New Developments
New building permits issued in the first five months of 2009 showed a year-over-year drop in all five boroughs for the second year in a row. Citywide, permits were down 48.5 percent from the same period last year to 720, and were down 69 percent from the first half of 2007, when the building boom was still in full force. Of the five boroughs, Manhattan saw the biggest drop from last year, with 18 building permits filed between January and May, or 72.3 percent fewer than in the same period of 2008. This number was off 71.9 percent from 2007.Tribeca Associates and its partners are in a legal battle with landlord Trinity Real Estate to prevent Trinity from foreclosing on 330 Hudson Street, a warehouse conversion intended to include office space and a hotel. Tribeca Associates asked to change the terms of the 99-year lease, under which Trinity was supposed to create a hotel, to delay construction because of the financial crisis. Tribeca had already defaulted on some of the lease terms and wasn't entitled to lease modifications. The case is now in court. Trinity's insistence on building the hotel is exacerbating the development's problems, because the hotel market is unlikely to pick up as quickly as the office market.
The Bloomberg Administration's plan to kick-start commercial construction in New York City's economically distressed areas was dealt a setback when federal financing for a new city program came in tens of millions of dollars lower than originally expected. The city's Economic Development Corporation is overseeing the Recovery Zone Facility Bond Program and is currently soliciting proposals from developers for a total of $121 million available in the form of triple-tax-exempt private-activity bonds for real estate development projects. However, that figure is roughly $80 million less than what was unveiled when the program was announced in June.
The Romanoff family, the developers of a proposed office tower near the High Line, has cut the size of the building at 437 West 13th Street in response to criticism from preservationists. The Romanoffs originally wanted to build a 215-foot, 12-story office building that extended over the High Line, but they have reduced that to a 201-foot building that will no longer extend over the park. The building will also no longer have the cellar that would have been constructed below the High Line. The Romanoffs had originally said that the High Line would increase their construction expenses, and they sought a variance to increase the building's size in the hope of recouping a fair return from the property. The Board of Standards and Appeals will hold another hearing on the project in September.
Some of the stores with the most significant expansion plans include Dunkin' Donuts, Subway, McDonald's and Starbucks. Those stores have had deep enough pockets to survive the recession so far and see it as an opportunity to expand.
Upper West Side residents are on edge, after developer Chetrit Group acquired land from the non-profit Jewish Home and Hospital. The land-swap deal between the two entities has neighbors concerned that Chetrit will use the space's special zoning laws to build beyond a reasonable height and disrupt the lay of the land. The Jewish Home, located at 120 West 106th Street between Columbus and Amsterdam avenues, had acquired special zoning permission so that it could build a taller, new facility.
The Garment District, once a landmark for American fashion and style, is in jeopardy of vanishing due to increased rent prices and cheaper, foreign labor. Compounding the problem is that zoning laws meant to protect the region, which stretches from 34th to 40nd streets and Broadway to Ninth Avenue, have done little to stymie decline. The city's manufacturing future, as well as its reputation as a fashion destination, are at stake. If you don’t have production in the garment center, there would be no reason for designers and suppliers to cluster in the district
The Port Authority of New York and New Jersey will turn control of the site for office Tower 2 at the World Trade Center to developer Larry Silverstein in the next few days, Port Authority Director told the City Council. Once the site has been turned over, the Port Authority will no longer have to pay Silverstein the $300,000 per day it has owed him since it missed a Dec. 31, 2008, completion deadline at the site. But the Port Authority and Silverstein are still in disagreement over the financing of two planned office towers.
Fashion retailer Esprit, which already has four outlets in New York City, is in talks with Apple to take over its lease at 21-25 West 34th Street, where Apple was set to build a store until CEO chose not to go forward with the site. Apple reportedly pays nearly $6 million annually in rent for the space. The site has the capacity for a three-story, 18,000-square-foot store.
The delay in construction of the Second Avenue subway is hurting the bottom lines of area businesses. Ninety-one percent of businesses near the construction said they've seen fewer sales since the subway project's groundbreaking in 2007. One-third of the businesses expect to close before the subway is completed.
While construction may have slowed in the economic downturn, a burgeoning crop of charter schools is creating renewed building opportunities. The city has long been a haven for the specialized schools -- 100 of the 141 operating in New York State are in the five boroughs -- and this school year will see another 21 open.
