Performing Arts Center could move to the Deutsche Bank tower site at 130 Liberty Street; the arts center was originally slated to go on a site four blocks north. The venue would house the Joyce Theater, a dance company, and could also serve as a home for cultural events such as the Tribeca Film Festival. Moving the building to 130 Liberty Street would also move up the construction timetable. The Deutsche Bank tower is slated for demolition by January, but the original site for the arts center won't be available for six or seven years.
After two consecutive quarters of negative returns, private commercial mortgages held by life insurance companies nationwide rebounded into positive territory during first-quarter 2009. Based on cash flow data collected from participating life insurance companies, first-quarter 2009 finally saw a positive return of 1.63 percent following negative returns in the last two quarters of 2008. But it is unclear whether these positive numbers will hold. Owners are likely to cut all other expenses before defaulting on their mortgages, so as the recession continues, there is a higher possibility for distress or defaults in the private commercial mortgage markets.
Nearly a dozen retail vacancies dot Broadway between Houston Street and Astor Place. In recent years of economic excess, the strip languished in the shopping shadow of its neighbors, trendy Soho to the south and bustling Union Square to the north. But in today's sagging economy, Noho, with its rents half the price of areas like Soho could draw new retail blood such as apparel tenants, gourmet markets, and European brands that would have previously turned their noses up at the area. Still, the economy and bleak national retail picture are stalling the neighborhood's resurgence. Due to market conditions, many retailers have pulled back.
After being stalled for three years, plans for an arts center at the World Trade Center site are back on. The Performing Arts Center may move to the Deutsche Bank tower site at 130 Liberty Street. The center was originally planned to go to a site four blocks north. The space would house the Joyce Theater, a dance company, and could also serve as a place for cultural events such as the Tribeca Film Festival. Moving the building to 130 Liberty Street would also move forward the construction timetable. The Deutsche Bank tower is being planned for demolition by January, but the original site for the arts center will not be available for six or seven years.
The lenders on Midtown's Shangri-La Hotel have sued developer RFR Holding partners for at least $145.6 million. The lenders filed to foreclose on the hotel, but last week they amended the complaint to make Rosen and Fuchs personally liable for the loan and other fees. The developers were planning to build the Shangri-La Hotels and Resorts' tower at 610 Lexington Avenue at 53rd Street.
A Lower Manhattan church and an Upper West Side public school building were named landmarks by the Landmarks Preservation Commission. The former St. George Melkite Catholic Church at 103 Washington Street, between Carlisle and Rector Streets, was built in 1812 and served as a boarding house until a church took the space between 1925 and 1966. The Mickey Mantle School, at 460-466 West End Avenue at 82nd Street, opened in 1896.
After allegations that the Bronx Overall Economic Development Corporation mishandled hundreds of thousands of dollars in funds from the Community Benefits Agreement for the Gateway Center Mall, Bronx Borough President is calling for a complete accounting of the corporation's economic activities. Officials from the agency say the lawsuit is frivolous and deny that they diverted any of the $1.8 million provided by Related Companies, developer of the mall being constructed on the former Bronx Terminal Market site. Related contributed the money to promote job training and local hiring at the mall. The corporation said it expects to be cleared of any wrongdoing when the economic reports are released.
Parishioners and area residents spoke up at a Landmarks Preservation Commission hearing yesterday on the fate of the West Park Presbyterian Church at 165 West 86th Street. Church leaders are opposed to giving the property a landmark designation because it could prevent parts of the property from being redeveloped. But neighborhood residents and preservation groups argue that the property needs to be landmarked to prevent church leaders from demolishing the building, which needs more than $10 million worth of repairs. The church was designed by Leopold Eidlitz in 1883.
Two Manhattan office buildings, 183 Madison Avenue and 100 Fifth Avenue, are now part of the United Kingdom insolvency proceedings of Rock Investment's parent company. PricewaterhouseCoopers is administering the two properties along with about 45 others, mostly in England. The company plans to hold onto the properties rather than sell them. Rock Investments paid $107.5 million for 103 Madison Avenue in 2007 and $152 million for 100 Fifth Avenue in 2008.
Discount clothing retailer T.J. Maxx is looking to open a second store in Manhattan. T.J. Maxx has a location at 620 Avenue of the Americas and may be interested in 250 West 57th Street for its new space. The building has more than 46,000 square feet of retail space in the basement and on the ground floor and first floor. It is across the street from the Hearst Tower, where the retailer Anthropologie may take the ground-floor retail space.
