Major Developments
Stalled construction projects are not having much of a psychological impact on the city. Despite an increasing number of delayed projects, including 250 West 55th Street, 99 Church Street and Solow's First Avenue project, any psychological effects are likely to be short-lived, because the projects will be completed eventually. Large banks are only about halfway done with their commercial real estate losses. The U.S. commercial real estate losses could reach 10 or 15 percent of loans in this cycle. Banks with retail and office loans face the highest risk.
The Plaza hotel is on tough times. The building's lower level Grand Concourse has few restaurants and retail spots, and the space is netting just $150 to $175 per square foot. The hotel will have two new stores coming soon.
The Empire State Building has joined a number of older commercial buildings in New York City aiming to reduce its energy consumption through retrofitting, a process of making a nearly 80-year-old building more energy efficient. The $515 million project will include a massive effort to improve the quality of the building's windows, which will improve the structure's insulation. The upgrade will try to reduce utility costs by $4.4 million annually.
Borders has slashed by 18 percent the price to sublease the space it rents in a commercial cooperative space in the Ritz Tower in Midtown. Previously, Borders offered to sublease four floors of retail space, for $4.3 million. Now, Borders is asking $3.5 million per year for the site.
The refurbishing of downtown's DeLury Square Park, to be completed in 2010, is underway. The city obtained 5,800 square feet of land in a $5.5 million sale in order to form the expanded park space. When completed the park will be 8,800 square feet, total.
A new 50,000-square-foot synagogue at 200 Amsterdam Avenue on the corner of 69th Street will celebrate its topping out ceremony. The new three-story Lincoln Square synagogue, a $30 million construction effort, is one of only two new synagogues constructed in New York City in the last 20 years.
Amtrak has reached an agreement to move to the Pennsylvania Station annex.. The project plans to expand Penn Station with an annex in the post office building and create a more visible entrance to the station, which is below Madison Square Garden. In exchange for moving, Amtrak will receive some of the revenue from retail stores in the expanded station. The project is likely to cost $1.1 billion to $1.5 billion.
A City Council bill that would create a kind of commercial rent control has stalled. The bill would require landlords and tenants to participate in mediation and arbitration if they can't agree on a fair rent for a commercial space. The Act has support from 33 council members, but Council Speaker will not bring the bill to a vote because she isn't sure whether the proposed regulation is legal. Critics say that she isn't supporting the bill because she does not want to regulate landlords who support her.
The Empire State Building built in 1931 was one of several newer buildings that contributed to the city's 92 percent increase in inventory during the Great Depression. Even amid the boom, in 2006, the landmarked building's vacancy rate stood at 18 percent. Today, the building, at 350 Fifth Avenue at 34th Street, has a vacancy rate of 22 percent. About 45 percent of the current vacancy is intentional, with space being held off the market for renovation. That translates to about 270,000 or 280,000 of the building's 600,000 vacant square feet. The rest of the vacant space, about 320,000 square feet, is on the market.
Despite consistently ranking as one of the highest-grossing restaurants, Tavern on the Green has filed for Chapter 11. The poor economic climate and the city's decision to not renew their license motivated the decision. Tavern on the Green is set to receive a new operator who manages the Central Park Boathouse, another institution fraught with financial misfortune.
Several groups have ownership stakes in the Graybar Building, at 420 Lexington Avenue. SL Green bought one ownership stake from W&M Properties early last month for $7.6 million. SL Green's existing mortgage on the building was originally due next year, but the company was able to refinance thanks to the W&M deal and several others.
The New York State Supreme Court has ruled that the Metropolitan Transportation Authority must pay the Riese Organization $35.2 million for 194 Broadway, a property that the MTA took through eminent domain for the development of the Fulton Street Transit Center. The MTA also has to pay $106.5 million total for 204-210 Broadway, 198 Broadway and 192 Broadway, all owned by the Reformed Protestant Dutch Church of the City of New York, and 200 Broadway, owned by Brookfield Properties. The MTA acquired all of these properties for the Fulton Street Transit Center in 2006.
George Comfort & Sons, the firm that made the largest office investment purchase this year when it bought World Wide Plaza for $590 million, is 30 days delinquent on a $160 million loan on a Bryant Park office building. The securitized loan on 119 West 40th Street, a 340,219-square-foot building, was listed as 30 days late because the terms of the loan are being renegotiated.
The President of Rudin Management sees some positive signs in the commercial real estate market. Companies are adding space to their leases in Rudin Management's buildings. Law firm Loeb & Loeb added about 30% more space to the lease it signed at 345 Park Avenue. Some companies, like Bank of America, have taken sublease space off the market. But the commercial debt market is still problematic. Debt problems will probably peak in 2017 or 2018 when loans made a few years ago come due.
The troubled hotel climate in Manhattan prompted securitized loan servicing firms to characterize five mortgages for hotels, including the Soho Grand, as potential credit risks. The move doubles the number of Manhattan hotels on so-called watchlists to 11. The largest loan is for a $195 million note covering both the Soho Grand and Tribeca Grand. The loan was put on the watchlist in part because the hotels do not generate enough cash to cover the debt service payments.