Worldwide Plaza's new owners, George Comfort & Sons and RCG Longview, have 639,540 square feet ready to rent and are talking to prospective tenants,. There are several tenants looking for more than 100,000 square feet that might be interested in the space. The building's current ads place it at 1.9 million square feet, leading to the purchase price of $318.42 per square foot.
Mayor Michael Bloomberg and Governor David Paterson broke ground on the first stage of the East River Waterfront Esplanade and Piers project in Lower Manhattan. The project, which will create 400 jobs and cost $148 million for the first phase, is part of the mayor's Five Borough Economic Opportunity Plan to create a more livable downtown community. The Hudson River Park-like project, slated to be completed by 2010, will transform two miles of underused waterfront spanning from the Battery Maritime Building to Pier 35.
Bronx Borough President Ruben Diaz is, like the Bronx City Council members, opposed to the creation of a new supermarket at the Kingsbridge Armory. Diaz is negotiating an agreement with the armory's developer, the Related Companies. He has to make a recommendation supporting or opposing the armory project Monday, and he said he hopes to have an agreement signed before that. The armory is across the street from an existing supermarket, and the city's original request for proposals for the site called for projects that would not threaten existing local businesses.
7-Eleven, is ramping up expansion in New York City, with plans for 100 to 150 new stores across the five boroughs over the next three to five years. Encouraged by higher retail vacancy rates and lower rents due to the recession, 7-Eleven, which currently operates 46 stores in the city, plans to open 10 new locations this year: three in Manhattan, three in Queens, three in Staten Island and one in Brooklyn.
New York and New Jersey are fighting over corporate tenant Depository Trust & Clearing. The company currently occupies 750,000 square feet at 55 Water Street, in a lease that's not up until the end of 2012. But because the company needs to have electronic infrastructure in place wherever it goes next, it needs to decide soon whether it will stay at 55 Water Street or move to New Jersey, where landlords are offering significant incentives. New York City officials are reportedly talking to the company about staying in its current space. If the company leaves 55 Water Street, it would mean another significant loss for the downtown market, already battered by financial services firms that are putting chunks of sublease space on the market.
The real estate crash has hurt Broadway Partners, which at nine years old is one of the newer kids on the block, more than some of its rivals in commercial real estate. The company's strategy was to purchase buildings using highly leveraged loans, wait for rents to increase and sell the buildings for a profit within two years. The company purchased 28 office properties nationwide in 2006 and 2007. Already, Broadway Partners has defaulted on more than a dozen buildings' short-term loans and has seen two of its buildings fall into foreclosure. It is unclear whether the company will be able to raise enough capital to pay off its loans and survive.
The Fed announced today that it would extend the Term Asset-Backed Securities Loan Facility, or TALF program -- an initiative meant to boost the struggling commercial real estate market -- through mid-2010. The TALF program for newly issued commercial mortgage-backed securities will extend through June 30, past its original deadline of December 31, 2009. TALF programming for newly issued securities backed by auto, credit card, student and small business loans will continue through March 31. Fed officials said that the TALF would not extend for residential mortgage-backed securities, but that they would remain flexible on the issue pending market changes.
The South Bronx's Mott Haven neighborhood, , is now sprouting lettuce, peppers, tomatoes and all manner of herbs, thanks to a collaborative effort including the New York Botanical Garden in the Bronx, For A Better Bronx and a city parks organization, Greenthumb NYC. The garden, La Finca Del Sur, located in a swatch of land near 138th Street and the Major Deegan Expressway, was created in part to fill the void of green space in the South Bronx.
While Governor David Paterson had called for a federally funded clean-up of the Gowanus Canal last year, he now says that the Environmental Protection Agency should consider another proposal from Mayor Bloomberg. Bloomberg's plan had been the target of criticism from the EPA and Gowanus residents in the past. The original clean-up plan involved removing toxic sediment from the canal bed. Paterson’s original plan would cost an estimated $400 million, which was to be supplied by federal funds and money collected from polluters.
The Port Authority of New York and New Jersey has given Perini Civil, a division of Tutor Perini, a $192 million contract to rebuild Greenwich Street, which will allow the public to access the 9/11 Memorial by the 10th anniversary. Perini Civil will need to build the infrastructure below Greenwich Street, remove 170,000 cubic yards of soil and put up the underpinning for the subway line that will pass under the street. The U.S. attorney in Brooklyn is currently investigating Perini Civil for alleged fraud in getting contracts that were supposed to go to minority-owned businesses. Tutor Perini, the parent company, has been criticized for cutting corners to meet tight construction timelines.
