Major Developments:
SL Green Realty says it has shaken a pesky lawsuit that threatened to stall the construction of its office building near Grand Central Terminal, One Vanderbilt. The REIT has settled a lawsuit filed by the owner of Grand Central, which alleged that the office landlord and the city rendered his 1.2 million square feet of air rights useless when it rezoned the area. The settlement was made possible, in part, by the recent sale of a stake in Grand Central to Michael Dell’s MSD Capital.In 2012, the Witkoff Group announced it would build a new hotel at Times Square, but it took four years for the development to begin taking shape due to the excavation at 20 Times Square that found the bottommost part of a foundation wall at the site were attached to nothing. Before adding support to the site, Witkoff needed to consult with the MTA, since the N, R and Q lines run directly beneath the property. Witkoff, along with Howard Lorber’s Vector Group, Ian Schrager, Winthrop Realty Trust and Maefield Development are developing a 39-story project at the site, which will include a Marriott Edition hotel with 452 rooms and 76,000 square feet of retail space.
Citigroup will leave behind a 393,000-square-foot block at Boston Properties’ 399 Park next year. L&L’s 425 Park Avenue still has 430,000 square feet to lease, and RFR Realty’s Seagram Building at 375 Park will have a block of 236,000 square feet when Wells Fargo leaves in 2021. Solow Management will have a block of 193,000 square feet available at 9 West 57th Street in 2020 when the private equity firm KKR leaves for Hudson Yards.
EDC floats plan for 1.1M sf development at MTA bus depot in East Harlem. The proposal includes a 655,215-square-foot building with 730 apartments, 50% of which would be affordable. The rest of the space would be used as retail and office space, with about 30,000 square feet set aside for a community facility, including 15,000 square feet for a burial ground memorial. Plans also call for a 300-spot parking garage and 18,000 square feet of outdoor space.
Activist investors Michael Ashner and Steve Witkoff are at it again, calling for the liquidation of New York REIT as quickly as possible to maximize shareholders’ returns. Earlier this month, REIT's">New York REIT’s board called off the proposed $8.4 billion merger with Washington, D.C.-based JCG. Instead, it will sell off its properties one by one, including its 49% stake in the 1.8 million-square-foot office tower at One Worldwide Plaza the 750,000-square-foot office building at 1440 Broadway.
The city is increasingly relying on motels to house homeless residents, and it is costing city taxpayer, to almost $50 million. More than 4,000 homeless individuals stayed at 46 motels last month, a dramatic jump from the 1,000 who slept in eight hotels in January. In the past year, these motels turned homeless shelters have cost the city almost $50 million. On average, the rooms cost $161 per night.
La Guardia Airport’s status just got worse amidst its eight-year, $8 billion overhaul. As construction blocks the way of travelers and cabs, wait times have skyrocketed and fliers are increasingly forced to haul their luggage down the highway. Travelers navigating the Grand Central Parkway is now a common sight, as construction has brought traffic entering the airport to a standstill. Reconstruction plans include replacing the central terminal, two new concourses and pedestrian bridges.
Related Companies has been tapped by Mayor Bill de Blasio as CEO and president of the Trust for Governors Island, the organization that is guiding the island’s planned overhaul. In the role, Samuelian would manage all activities and operations and help guide the mixed-use development planned for the island. De Blasio announced plans to turn the 172-acre island into a year-round destination, some sort of mixed-use project would be developed on up to 33 acres on two sites on the southern end of the island. He also announced that roughly 900,000 square feet in the historic district to the north, largely dotted with historic military structures, would be reactivated.
City Hall published a long-awaited draft proposal to rezone all of Midtown East, which would allow developers to build significantly taller than current rules permit. Under the plan, developers building close to Grand Central Terminal could benefit from a 30% increase in permitted density. Buildings along Park Avenue and near subway stations could also rise significantly higher, while sites farther away from subway stations would not be allowed to rise as high. The new proposal, which will be used to study the environmental impact of a rezoning, would also allow landowners to trade air rights across Midtown East. The catch is developers who want to benefit from a site’s new maximum density would need to contribute money for public infrastructure improvements or buy air rights from landmarked buildings. City Hall believes it could lead to an additional 6.6 million square feet of office supply.
Forest City Realty Trust is launching a strategic review of its retail portfolio, which could lead to asset sales. The company owns 14 shopping malls and another 19 retail properties across the U.S. In New York City, it owns retail properties at Atlantic Yards, 234 West 42nd Street in Times Square, and 94 Court Street in Brooklyn, among others.
It may get a whole lot easier to find office space on Park Avenue pretty soon, as a series of upcoming departures is set to leave landlords with roughly 2 million square feet to fill. The vacancies from Citibank, Major League Baseball and others could impact 10% of the office submarket, which stretches from East 45th to East 59th streets. BlackRock could leave its 700,000 square foot digs at 345 Park and 40 East 52nd Avenue and move to Hudson Yards or the World Trade Center when its lease expires in 2023. JPMorgan Chase is planning to leave its 300,000-square-foot at 277 Park. Park Avenue offices have an average age of 55.6 years, and many have lower ceilings and structural columns. Meanwhile, many finance companies which currently occupy roughly 70% of Park Avenue’s 22 million square feet of space are weighing smaller spaces in light of shrinking profits. At 299 Park, Boston Properties is spending $50 million to upgrade the building after Citibank vacates 385,000 square feet next year.
