The Real Deal New York

Trinity rethinks $1B+ Hudson Square ground lease deal

‘It’s very much up in the air’: source

June 04, 2015 09:35AM
By E.B. Solomont


From left: Jason Pizer, 1 Hudson Square and Darcy Stacom

Trinity Real Estate is rethinking its plans to ground lease four valuable Hudson Square buildings in a deal that was poised to net the church up to $1.5 billion.

The massive real estate arm of Trinity Church informed bidders last week to “sit tight” while it reconsiders its offering, sources told The Real Deal. Sources said CBRE’s Darcy Stacom will be taking over the marketing of the buildings from colleague Michael Laginestra, who represented Viacom when it leased 400,000 square feet from Trinity at 345 Hudson Street in 2007.

“It’s very much up in the air,” said a source who is representing one of the bidders. “I don’t know if they’re going back to the drawing board.”

CBRE declined to comment, as did Trinity.

Trinity was shopping leaseholds for four buildings – 1 Hudson Square, 200 Hudson, 205 Hudson and 12-16 Vestry Street. It was offering 75-year leases, sources said, and wanted a single, upfront payment from the buyer.

In late March, Trinity reviewed bids from major office players, including Vornado Realty Trust, SL Green Realty, Ivanhoé Cambridge and Brookfield Office Properties. Prospective buyers went through at least three rounds.

Representatives from Ivanhoé, Brookfield and SL Green declined to comment; Vornado did not immediately respond.

Of the four buildings being offered for lease, the largest was 1 Hudson Square, a 17-floor, full-block office building with nearly 1.2 million square feet of prime office space.

The other buildings in play are 200 Hudson Square, with 387,000 square feet; 205 Hudson Square, with 401,000 square feet, and 12-16 Vestry Street, with 61,000 square feet.

All of the buildings need a substantial capital investment, but sources speculated that Trinity got pushback from bidders who weren’t thrilled with the notion of signing a 75-year lease that required upfront payment. “They were hoping somebody would hold their nose and live with it,” one source said. “It was very naïve.”

Some said Trinity Real Estate, which is led by Jason Pizer, is now considering adding to the offering, and could be looking to sell leaseholds for up to 11 buildings. However, other industry veterans said that many properties could be too large a prospect for a single buyer to digest in one go.

In all, Trinity owns roughly $3 billion worth of real estate in New York, comprised of roughly 5.5 million square feet. The bulk of Trinity’s portfolio is in Hudson Square, an area that is a darling of technology and creative businesses. Office rents in the area are in the mid-$70s per square foot. After a 2013 rezoning, Hudson Square also become a magnet for developers looking to build residential, retail and hotel projects.