Atlantic Yards developer has hired architecture firm SHoP to assist in designing the Nets basketball arena planned for the project. SHoP which has been hired for design projects including a remake of South Street Seaport and an East River esplanade will be assisting Ellerbe.
The demolition of the former Deutsche Bank building is to take six months longer than expected. The building was expected to be demolished by 2005, with the deconstruction costing about $45 million. The project, which is being paid for by the federal government, could end up costing nearly $300 million. The revised deconstruction plan has not yet been approved.
When the AIG headquarters at 72 Wall Street was sold, a new baseline for Class B office space Downtown of $107 per square foot was set. Youngwoo & Associates and Kumho Investment Bank bought the space for $150 million. AIG has 18 months to move from 72 Wall Street to the Goldman Sachs space at 180 Maiden Lane. Goldman, which has already collected $20.5 million in rent from AIG for the space, will collect another $52.8 million before the move is completed.
Developer Joseph Sitt, sold 901 Broadway for $24.6 million to a Spanish businessman who paid all cash. The 14,336-square-foot building sold for $1,715 per square foot. The five-story building at the corner of Broadway and 20th Street, is fully leased except for the fifth floor.
The Montefiore Medical Center purchased the Farrand Building, a former rehabilitation center, at 4401 Bronx Boulevard for $5.19 million. Formerly operated by Our Lady of Mercy Medical, the 40,000-square-foot building will be used in the same capacity by its new owners.
In the down market, more national chains are capitalizing on lower rents in Manhattan. J.C. Penney opened its first Manhattan location at the Manhattan Mall. Later this year, Costco is to open its store in East Harlem at 116th Street at East River Plaza.
Sam Zell has put together a $625 million fund to buy distressed securities, including those backed by commercial real estate. He sold his real estate empire, Equity Office Properties Trust, to Blackstone Group for $39 billion in 2007, at the height of the market.
The group behind Bowlmor Lanes, the Manhattan bowling alley and club with plans to relocate from Greenwich Village to Times Square, has sued its lender. The owner of the bowling spot alleges that the Landlord sent a false default notice that will now jeopardize the club's relocation.
Madison Square Garden's street level television studio is to close on Dec. 1 for renovations. The studio, at 11 Penn Plaza, will be refurbished as part of Madison Square Garden's $500 million renovation project.
A Battery Park City play area scheduled for demolition could have a new lease. Under a current plan, the state Department of Transportation would close Tire Swing Park, then remove its wooden playground equipment and mature trees to make way for new equipment. The DOT has agreed to consider residents' input and will present two alternative park plans to Community Board 1. If the renovation takes place, state officials believe that the park will reopen by Memorial Day 2010.
A planned reconfiguration and renovation of Chinatown's Chatham Square has been put on hold, this time for two years. The widely unpopular $50 million project, which would connect East Broadway to Worth Street and Bowery Street to St. James Place in the current seven-way intersection, has been halted due to imminent Brooklyn Bridge construction. DOT's Lower Manhattan borough commissioner believes that the confluence of those two projects would create an untenable traffic morass. While the district manager of Community Board 3, maintains that the DOT won't back off its plan for Chatham Square.
Top real estate investors including Yair Levy and Joseph Chetrit are close to defaulting on a $235 million loan on the Bed Bath & Beyond building in Chelsea. To preserve some value in their holdings, the owners transferred a vacant slice of the building's lot to another entity they own. Developers Levy Chetrit and Charles Dayan are investors in an entity called CF 620 Owner One LLC, which bought the property at 620 Sixth Avenue between 18th and 19th streets in 2005 for $289.8 million.
Although commercial real estate loan delinquencies are still rising and property values are falling, interest in the commercial REIT sector skyrocketed, with three new IPOs in the REIT sector alone. Apollo Commercial Real Estate Finance plans to invest in commercial real estate securities and corporate debt; Foursquare Capital plans to invest in commercial and residential mortgage backed securities, mortgage loans and asset-backed securities; and Colony Financial plans to invest in commercial mortgages and real estate debt. In the past six months, the Dow Jones REIT index has gone up 84 percent and 60 different REITs have raised nearly $60 billion in new equity.
The Moinian Group has topped off the new W New York hotel and residential building, at 123 Washington Street between Carlisle and Albany streets near Ground Zero. The 58-story, 400,000-square-foot building, will include a 217-room W hotel, 223 condo residences, a restaurant, bar, spa and fitness center. The construction has outpaced several other projects in the neighborhood, including the Freedom Tower one block away, which is rising above street level.
The government of Canada may be looking for as much as 100,000 square feet of office space in Manhattan. The government currently has leases at 1251 Sixth Avenue, for its Consulate General offices, and the second at One Dag Hammarskjold Plaza at 885 Second Avenue 48th Street, for the Mission of Canada to the United Nations.
