in depth new york the market the week practice & Law EG Life CONTENTS 60 London calling: US landed estate LeFrak is not giving up on breaking into the UK

64 Girls on top: What it takes to be New York’s most powerful women

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turnover s h awke There’s a saying in the city that never sleeps that you know you are a true New Yorker s o n ja o: t

when you stop looking up. But post-9/11, post-Hurricane Sandy, post-downturn, it p h o seems New Yorkers are doing just that. Samantha McClary casts her eyes to the skies

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This will be the biggest real retailer Coach, beauty company estate project in US history – a L’Oréal and enterprise software $20bn, 18m sq ft, mixed-use firm SAP, will be delivered in scheme in the heart of New 2015. It is fully financed with York. Hudson Yards will equity from Related and its transform an industrial area of 50:50 joint venture partner the city into a place where the Oxford Properties, Related biggest names in fashion and shareholder Kuwait Investment media will congregate; a place Fund and JP Morgan. Debt has to shop, to live, to be seen. The come from Starwood Capital. A 26-acre rail yard site that second tower, 30 Hudson Yards, encompasses an entire block will begin in 2014. Media giant between 30th and 33rd Streets Time Warner – the main and 10th and 12th Avenues was occupant of Related’s first eventually bought by Related major project in New York, the Companies in 2008 for $1bn. 2.8m sq ft Time Warner Center Related had bid for the project at Columbus Circle – is widely before the crash, but lost out to tipped to anchor the 2.3m sq ft Tishman Speyer when its tower. Financing for that will be anchor tenant, News Corp, got sought once more tenants are cold feet. Tishman pulled out of locked in. the project later and Related Alongside the 6.7m sq ft of stepped back up, pulling offices that will be delivered, together a deal that would the scheme will include more mean it would not have to close than 5m sq ft of residential – on the giant investment until the moneyspinner in the the market returned to health. development. Residential The site is now starting to should fetch upwards of $3,000 take shape. Designed by per sq ft, more than double the architect Kohn Pederson Fox, offices. It will include more the development, which will be than 1m sq ft of shops in the last year’s London Games. already skyrocketing. delivered in two phases, is well city’s largest mall, a hotel, Hudson Yards is the biggest Jay Cross, president of into construction, with the first school and an innovative project that Related has Hudson Yards, says: “The of two giant office towers on culture shed that has recently undertaken, but it is confident development of Hudson Yards, the site being built. A 1.7m sq been named as the home of of success. The hugely popular coupled with significant public he optimism is chief executive of the tri-state patterns. Once upon a time, Tighe says Midtown South ft, 52-storey tower, which will New York Fashion Week. High Line wraps itself around investments being made on contagious. When you area and the woman credited occupiers tended to be much was traditionally the part of create a new home for luxury In the middle of the Yards the scheme, the New York the West Side, provides an talk to agents, investors with being involved in most, if more sector-specific, but the town occupiers went to if they there will also be a five-acre government has invested $4bn incredible opportunity for New and developers in not all, of New York’s game- days of blinkered searches of couldn’t afford Midtown or park, which Related says will in surrounding infrastructure, York City to improve its ageing the city that never changing deals over the past the garment district, Wall Downtown. Now rents there feature a new icon for New York including a new subway line office stock, create new green sleeps, there is no two decades (see p64), says this Street, Madison Avenue and are significantly higher than – a sculpture that will have the and station opposite the Yards, spaces and integrate smart Tdoubting the overarching uptick in employment has seen other industry ghettos are long Downtown – close to $20 per year-round draw of the and rents in the area are technology and sustainable mood. The investment market a direct correlation with a gone. The search now is sq ft more – and within about Rockefeller Christmas tree. It living into a new, modern, 21st is well up on 2007 levels, the pick-up in the office sector. simpler, harder, more focused 15% of the prime Midtown will be designed by Thomas century neighbourhood.” occupational market is moving Indeed, figures from CBRE – it’s about finding the right market. As in cities across the Heatherwick, the architect in the right direction with rents show that 20.7m sq ft of space buildings at the right prices. globe, this is down to the behind the Olympic Cauldron at rising, tourism is booming, has been leased in the year to Alongside this improvement famous Google effect. hotels are packed, debt is date, more than 1m sq ft up on in occupier activity, the city is Since Google acquired the available and equity is pouring the equivalent period in 2012. also seeing a healthy increase 3m sq ft 111 Eighth Avenue in in from all over the world. So what’s next for the Big in rental growth. Average rents December 2010 for $1.8bn, New York may be about to Apple – the city where there is for Manhattan at the end of the there has been a wave of lose a mayor who has put simply no longer a place for third quarter were $62.27 per activity from technology firms business and development at pessimism? Estates Gazette sq ft, up by almost 8% on the in the area. Amazon, IBM, the top of city politics for 12 went stateside to find out. $57.32 per sq ft achieved in the eBay and Facebook – which is years – more on that later – but equivalent period last year. understood to have agreed a the property industry needs to Midtown marches on The uplift has been largely 10-year deal for as much as focus on the environment When a company looks for steady in the traditional office 160,000 sq ft at 770 Broadway Michael Bloomberg has helped space in New York, it now markets of Midtown and at a rent in the mid-$70s per facilitate, not worry about tends to search from the top of Downtown – up by 7.3% and sq ft – have all expanded into future what-ifs. Battery Park to 60th/61st 3.7%, respectively, in Q3 – the area. Google is also said to At least, not for now. Latest Street from east to west, says while upcoming Midtown be growing in the area, with figures from the federal labour Tighe. And that is very South recorded an 18.2% rise discussions under way with department show a 2.5% different from traditional in rents over the period. developer Related Companies increase in private sector jobs to take space at its building on since October 2012, a pace that The days of blinkered searches of the 10th Avenue. puts the city ahead of both New According to data from York state and the country – industry ghettos are long gone. The Cushman & Wakefield, all this which were up by 1.5% and search now is simpler – it’s about finding activity has seen vacancy rates 2.1%, respectively. in Midtown South tumble to CBRE’s Mary Ann Tighe, the right buildings at the right prices 7.6% in the third quarter of hudson yards 56 www.estatesgazette.com 30 November 2013 30 November 2013 www.estatesgazette.com 57 in depth new york the market the week practice & Law EG Life

