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Major players gobble up Hudson Yards sites
Big builders set to converge on far West Side
By Lauren Elkies
September 2007
A view of the rail yards at Ninth Avenue between 31st and 33rd streets.
Development of the Hudson Yards area is still in its infancy, but big builders have been amassing large swaths of land on the far West Side with plans to infuse the area with major residential and commercial projects.
This month, The Real Deal set out to take a detailed look at what many see as the area of Manhattan poised for the greatest amount of development going forward, with a block-by-block chart and map of projects planned for the neighborhood as well as recent property sales.
Of course, the big boys of development -- including Vornado, Related, Brookfield, the Moinian Group, Rockrose and Extell Development -- have accrued sizeable holdings in the area, stretching roughly between 30th and 42nd streets from the Hudson River to Eighth Avenue.
Comparatively smaller players -- names like Circle Properties and Lalezarian Developers -- are also snapping up buildings and development sites.
Extell may lead the way with the greatest number of large planned projects, bids or recent buys, with a total of five. The firm has already completed one condo building in the area, the Orion; has plans for a mixed-use tower and an office tower; is bidding on a massive hotel project; and just purchased a tract of land on 34th Street.
But it's the Related Companies, Brookfield Properties and Vornado Realty Trust that may end up covering the widest amount of land, even with fewer total projects in the works.
All three companies are among the bidders to develop the massive 26-acre Hudson Rail Yards, owned by the MTA, which run from 30th to 33rd streets and from 10th to 12th avenues.
In addition, Vornado and Related are the companies planning to develop Moynihan Station, which includes rebuilding Penn Station and Madison Square Garden on the site of the Farley Post Office.
For its part, Brookfield is planning four office towers that would total 4.7 million square feet on Ninth Avenue between 31st and 33rd streets.
Just the beginning
Even with all the goings-on, there are still available sites in the Hudson Yards district.
"All the top developers in the city are looking in a very detailed way at what's going on in the neighborhood," said Robert Knakal, chairman and founding partner of Massey Knakal Realty Services.
While deals and projects have been in the works, there has been little by way of tangible results.
"It's an area that's going to be a major development site, but it's at the beginning," said Richard Bassuk, president of the real estate finance and brokerage firm the Singer & Bassuk Organization.
The Singer & Bassuk Organization has been in discussions with clients about development options in the area.
"Nothing's gotten built in that neighborhood ... because much of [the] zoning is commercial and it's not clear how to make that work yet," said Gary Barnett, president of Extell.
His company is developing a site at 31st Street and 10th Avenue. There will be an office and gallery on the bottom floors, a hotel in the middle and condos above the hotel, Barnett said.
On the site of famed Copacabana nightclub on 11th Avenue between 33rd and 34th streets, Extell plans a new, 1.5-million-square-foot office tower.
Twelfth Avenue freezeout
Some developers have become gun-shy because of the many unknown factors in the Hudson Yards area. A walk around the Hudson Yards reveals a district filled with derelict industrial buildings, vacant parking lots, functioning automobile shops and cordoned-off blocks of construction.
Some major public and quasi-public projects have yet to start. In addition to the rail yards, another major project for which the state will select a developer is the building of a headquarters hotel for the Jacob K. Javits Convention Center.
Meanwhile, the expansion of the Javits Center itself has yet to get under way. The Spitzer administration is now considering a proposal that would increase the new space from 300,000 square feet to 550,000 square feet -- and at $4 billion, double the cost of the overhaul proposed under Governor Pataki.
An even more massive public project yet to start is the extension of the No. 7 subway line to 34th Street and 11th Avenue.
On a smaller scale, there's also uncertainty about the future of the northern portion of the High Line, a one-and-a-half mile abandoned elevated railway that ends at 34th Street in the area of the western rail yards.
"There's a lot of wait-and-see attitude," said Jack Botero, a Manhattan-based associate director of the national multi-housing group of Marcus & Millichap.
Botero said he has been acting as a consultant to two successful parking lot owners in the Hudson Yards area who are trying to determine if they should hold onto their lots or sell them.
Brookfield Properties' CEO has said the company's plans on Ninth Avenue will be put on hold if there is no movement on the extension of the No. 7 train.
Meanwhile, Barnett said, "No one has a clear handle on what things are worth there."
Rentals aplenty
But there is no doubt that the Hudson Yards area is slated for major commercial and residential development, made possible by the 2005 rezoning of the area from a manufacturing district to a commercial and residential one.
Some developers are still proceeding with their plans.
Rockrose has started work on two projects in the area, which will have residential and commercial components. At 455 West 37th Street, which runs from 37th to 38th streets and from 10th Avenue halfway down the block to Ninth Avenue, the company has begun construction of a 394-unit rental building, according to Sofia Estevez, senior vice president at Rockrose.
On the west side of the street at 505 West 37th Street, the company has broken ground on a two-tower, 835-unit rental building, which will extend from 37th to 38th streets and from 10th Avenue halfway down the block to 11th Avenue.
Moinian has started construction on its rental and retail tower at 605 West 42nd Street.
Developers on the far West Side face a conundrum: In a market where construction and land costs are high, how do you keep rents low enough to draw tenants and retailers, but high enough to make a profit?
"People aren't going to take a less convenient location unless the price is right," Bassuk noted.
For the residential portions of its far West Side buildings, Rockrose is not planning on slashing rents dramatically to draw would-be dwellers to the still-remote location, Estevez said. Still, rents in the buildings will average $6 per square foot, or 10 percent less than at a new building in a more established area, such as at the company's 110-114 Horatio Street, where rents average $66 a square foot.
Rockrose is planning, however, to bring retail to the area at a slightly discounted rate, Estevez said. At 455 West 37th Street, there will be a supermarket and a high-end restaurant. (A Time Warner Center restaurateur is reportedly interested in the space.) Restaurant space will also be built at 505 West 37th Street.
"We'll decide what else the neighborhood needs when we're closer," Estevez said. But making room for those services will come at a cost. "I do anticipate we will have to subsidize" the rents, she noted.
Inn development
The far West Side also appears ripe for hotel development.
Moinian, Extell and Texas-based Faulkner USA are all jockeying for the right to develop the Javits hotel project.
Would-be developers of the hotel said they do not expect to adjust room rates because of the location.
"The pricing model is likely the highest convention center hotel rate in the nation. We made no concession for the location because we have determined that it is a high-value submarket in the city," Moinian's spokesperson said.
Moinian's current proposal calls for a massive 1,275-room hotel designed by architecture firm Gensler.
Barnett of Extell said that his company has proposed a 70-story-plus "iconic" Hyatt hotel with a more luxurious Grand Hyatt at the top, separated by a sky lobby.
The hotel market is faring well in the city, and if most hotels stay small and offer limited services, they will be easy to run and profitable on the far West Side, said Eric Anton, an executive director at Eastern Consolidated.
Extell is also including a hotel in its project at 31st Street and 10th Avenue. Prolific hotelier McSam Hotel Group, meanwhile, bought four parcels of land on West 38th and 39th Streets.
"Everyone's talking hotel, hotel, hotel, hotel," Anton said.
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Graphic of developments...
http://www.therealdeal.net/pdf/Hudso...MajorSites.pdf
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