The Metropolitan Transportation Authority bought the first of four adjacent Midtown commercial buildings that will ultimately be demolished to make way for the development of a 60-foot ventilation structure that is part of the East Side Access project. The MTA paid $9.25 million for the vacant, 8,748-square-foot, five-story building at 48 East 50th Street.
Gramercy Park's Cabrini Medical Center filed for Chapter 11 bankruptcy protection, leaving a valuable asset for the taking. The medical center closed its doors March 17, 2008 and the following day, the 338-bed hospital handed over its 60 hospice beds to Saint Vincent Catholic Medical Centers. Cabrini was one of the five hospitals in New York City slated for closure in 2006 by the Berger Commission on Health Care Facilities. After the hospital shut a year ago, the facility provided ancillary health services like inpatient medical/surgical, psychiatric and rehabilitation services, and was a state-designated AIDS center. Over the past two years, Cabrini was in negotiations with Saint Vincent's to buy two of its buildings. The most important asset of the bankrupt medical center is its 18-story hospice located at 227 East 19th Street between Second and Third avenues. Sun Life Assurance Company of Canada holds a $35.1 million first mortgage on the building.
Law firm Wachtell Lipton Rosen & Katz renewed its 240,930-square-foot lease at 51 West 52nd Street for 10 years. Showtime Networks renewed a 15-year lease of 202,495 square feet at 1633 Broadway at 51st Street. The company was also considering a move to 200 Fifth Avenue. Magazine publishing company Bonnier Corporation has converted its 100,750-square-foot sublease at 2 Park Avenue at 32nd Street to a direct lease.
Construction on the $1.4 billion Fulton Street Transit Center project has hurt local businesses in the Lower Manhattan area. Construction on the center, which is expected to be completed by 2014, is five years behind schedule. The city is currently in the process of replacing the 150-year-old infrastructure along Fulton Street, a project which has closed the street to vehicular traffic and forced 35 of the 200 storefronts along Fulton and Nassau streets out of their spaces. The Lower Manhattan Development Corporation is offering a maximum of $25,000 in grants to the affected small businesses, an amount many store owners are saying is not large enough. Work on the infrastructure project was originally planned to conclude by this summer. Now, the city says work on the Fulton Street infrastructure will be over by year's end, barring unforeseen delays.
Hotel location becomes key Before the economy collapsed last September, hotel developers rushed to do deals in almost any Manhattan neighborhood, from the Financial District to the Lower East Side to the far West Side, trying to cash in on the surging demand for rooms. Now, as the local market suffers a double squeeze of plunging occupancy levels and thousands of additional rooms coming online, hoteliers and developers are facing the brutal reality that neighborhoods still matter a great deal in the Manhattan hotel business.
Construction spending on offices, retail centers, and hotels is expected to drop 16 percent this year and 12 percent in 2010. Spending on office buildings is expected to fall 22 percent this year and 17 percent in 2010, retail construction is expected to decrease 28 percent this year and 13 percent in 2010, and hotel construction is likely to sink 26 percent this year and 17 percent in 2010.
Lending for commercial projects has stalled and many are concerned that developers will be unable to refinance $400 billion in commercial real estate debt that is coming due this year. Commercial real estate nationwide is worth about $6.7 trillion and has about $3.5 trillion worth of debt.
While developers at many new condos in New York have already slashed prices, Donald Trump is standing firm. Despite the pressure to get out the price-chopping ax due to current market conditions, The Donald insists he won't budge at his latest project, Trump Soho, a 46-story condo-hotel.
As retailers continue to struggle amid the recession, chain stores are turning back to their leases' fine print to find reason to ask for rent reductions. Many retail leases include cotenancy clauses, which allow tenants to ask for rent cuts or even to pull out without penalty if other key tenants leave a particular shopping center. Gap, Williams-Sonoma, and Ann Taylor are some of the stores looking to take advantage of these clauses. Chico's has saved $8.1 million by using cotenancy clauses and negotiating for other forms of rent relief.