this year, the lowest level of any the sector. Cornell Technion, a double what they were back in the region. It began in the spend as much as $5bn a year “For 12 years the city had a mayor who will come under De Blasio’s US business district. partnership between NYC’s 2007. These two alone have summer when Soho China, on overseas investment and is remit. He is known to want Cornell University and the probably traded more than part of a consortium that due to announce plans soon for understood its DNA. A change in to link any new development A maturing market Israel Institute of Technology, $5bn of property in the past includes Brazilian banking a $1bn hotel and residential leadership is a threat. We have to make requiring city subsidies or What the area needs next is a is developing a 12-acre tech year. Not bad for an industry magnate Moise Safra, bought a project in New York. zoning variance to affordable hit of institutional investment. campus on Roosevelt Island in just recovering from one of the 40% stake in the 2m sq ft CBRE’s Shanahan says sure it doesn’t interfere with business” housing provision, in his bid to When the institutions start to NYC’s East River, and Carnegie world’s worst-ever downturns. General Motors building on brokers in New York look to provide 200,000 new units in snap up real estate in this part Mellon University has also Cash is pouring into the city. Fifth Avenue for $1.4bn. London to see who the next big Center buildings and Hudson 52-year-old Democrat Bill de the city, and is keen to end low of the city, the market will feel announced plans for a tech Any New York broker will tell Then, in October, Greenland international buyer of real Yards (see boxes) coming out of Blasio. CBRE’s Matt Van tax rates on vacant residential more comfortable that the campus in the city. you they have been to meetings Group took a 70% stake in the estate will be. “Whoever buys the ground, there is a feeling Buren, president of the New land. All of this could hurt the Google effect is not a bubble, Not that New York City in with rooms full of billionaires $4bn Atlantic Yards mixed-use in London, buys here,” he says. that there is just not enough of York tri-state region, says: “For development sector. but a symptom of a maturing general is suffering from a lack from across the globe – the Far project in Brooklyn, which will Shanahan and business the right space available. 12 years, the city has had a But Bloomberg has left De tech market. of investment. According to the East in particular – desperate see more than 6,400 homes partner Stacom say London is Couple that with a growing mayor who was a successful Blasio with a balanced budget And the signs are that the city’s biggest dealmakers, for a bite of the Big Apple. plus offices, shops and the much friendlier tax-wise, so propensity for office space to be businessman, who understood and a growing population – a market is maturing, with even power duo Darcy Stacom and After years of eyeing the Barclays Center arena international buyers feel safer lost to the residential sector the city’s DNA. He steered it city in very good health. New York’s top educational Bill Shanahan of CBRE, market, Norwegian sovereign delivered; and Summit Glory testing the waters there first. and it paints a potentially towards a place that is friendly Tighe says: “We just have to facilities investing heavily in investment levels have now wealth fund Norges Bank Holdings, a subsidiary of worrying picture. In recent to business and favourable for hope he follows the doctor’s surpassed boom-time highs, finally made its first big play in Shanghai-based Fosun, made The challenges years, 17m sq ft of office space development. A change in oath of ‘I will do no harm’.” She with land prices sometimes the US this year. In February, it the largest individual real There is a lot of good news to has gone over to residential leadership is a threat. We have adds that, whatever the future spent $1.3bn on a portfolio of estate acquisition by a Chinese report from the Big Apple, but and, with multi-housing rents to make sure it doesn’t interfere holds, there is no room for five properties from TIAA- buyer in the city, with its it is certainly not all plain at record levels and expected to with, or inhibit, business.” pessimism