Installation has begun for the largest steel columns yet at One World Trade Center. 24 of these 60-foot-long, 70-ton columns will be installed, to serve as the structure's above ground perimeter.
The Sapir Organization's office rehabilitation project at 100 Church Street has financial challenges that extend beyond the scuttled lease deal for the Claremont School that led to a lawsuit against SL Green Realty. Seven architectural and contracting firms that have worked at 100 Church Street in Lower Manhattan claim they are owed nearly $3 million in unpaid invoices since March from the building's owner, Sapir, a Midtown-based developer and owner. Between March and August, the companies filed mechanic's liens totaling $2.89 million, including $202,919 by Long Island City-based Remco Maintenance and $1.7 million by Ecker Window, based in Yonkers,
With landlords having troubles refinancing and $165 billion in commercial loans coming due this year, the commercial real estate market is likely to pose major problems to the recovery of the overall economy. At a meeting this afternoon, Fed Chairman Ben Bernanke and his colleagues are expected to talk about the uncertain future of commercial real estate. Term Asset-Backed Securities Loan Facility program and treasury purchases are set to appear on the agenda. After being expanded in June to cover commercial real estate, the TALF program is set to expire December 31, but many lawmakers are pushing to extend it for another year.
If owners financed the buildings short-term, it's now sayonara. Many of the financing deals that went through were based on bank financing that's no longer feasible in the credit crisis. For the future, this means banks could be taking a harder line with borrowers and pursuing litigation more regularly.
Ask half-a-dozen mortgage and real estate brokers which bank has the best rates for residential mortgages in New York City right now, and expect two dozen different answers. Then check back again, in a week or even a day, for an entirely new set of replies. Buyers have typically benefited from shopping around for mortgage rates from various lenders. However, in the wake of a massive government bailout of ailing banks plus a recessionary deep freeze in the credit markets, the residential mortgage market is more splintered than it has been in 15 years. What's more, it's only growing more fractured. "It used to be three or four banks would control 80 percent of the market, but now it's 12 banks, and those constantly change. Rates are between 4 7/8 and 5 3/8 right this second, and two months ago they were cheaper." Look beyond the waves of volatility, and a few clear trends emerge.
Citigroup is poised to dole out up to $2 billion in loans to independent mortgage groups. The bank is using funds received in the bailout, a third of which it has allocated toward attempting to revive the crippled mortgage market. This so-called warehouse lending is aimed at helping mortgage banks make loans. Four years ago, 115 warehouse loan providers existed in 2009, that number shrunk to 30.
In a mission to shed excess office space, JPMorgan plans to unload 23 office properties across the country. The space they’re marketing, when combined, totals 7.1 million square feet. The package of properties, if all sold, could bring in upwards of $1 billion. This portfolio is reportedly the largest on the market this year. Some of the buildings up for sale include notable New York City locations, such as One Chase Manhattan Plaza and Four New York Plaza.
A California-based bank has filed to foreclose on a $45.7 million acquisition loan made to a partnership that includes developers Jacob Chetrit and Charles Dayan, who planned to convert an 1883 office building near City Hall into a luxury hotel. The partners bought the landmarked 10-story building at 5 Beekman Street at Nassau Street in March 2008 for $61 million, taking out the loan from Pacific National Bank at the same time. The bank filed the foreclosure after the borrowers failed to make their July mortgage payment.
Even though the stock market is rising, national and local landlords are bearing the brunt of the recession, especially when the tenants are jewelry retailers. A National Jeweler article noted that the top 50 North American jewelry chains have closed 891 retail locations in 2009. Last week, the fine jewelry retailer, Finlay Enterprises and its subsidiary Finlay Fine Jewelry, filed for Chapter 11 bankruptcy. The company had 182 department store-based jewelry departments and stand-alone jewelry stores at the end of the second quarter ending August 1, including 67 Bailey Banks & Biddle, 34 Carlyle and four Congress specialty jewelry stores and 77 licensed counters with Bon Ton department stores.
Independent retailers in New York City are struggling as rents and the cost of goods rise. Retail rents increased 54 percent between 2001 and 2008.
MTV leaves 1515 Broadway. Its parent company, Viacom, has chosen not to renew its lease at 1515 Broadway between 44th and 45th streets. The music entertainment moved into its glass-paneled space back in 1997, when rent was low, for around $40 per square foot.
