January 2018 New York New Developments

Co-working is coming for two of the country’s leading office building owners.

Blackstone Group-owned Equity Office and Houston-based Hineshave both released RFPs looking for partners to help them gain experience in the co-working business currently dominated by WeWork. Equity Office is particularly interested in figuring out how to make tenants more interested in their Howard Hughes office complex in Los Angeles, and the company expects responses to their RFP in the next few days.

WeWork has lately been seeing explosive growth and is currently valued at $20 billion. The firm has launched a gym and elementary school in recent months and announced an $850 million acquisition of the Lord & Taylor flagship on Fifth Avenue. New York, in particular, has become an attractive space for co-working thanks to factors including a construction boom, high job growth and a strong ability to attract young workers.

A change in federal accounting rules taking effect by 2019 could give co-working companies a major boost. Under the new rules, public companies will have to list office leases as liabilities on their balance sheets, which could make them look worse on paper. But there’s a loophole: if public companies sign a lease with a co-working space provider, and if the provider has a right to move the tenant, that lease won’t have to be listed as a liability. Several co-working companies are now using the rule change as part of their pitch to potential tenants.

Shiseido inked a 225,800-square-foot lease at L&L Holding’s 390 Madison Avenue.
The Japanese cosmetics firm is paying $100 per square foot under the 15-year deal. Shiseido will be moving out of its current headquarters at 900 Third Avenue.

Westfield Corp., the operator of the World Trade Center mall in Lower Manhattan, Garden State Plaza in Northern New Jersey and several upscale shopping centers in London, has agreed to a $15.7 billion takeover by another giant in the shopping center industry: Unibail-Rodamco.

Kirkland & Ellis expanded its footprint at the former Citigroup Center to more than half-a-million square feet with the addition of four floors, an extra 120,000 square feet at the 59-story Midtown office tower at 601 Lexington Avenue. The new lease brings Kirkland & Ellis’ spread in the Boston Properties’ tower to about 520,000 square feet after the company signed an early renewal in 2015 for 400,000 square feet running through 2039.

Common is raising about $40 million in a new funding round. The New York-based firm rents out rooms in furnished, shared apartments on flexible lease terms. It opened its largest co-living space to-date at Adam America Real Estate’s 69-unit apartment building 595 Baltic Street in Boerum Hill. In June, it expanded to Ridgewood, Queens. FAO Schwarz is back. More than two years after closing its doors at the GM Building, the toy store inked a 19,000-square-foot lease at Tishman Speyer’s 30 Rockefeller Plaza.

Morton Williams is opening grocery store and has signed a lease for a branch at One West End Avenue between West 59th and 60th streets, where it will occupy a total of 29,400 square feet of space on the ground floor and lower level for shopping and storage. Asking rent went for $85 a square foot.

SL Green Realty is considering raising more than $200 million in EB-5 funding to help fund construction of One Vanderbilt. Last year, a syndicate led by Wells Fargo committed to funding the $3.1 billion project with a $1.5 billion construction loan. And in January, the National Pension Service of Korea bought a minority stake, pumping $525 million into the building.

Some 2,000 businesses in Manhattan won’t have to pay a commercial rent tax.

The City Council approved a bill that will change who pays a 3.9% tax on base rent. The tax applies to tenants who pay more than $250,000 a year. The bill changes that threshold so that tenants who make $5 million or less in annual income and who pay less than $500,000 in rent are free from the tax.

Commercial tenants who make $5 million or less and pay between $500,000 and $550,00 in annual rent, as well as businesses who bring in between $5 million and $10 million and pay less than $550,000 per year, can receive a partial, sliding credit. 900 stores will receive some relief. The legislation is expected to cost the city $38.6 million in foregone revenue in fiscal year 2019. This was a sticking point for the de Blasio administration, which criticized the bill.

A bill, if passed, will require any New York City commercial or residential building over 25,000 square feet in size to post their energy efficiency grade. It ranges from A to F near public entrances. The bill’s author views the bill as part of the Big Apple’s effort to meet international standards of sustainability.

A federal plan, agreed by Obama in 2015, to underwrite about 50% of the cost of building a new tunnel connecting Penn Station to Jersey was scrapped y by the Trump administration by way of total denial. The Gateway Development Corporation, specially formed for the project, remain hopeful the President will revisit the decision next year.

Despite handing over control of his family real estate and golf course business to his sons after ascending to the presidency, President Trump is still involved in the business, if you believe an email sent by a revenue manager at one of his hotels.

Guy Fieri’s 15,000-plus square-foot restaurant in Times Square will close at the end of the year at 220 West 44th Street. The restaurant has about 10 years left on the lease, and pays about $1.8 million a year in rent.

An unorthodox mixed-use development could be heading to Brooklyn above a stretch of the Long Island Rail Road.

The MTA released a Request for Proposals for a 3.8-acre stretch of airspace above freight rail tracks on 61st Street between 8th Avenue and Fort Hamilton Parkway. The agency wants to see proposals for mixed-use developments with affordable and market-rate residential units, office space, retail space and parking, and the project would give the MTA a new revenue source. The site is located between the 8th Avenue and Fort Hamilton Parkway subway stations, and the development would have to be built on a platform over the train tracks with a 22-foot overheard clearance. All submissions for the 61st Street Overbuild RFP must be in by April 2018.

Bank of America will lease the entire 386,000-square-foot building at 1110 Sixth Avenue, consolidating several offices around the city. Bank of America will move into 1100 Sixth Avenue in 2019, when current tenant HBO moves into 30 Hudson Yards.

Jack Terzi’s $140 million deal to buy the former JPMorgan building at 23 Wall Street is in jeopardy because the seller, China Sonangol, allegedly refuses to play ball. The escrow agent has refused to release the down payment on the purchase, because of concern that controversial Hong Kong tycoon Sam Pa may benefit from the deal. If the deal does not go through, Terzi is demanding that Sonangol pay at least $250 million in damages, and return a $17 million down payment.

Anthony Bourdain’s Pier 57 project is done after more than two years after announcing his vision for a Singapore-inspired night market.

Barneys store on Madison Avenue is up to an arbitrator. The upscale retailer has been unsuccessfully negotiating with its landlord Ashkenazy Acquisition to get a lease extension for its 660 Madison Avenue location, and since then the two sides have been unable to reach an agreement, the issue has gone before an arbitrator.

Just like restaurants post letter grades in their windows, large buildings may soon have to broadcast their energy efficiency ratings. The City Council is considering a measure that will require residential and commercial buildings larger than 50,000 square feet to post a federal energy efficiency rating and a simplified A-D letter grade in their lobbies starting in 2020.