in New York now CREFF. Then, in September, it $725m purchase of the 2.2m sailing for New York real estate. grow by an average of 3.2% a De Blasio’s policies could that the global recession seems bought a 45% stake in Boston sq ft One Chase Manhattan. Supply is a major issue. The year for the next five years, that cause concern for the real to be receding. The time for Properties’ 1.2m sq ft Times And there is no sign of that city has an ageing stock of figure is only likely to increase. estate sector. The East action, positivity and pushing Square Tower for $684m. investment slowing. The buildings that are becoming But the biggest threat, and Midtown rezoning plan, which ahead is now, as Tighe simply But Norges Bank’s big splash Chinese insurance funds have unfit for purpose. The average one that cannot be ignored, is would have allowed larger poses the question: “What in the city has been surpassed tens of billions of dollars to age of a New York building is the unknown. In January, the new offices to be built in the alternative do we have?” by the Chinese, who are fast spend on overseas real estate. 60, and even with the mega city will get its first new mayor Grand Central/Park Avenue becoming the most active in The Wanda Group wants to projects of the World Trade in more than a decade, district, has been tabled, so it more on New York real estate overleaf WORLD TRADE CENTER While Hudson Yards may be the biggest that there was no alternative but to rebuild. More development to be undertaken on US soil, the than a decade on, he has completed two of the redevelopment of the World Trade Center has to towers that will make up the new World Trade be the most sensitive. The 16-acre Downtown Center – 7 World Trade Center, a 741ft, 1.7m sq ft site, devastated by the terrorist attack that building completed in 2006 that is home to changed the world forever on 11 September ratings agency Moody’s and Silverstein 2001, had to be rebuilt to send a message of Properties, and 4 World Trade Center, a 977ft, survival to those intent on disturbing the peace, 2.3m sq ft building to be occupied in part by the but also had to be sensitive to the thousands of Port Authority of New York and the city lives lost on that fateful day. government’s human resources department. It The complex that made up the World Trade was completed earlier this month. Center was famously bought by veteran New One World Trade Center – formerly known as York developer Larry Silverstein for $3.2bn just the Freedom Tower, developed by Silverstein but six weeks before 9/11. Silverstein then, even owned by the Port Authority – is prelet to more famously, skipped his usual breakfast publishing giant Condé Nast and is the focal point meeting in the Twin Towers on the morning of the of the redevelopment at 1,776 ft and 2.6m sq ft. It attack so as not to upset his wife of more than 50 is due for completion early next year. years. “If you’ve been married 50 years and your Silverstein shows no fear of the scale of the wife gets upset,” says Silverstein, “you know project he is undertaking at the ripe old age of 82. you’ve got yourself a major problem. I quickly The fact that 4 World Trade Center is 40% vacant shifted my plans. I realised there was no way I on opening causes him no concern. The veteran was going Downtown. I said don’t get upset, don’t developer is used to building on spec and, despite get angry. I apologised. The words were: protestations from peers that he must be crazy, whatever you want me to do, I’ll do.” Silverstein is very much of the opinion that if you Not long after that conversation, Mrs build it, they will come. Silverstein received a call from the captain of the “When you build a first-class building in a couple’s boat, moored on the Hudson River, wonderful location, it’s not a question of if the asking where Mr Silverstein was and telling her building will occupy, it’s a question of when,” to turn on the television. he says. Since that time, Silverstein has gone into battle “One of the things I learned very early on in life with his insurers, which had sought not to pay out is never to bet against New York. The city has a on the disaster. He refused to give up, arguing way of coming back bigger, better and stronger.”

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