Equity investors are feuding with lenders over control of two East Side Midtown hotels purchased as a package for more than $100 million in late 2006, highlighting the divergent interests within real estate partnerships in a down economy. The two hotels were bought by an investment entity called Peninsula Real Estate Fund I, created by Dublin-based Anglo Irish Bank and investors led by longtime hotel executive Timothy Haskin, formerly a managing director with Tishman Hotel. The complex dispute between the equity fund and the Anglo Irish Bank originated with the purchase of the two hotels. The 172-room Beekman Tower Hotel at 3 Mitchell Place at the corner of First Avenue and 49th Street and the 187-room Eastgate Tower Hotel at 222 East 39th Street between Second and Third avenues were purchased for a total of $135 million in October 2006.
After rumors that General Motors was looking to relocate from the 100,000 square feet of office space it currently occupies at the GM Building at 767 Fifth Avenue between 58th and 59th streets, Boston Properties, may be offering GM incentives to stay. GM, which is currently paying $90 per square foot on a long-term lease which expires next spring, may receive six months of free rent if it stays put, among other concessions from Boston. Other locations that were considered when the company went bankrupt last year included office space at the Citigroup Center a few blocks away.
Mayor Michael Bloomberg announced several initiatives involving real estate meant to help New York City's media professionals. The Media Tech Bond Program aims to help companies purchase new manufacturing, research or production facilities or renovate existing buildings to better accommodate new technology. The media tech bonds can be used to finance projects between $1 million and $10 million. The city is also working with the Downtown Alliance to lease and set up Hive@55, a workspace for media freelancers at 55 Broad Street. The 5,000-square-foot space will accommodate 50 freelancers and up to 1,850 part-time and drop-in workers.
The space that ABN Amro put up for sublease at 7 World Trade Center might be taken soon. Music licensing company Broadcast Music is may sublease 58,000 square feet of ABN's 140,000-square-foot space. BMI will be moving out of its space in the office portion. In addition, Italian insurance giant Generali has a sublease in place for 17,000 square feet of ABN Amro's space, and two other financial firms will soon complete deals for the rest.
The U.S. Small Business Administration can now refinance commercial real estate investments through its 504 Certified Development Company lending program. The program, which is now part of the American Recovery and Reinvestment Act of 2009, allows small businesses to borrow up to 90 percent for purchases of commercial real estate. These steps are aimed at increasing access to capital and giving small businesses just what they need to help our economic recovery.
The city is reviewing plans for a 27-story hotel and condominium tower to be built at 50 Bowery in Chinatown across from the entrance to the Manhattan Bridge. The owner filed plans for the parcel that extends from Bowery through to Elizabeth Street, just south of Canal Street.
To make the Empire State Building more attractive to potential tenants, the building's owners decided to go green, spending $120 million on environmental improvements. The renovation of the building is expected to take 18 months, and includes retrofitting all 6,500 windows, adding insulation to radiators and upgrading the building's lighting, cold water and ventilation systems. The owners expect an annual energy savings of $4.4 million, which would pay off the new technologies in three years. The building's renovations have already attracted construction firm Skanska as a tenant.
The long-delayed renovation plans for the Jacob K. Javits Convention Center received final approval to begin construction on the $463 million project. Plans for the original project were shelved during the Spitzer administration when original calculations put the price at over $3 billion. Hotel Association of New York member hotels added a $1.50 nightly surcharge to all guest bills to raise an additional $150 million for the renovations, which are expected to create 9,000 jobs. Some improvements to the center will include repairs to the leaky roof and a 100,000-square-foot expansion, which will be used for more exhibition and food service areas. The expansion will be built on the block bounded by 39th and 40th streets and 11th and 12th avenues.
All new buildings are now mandated to comply with the new NYC Construction Codes signed into law by Mayor Bloomberg in July 2007. The new codes require widened stairwells in high-rise buildings, expanded sprinkler systems, and enhanced emergency voice communication systems. Also, in order to prevent violations from going unnoticed, a new classification system will be implemented that will file them under three categories, depending on the severity of the violation.
Icon Parking has stopped paying its condo charges on the parking lots it owns in four Trump Place condos. According to city lien filings, 120 Riverside Boulevard, 200 Riverside, 220 Riverside and 240 Riverside, also known as Heritage at Trump Place at the corner of 72nd Street, are owed a total of $203,921 since the beginning of the year. Icon is complaining that it is paying too much in common charges since it doesn't use the gyms or other amenities in the building meant for residents. Icon has mortgaged about 140 of its garages around the city for $133 million. It could not be determined if Icon is current on the loan or if it owes other co-ops and condos for rent or common charges.
