Paydirt: Dialing Doha, miracle on the Hudson (Yards), Midtown gets buff … & more

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From clockwise: Hudson Yards, Midtown East, Abdullah bin Mohammed Al Thani, and the Empire State Building (Illustration by Lexi Pilgrim for The Real Deal)
From clockwise: Hudson Yards, Midtown East, Abdullah bin Mohammed Al Thani, and the Empire State Building (Illustration by Lexi Pilgrim for The Real Deal)

(Paydirt is a new weekly column that riffs on the biggest NYC real estate news of the moment, providing analysis and historical context on the deals and players that make this town tick.)

Does dodgy diesel have anything to do with the Empire State Building?

In mid-September, the EPA revealed that Volkswagen had been cheating on its emissions tests. The scandal, which left the German carmaker’s reputation in tatters and rocked its stock, was a big blow for the Qatar Investment Authority, the biggest holder of VW’s preferred shares and the third-largest owner of its common shares. The $335 billion sovereign wealth fund lost about $4.8 billion from the fallout, according to Bloomberg.

Perhaps that circumstance forced QIA boss Sheikh Abdullah bin Mohammed bin Saud Al Thani to hatch a new plan. Just 10 days after the EPA’s announcement, he threw a party at the St. Regis in New York, according to the Financial Times. In the presence of bigwigs such as Stephen Schwarzman, Larry Fink and Bill Ackman, Al Thani said the fund would invest $35 billion in the U.S., including in properties. It made good on that promise, buying a 44 percent stake in Brookfield’s [TRDataCustom] 7 million-square-foot Manhattan West in October and just last week, a 9.9 percent stake in Empire State Realty Trust, the REIT that controls the Empire State Building.

QIA now owns a piece of the most famous building in America. But though the tower’s office portion and observatory have been thriving, its retail remains moribund, with unexciting tenants and many impediments to new deals.

Miracle on the Hudson: Related and Oxford have scored about $14 billion in financing for Hudson Yards, their $25 billion, 17 million-square-foot megaproject on the Far West Side. Where’d the money came from? You name it: conventional banks, EB-5 investors, hedge funds, German insurance firms and tenant-owners.

But what makes the project’s financing especially interesting is the nature of some of the deals. At 10 Hudson Yards, for example, construction loan proceeds – including a rare construction mezzanine loan — came in prior to the equity money, according to SRZ’s Jeffrey Lenobel, who advised the Related-Oxford joint venture.

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And at 30 Hudson Yards, a $690 million loan led by Bank of America closed prior to syndication, which is extraordinary — banks will normally rope in lenders to spread the risk before finalizing the deal. What helped was that Related had already sold big office condos at the tower to the likes of Time Warner, Wells Fargo and KKR. “It’s not a usual deal in New York to have an office condo play,” Bank of America’s Jeff Dybas told the Commercial Observer.

A denser Midtown East: Hush-hush seems to be the order of the day around City Hall. The de Blasio administration, sans announcement, put out its proposal to rezone Midtown East, identified as 78 blocks bounded by 39th Street to the south, 57th Street to the north, Second and Third Avenues to the east and Fifth Avenue to the west. City officials hope the rezoning spurs developers into sprucing up the area’s building stock by allowing higher-density construction and making it easier to transfer air rights from nearby landmarked sites.

The proposal identifies 16 sites that are most likely going to be redeveloped, and under the new zoning, could add 6.5 million square feet of new office space. The biggest site post-rezoning would hold 1.5 million square feet of office space across three buildings: Pfizer’s HQ at 235 East 42nd Street, Tri Realty Management Group’s 801 Second Avenue and 219 East 42nd Street, also owned by Pfizer. The three buildings combined would be roughly the size of SL Green’s One Vanderbilt, the first project to benefit from the first phase of the area’s rezoning.

Without the rezoning, the city fears landlords may opt to convert the office buildings into condos or hotels. We’ll know a bit more on Sept. 22, when there’s a public meeting to discuss the proposal.

Rivington House drama drags on: Though Mayor Bill de Blasio still hasn’t taken responsibility for the epic fail that resulted in the $116 million Rivington House deal, he’s trying to show he feels badly about the whole thing. His latest move? Squeezing Slate Property Group out of its stake in the Bedford-Union Armory development in Crown Heights. Hizzoner said the Rivington deal made him take a “hard look” at Slate. It’d serve the city well if the mayor applied some of that scrutiny to his own shop.

Kathryn Brenzel contributed reporting.

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