The Real Deal New York

Vornado, Toll Bros. eye trio of city buildings

Mayor Bloomberg seeks proposals for Lower Manhattan properties

July 31, 2012 10:30AM
By Adam Pincus

From left: 346 Broadway, 49-51 Chambers Street and 22 Reade Street

In the three months since the Economic Development Corporation issued requests for proposals for a package of city-owned buildings, some of New York’s top real estate firms — Vornado Realty Trust, Toll Brothers and Kushner Companies, among them — have toured the properties. Should those or other companies wish to bid on the Lower Manhattan properties, their proposals are due today.

The 750,000-square-foot, three-building package is composed of 346 Broadway, 49-51 Chambers Street and 22 Reade Street.

Mayor Michael Bloomberg, in his State of the City address in January, said the city would sell off those buildings. The expected sale is part of an $80 million city effort to consolidate the spaces that it occupies and relocate tenants, the RFP says. The city hopes to have a contract signed with a buyer no later than the first quarter of 2013.

The relocation plan in these three buildings is expected to take place over more than three years — with the final tenants moving from the 99,000-square-foot 22 Reade Street to 1 Centre Street by March 2015; those in the 418,991-square-foot 346 Broadway leaving for various locations by November 2014, and those leaving the 231,379-square-foot 49-51 Chambers Street for various locations by February 2015. While the tenants remain in the building, the city would pay no rent, the RFP says. Sources said that reduces the relative value of the buildings because the new owner would have to carry them on the books yet receive no income for several years.

A wide spectrum of professionals from more than 40 developers, brokers and investment firms toured the buildings on May 18, according to a list published on the EDC’s website. In addition to Vornado, Toll Brothers and Kushner, representatives from United American Land, TF Cornerstone and Zar Property NY were at the viewing. Also in attendance were professionals from Town Residential brokerage, from the architecture firm and brokerage Flank and from the private equity firm Area Property partners, the list showed.

Sources gave wildly different valuations for the city properties, and uses ranging from office to hotel to retail to rentals or condominiums.

One bidder said he expected firms to generally bid in the “mid-$200′s” per square foot, which would give the trio of office buildings a price of $187.5 million. But another source cited recent Tribeca comparable sales, which are as high as $5600 to $800 per square foot. That would yield a price of $600 million.

One high comparable sale is the 11,000-square-foot commercial building 10 Hubert Street, at the corner of Collister Street in Tribeca, which sold Nov. 17, 2011 for $8.3 million, or $755 per square foot. It’s now being converted to four residential units, city Department of Building’s records show.

Another key to the prices that will be offered is what a developer could sell or rent the units for. Streeteasy.com shows some luxury buildings in Tribeca such as 250 West Street at Hubert Street and 57 Reade Street at Broadway with units listed or in contract above $2,000 per square foot and averaging more than $1,500 per square foot.

Brokers said it’s also difficult to figure out how much it will cost to rehabilitate and convert to apartments.

One investment sales broker who was not involved in the bidding process, Alan Miller, a senior director at Eastern Consolidated, pointed to a redevelopment in the area at the nearby redevelopment of 93 Worth Street, across the street from 346 Broadway.

That project that reportedly cost about $320 per square foot to convert from office to residential. Miller said that was likely a good comparable cost for a conversion to residential, which appeared to him to be the highest and best use despite the challenges, including that 346 Broadway, with a width of 400 feet, is an unusually wide structure.

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