Now that Youngwoo & Associates has been tapped for the Pier 57 project, new details are emerging about how that long-vacant space will be used. The $210 million project will include a rooftop garden, cafes, an auction house, art galleries and an art library. The designers' plan favors an environmentally friendly approach to land development, incorporating recycled materials into the center. The Pier 57 plan follows the cultural moves cultivated in some of Manhattan's trendier neighborhoods.
The Sapir Organization has filed a lawsuit against SL Green Realty and Gramercy Capital to keep the companies from foreclosing on 100 Church Street, on which they hold some of the debt. The Sapir Organization alleges that the lenders prevented it from signing leases for space in the building that would have allowed Sapir to get loan extensions for the property. Sapir needed to lease a certain amount of space. The Sapir Organization had reached a deal to rent more than 255,000 square feet to the Claremont School, but the deal allowed Claremont to back out of the arrangement if the lenders didn't approve the lease by April 17. The lawsuit alleges the lenders delayed the deal by requesting information that had already been provided.
Atlantic Yards has become a race against the clock for developer Bruce Ratner. His October 14 hearing before the New York Court of Appeals could derail his plan, and a December 31 financing deadline is no small feat, either. Atlantic Yards has divided the Prospect Heights community, garnering support from union groups that believe the project could create construction opportunities and angering community members who have demanded the release of final renderings before the project is approved.
SL Green Realty will sell 49.5 percent of its interest in 485 Lexington Avenue, a commercial office building between 46th and 47th streets. The space sold for $547 per square foot. The purchasing party was a joint venture partnership comprised of Optibase and Gilmor USA through Mazal 485. 485 Lexington is an anomaly,it is a tremendous asset located two blocks from Grand Central, which is 98 percent leased, to credit quality tenants with virtually no turnover for seven years.
The Lower Manhattan Development Corporation approved another $2.5 million for the demolition of the Deutsche Bank building. So far, about $280 million has been allocated for the purchase and demolition of the 130 Liberty Street building, and the project could cost an additional $30 million before it is completed. Some of the newly allocated funds will go toward the project's legal costs, associated with the August 2007 fire at the building. The $2.5 million allocation approved this week should be enough to help the project through November.
Delays in the demolition of the Deutsche Bank building have increased the cost of rebuilding at the World Trade Center site by about $100 million, sources familiar with the projects. The Deutsche Bank building will take three more years to demolish than initially expected, and because it is supposed to be the location for infrastructure at the reconstructed World Trade Center, those projects, including a vehicle screening center, have also been delayed. The Port Authority recently allocated $6.5 million to build a temporary wall next to the Deutsche Bank building so that some construction could be done before demolition is finished.
Wal-Mart is searching for potential New York City locations, particularly in the outer boroughs. The company's executives say the recession has created an opportunity for Wal-Mart to enter the New York City market. The company is likely to look at neighborhoods where there is a high demand for jobs and supermarkets,. Wal-Mart tried to open stores in Queens and on Staten Island several years ago, but labor unions blocked the move, worried that the store would hurt unionized and small retailers. Union leaders and elected officials said that, despite recently created Wal-Mart policies designed to improve employee health care and green initiatives in stores, they were unlikely to support any move into the city.
Pharmaceutical company Eli Lilly is going to be the first tenant at Manhattan's Alexandria Center for Science and Technology at East River Science Park. The new science park, located next to the NYU Langone Medical Center at 560 First Avenue at 33rd Street, will also house ImClone’s Research Division, which is owned by Eli Lilly. East River Science Park is part of Mayor Bloomberg’s initiative to further the city’s involvement in bioscience research.
Oak Hill Capital Partners, a private equity firm, gave Duane Reade $125 million in refinancing last week to keep the drug store chain from defaulting on its loans. Those loans have now been extended to 2015, and in the meantime, the chain must find a way to turn itself around. Oak Hill, which purchased Duane Reade for $750 million, has remodeled 20 Duane Reade stores so far, widening the aisles, lowering shelves and adding glass to let in more natural light. Another 100 stores are slated for remodeling by the end of next year.
Developer Harry Macklowe must pay former top Macklowe Properties executive Warren Cole $6.5 million resulting from a breach of contract lawsuit filed in the fall of 1999. Macklowe, named as an individual, owes Cole $3.4 million for the repayment of loans and an additional $3.1 million in interest related to three Manhattan buildings.
