With Financing Still Rare, New York Developments Start to Rebound

By JOTHAM SEDERSTROM 

When the development firm Hines began exploring plans for a state-of-the-art, ground-up office tower overlooking Bryant Park in April 2009, the notion seemed far-fetched at best, given the economic mood.

After all, Lehman Brothers had collapsed seven months earlier and Bernard L. Madoff had just pleaded guilty to federal felony charges in his vast financial Ponzi scheme. By the end of 2009, construction had frozen at development sites all across Manhattan.

But in the nearly 30 months since those discussions, Hines’s plan to build a 28-story, glass-and-stainless steel tower at 1045 Avenue of the Americas has withstood many of the obstacles that have thwarted other real estate developers.

“In no point in the last 30 years across all the cycle changes have we ever not been active,” said Tommy Craig, a senior vice president and head of Hines’s regional office in New York. “Resilience is one of the defining virtues of our firm.”

With a search for equity partners and a marketing campaign set to begin this week, the 450,000-square-foot building is one of two Manhattan projects now in the works for Hines. The other, a 72-story mixed-use building at 53 West 53rd Street, is set to rise adjacent to the Museum of Modern Art once an equity source is chosen. The project, designed by Jean Nouvel, was scaled down recently from its original height of 82 stories.

To make way for 1045 Avenue of the Americas, Hines and its partner, Pacolet Milliken Enterprises, had to first raze the white marble building on the site that, since 1954, has been owned by Milliken to house its textile company.

As demolition continued during 2009, the architectural firm Pei Cobb Freed & Partners went to work on a modern hourglass-shaped structure that drew on Bryant Park as a compass. With a 46-foot-wide stainless steel canopy aimed directly at the southwest corner of that park, the tower will serve as something of a gateway to the eight-acre public space.

“It has protected views because of the park,” Mr. Craig said. “That’s the thing that most New Yorkers value the most. It’s something not only residents value but that commercial users value, too.”

With plans for 10-foot-high ceilings on most floors (two penthouse floors will have 11-foot ceilings), terraces at the 10th floor and expansive trading floorplates, the building would be well suited for financial services tenants, brokers marketing the tower say. But as a side-core building without columns, it will also be heavily marketed to law firms that prefer windowed offices.

And brokers say the tower’s relatively small size could allow smaller firms to grab the coveted status of anchor tenant — and with it, perhaps, naming rights.

“In New York, it’s always hard to find a building where a 200,000-square-foot tenant could move in and the building could be named for them and it would give them a high-profile presence in Manhattan,” said Mary Ann Tighe, the chief executive of CB Richard Ellis’s regional office, who has been assigned to market the building alongside Howard Fiddle, Benjamin Friedland and Evan Haskell. She added that asking rents at the building would hover above $100 a square foot.

“Typically, to be able to do something like that, you have to be half-a-million square feet or greater,” she said.

While construction is not expected to begin at 1045 Avenue of the Americas until early next year, it remains one of a small handful of city projects able to qualify for coveted construction loans. Even so, approximately 1.5 million square feet of office construction was completed last year across New York City’s five boroughs, up from just 350,000 feet in 2009, according to data provided by Cushman & Wakefield. As of January, an estimated 5.6 million square feet of construction was under way.

Besides 1 World Trade Center and 4 World Trade Center — probably the best known of the pending projects — construction has begun or is expected to begin at 250 West 55th Street; 51 Astor Place; Hudson Yards; Brookfield’s Manhattan West; and 20 Times Square, among several others.

“It’s primarily been a financing issue,” said Ben Thypin, the director of market analysis at the research company Real Capital Analytics. “There could have been developers who wanted to build, but they couldn’t find a bank or lender to write them a large enough construction loan at the time. A lot of it also has to do with whether they have a tenant or not.”

Among active real estate developers, the Extell Development Company may be one of the busiest. In Manhattan, the company is juggling some two million square feet of ground-up construction at three sites, most significantly the International Gem Tower, a 750,000-square-foot office building intended to be a new hub for Manhattan’s diamond and precious stone dealers at 44 West 47th Street. Construction is expected to be finished late next year at the 34-story building in Times Square.

For Gary Barnett, the president of Extell, who predicted that more new construction would begin as underwriting became less conservative, the choice to move ahead with those projects was the only rational decision for his firm.

“We really didn’t have a choice in the matter. We had to build,” Mr. Barnett said, adding that construction had been moving forward despite what he described as extremely conservative underwriting. “It’s what we do. It’s what we’ve done.”