Cash is still king in Manhattan, where the majority of condos sold so far this year have been scooped up in all-cash deals. 56.5% of condo sales were all-cash between January and July. By comparison, 35% of co-op sales were all-cash during that time, as were 91.7% of townhouses over $5 million. In the condo market, 82.1% of deals over $5 million were all-cash. Despite the high prevalence of all-cash deals, the number did drop around 2% during the first half of 2016 compared to the same time last year.
Lenders on the stalled Battery Maritime hotel have reached out to the Witkoff Group to join the project and rescue it from further delays. Earlier this year, the Dermot Company was removed from the project when it was unable to secure enough capital to compete construction. Plans for the landmarked Battery Maritime building include a 70-room luxury hotel with a rooftop and restaurant. The city’s been looking to develop the building since the 1980s, and finally signed a 99-year lease in 2012 with developers led by current and former Dermot Company executives. But last year, the project hit a major roadblock when construction costs ballooned to at least $125 million as a result of changes in the federal historic tax-credit program, as well as an abatement needed after Superstorm Sandy. The developers were also seeking $77 million from EB-5 investors.
After eight months without 421a, and relative silence from Albany on how to revive it, Gov. Andrew Cuomo emerged with a possible solution. The proposal echoed past plans for the tax break, but put forward a new wage subsidy for large projects in Brooklyn and Queens. Some industry players regard the proposal as a significant step forward in what has been a stalemate between the Real Estate Board of New York and the Building Construction Trades Council of Greater New York. But the proposal leaves several major questions unanswered, including how the state will pay for it. The proposal axes the most controversial component of previously suggested 421a programs, a prevailing wage requirement that developers had dismissed as a non-starter. Cuomo instead set a minimum of $65 an hour in wages and benefits for Manhattan projects south of 96th Street with over 300 units, and a minimum of $50 an hour in wages and benefits for similarly-sized projects in Brooklyn and Queens. For the latter, the state would have to give out $15 per hour. Developers would be required to set aside 25 to 30% of a project’s units for affordable housing.
The typical amount of office space allocated to each office worker has been reduced from 300 to 400 square feet a decade ago to 125 to 250 square feet today. But many believe the space allotted to individual workers has hit its nadir and that the long-term trend may even be reversing. Nonetheless, developers are delivering towers that allow tenants to squeeze more people into a given space. At 10 Hudson Yards, one floor can accommodate 739 office workers on a floor that has 57,656 square feet. That would provide just 78 square feet per person. Meanwhile, at 30 Hudson Yards the floor allows for 615 people, or 89 square feet per person in a 55,500-square-foot space.
Sam Zell said Related Companies Oxford Properties Group’s Hudson Yards mega-project will add 10 to 12 million square feet of office space.
Elected officials in New York and New Jersey all agree that a new bus terminal that connects travelers to Manhattan’s West Side is needed. The Port Authority of New York and New Jersey’s design competition for a new $10 billion terminal has so rankled both sides that they’re effectively at a standstill. Manhattan Councilman who wields veto power over the project said he will oppose any of the concepts that come from the competition. The bi-state agency has been planning for a new terminal since 2013 and had settled on five possible concepts. The real issue is where will it be and what it looks like.
Blackstone Group. Cap rates are going up for hotels generally. New York’s revenue per available room (a common metric for hotel revenues) fell by 1.2% between 2014 and 2015 to $306.
As part of the Metropolitan Transportation Authority’s $27 billion, five-year capital plan, the city is slated to receive 1,025 new subway cars, with features wider doors and accordion-like passageways that allow riders to move between cars. MTA is also planning to renovate 31 subway stations across the five boroughs, adding amenities such as Wi-Fi, USB chargers and digital information displays.
Last month, a State Supreme Court appeals judge lifted an injunction blocking the construction of a 2.4-acre public park on the Hudson River known as Pier 55. In June, the court ordered that work on the $130 million project, which would turn a dilapidated city pier into a floating attraction with gardens and a 700-seat amphitheater, cease until a judge could hear a lawsuit filed by the City Club of New York. The advocacy organization alleges that the Hudson River Park Trust, which is spearheading the project, undertook an improper environmental review process and did not collect sufficient public input. Under the latest ruling, construction can proceed until the case comes before the court in September.
The MTA will shut down the L train between Brooklyn and Manhattan for 18 months starting in 2019, in order to repair damage to the East River tunnel caused by Hurricane Sandy. The L train handles 400,000 passenger trips each weekday. The transit authority concluded that it was preferable to a staggered repair, which would have reduced service by 80% for three years. The line will continue to operate in Brooklyn between Williamsburg and Canarsie during the shutdown.
Extell Development has secured a capital partner for its Central Park Tower at 217 West 57th Street. The partner is SMI USA, the U.S. subsidiary of Shanghai Municipal Investment, the largest state-owned enterprise in Shanghai. The new entity, SMITELL LLC, may be a combination of the two firms’ names. Extell transferred title to the site to that new entity in June. And in December, another LLC was registered under the name SMI Central Park Tower, LLC. The tower is slated to rise 1,550 feet and cost $2.98 billion.