Port Authority of New York and New Jersey said that it has met 19 out of 20 quarter rebuilding goals, including the installation of more than 2,400 tons of steel for the National September 11 Memorial and Museum and the installation of 1,250 cubic yards of concrete at 1 World Trade Center. The agency did not meet the goal of completion of approximately half a sector of steel over the PATH line. A study by the Lower Manhattan Construction Command Center shows that the Port Authority is five to 10 years behind the previously promised dates for public infrastructure at the site, including work on the PATH hub. Developer Larry Silverstein says construction delays on those key elements of infrastructure have adversely affected the cost and schedule of his three office towers while also hindering his ability to finance, market, and complete them as previously planned. But Silverstein said he remains firm in his resolve to finish the project:
Larry Silverstein told the Port Authority of New York and New Jersey that he would proceed with binding arbitration in the dispute over the financing of Silverstein's proposed office towers. Silverstein said the arbitration would begin in September. Governor David Paterson said that he would negotiate with Silverstein in an effort to avoid arbitration, which could take six to nine months. Silverstein didn't expect the process to take that long.
Buyers in condo-hotels across the country are turning to the courts to get their money back, alleging that condo-hotel developers violated securities laws in selling the units. The buyers argue that purchasing a residential unit in a condo-hotel is akin to buying stock, and the sales should therefore have been regulated by the Securities and Exchange Commission. The SEC would require developers to use agents licensed to sell both real estate and securities. But developers' lawyers say the legal argument doesn't make sense. The decisions in these court cases could determine whether the condo-hotel model survives.
Several large retail spaces that have come onto the market following bankruptcies are being leased. Raymour & Flanigan, a furniture retailer, has signed a lease for a 33,000-square-foot store at 1961 Broadway, at the corner of West 66th Street, part of a larger space that housed Circuit City. R&F waited for bankruptcy court proceedings to be completed for the space so that they could negotiate a lower rent with the building's owner, Millennium Partners. The asking rent for a 10-year lease was $4 million, which works out to $100 per square foot on the second floor and $300 per square foot on the ground floor.
The dollar value of securitized commercial loans 30 days or more delinquent in the greater New York City metropolitan area fell 17 percent in July compared to a month earlier,. There were 92 delinquent loans with a total value of $1.4 billion in July in the region, compared with 101 loans with a total value of $1.7 billion in June. Nationwide, the percentage of delinquent CMBS loans was 3.7 percent, down from 4 percent in June, but up sharply from the rate of 1.4 percent seen six months ago.
On the heels of UBS' $1.3 billion loss in the second quarter of 2009, its third consecutive quarterly loss, the Swiss bank last week subletted 28,000 square feet of office space at 299 Park Avenue to a firm called MarketAxess. The new 8.5-year lease at the Fisher Brothers-owned building comes less than two weeks after law firm Orrick Herrington signed a lease for some of UBS's old space at the CBS Black Rock building, after the troubled bank terminated its lease there early.
The 1,776-foot Freedom Tower at the World Trade Center site might not be completed until 2018, more than four years later than the date projected by the Port Authority of New York and New Jersey.
The Department of Buildings' list of stalled construction sites, which included 409 projects, leaves out a number of highly publicized stalled projects. Boston Properties' 250 West 55th Street project is not on the list, even though the company decided to suspend work on the building after the anchor tenant pulled out of the project. Larry Silverstein's 99 Church Street condominium is missing from the list. The Charles, a condo at 1355 First Avenue, between 72nd and 73rd streets, has not made any construction progress since the demolition of an old building on the site last year, but it is also not on the DOB list.
Governor David Paterson has asked the Port Authority of New York and New Jersey to draft new designs for the World Trade Center site that would allow the project to go ahead without developer Larry Silverstein. Silverstein has been locked in a dispute with the Port Authority over the financing of his three planned World Trade Center office towers. The Port Authority wanted Silverstein to come up with $600 million in exchange for Port Authority financing of two of the three office towers.
Officials at the High Line say the park will now cost up to $4.5 million per year to maintain, or between $522,388 and $671,641 an acre, surpassing Bryant Park as the city's most expensive park. The average city park receives $9,555 in funding per acre. The city is contributing $1 million per year in taxpayer funds for the yearly operating costs of the High Line, and the non-profit group Friends of the High Line was supposed to cover the remaining $3.5 million. Instead, the group is hoping to create a High Line Business Improvement District.
